JSE-listed real estate investment trust Equites Property Fund will develop a 122 734 m² logistics warehouse facility in Hammarsdale, KwaZulu‑Natal, for JSE-listed retailer Pepkor.

The indicative total cost of the development is R1.3-billion, which includes the cost of the land of R281-million.

Equites will enter into a 15-year "triple net" fully repairing and insuring lease with Pepkor on completion of the development. Pepkor will have a right to renew for three additional five-year periods.

The development is expected to be completed by November 2021.

Equites CEO Andrea Taverna-Turisan says the company is pleased with the transaction as it meets all its investment criteria.

The modern logistics facility will be situated in Hammersdale, a prime logistics node owing to its location along the N3 national road and its proximity to the rail network linking Gauteng to the Durban port.

It is also close to the inland container terminal at Cato Ridge, which is expected to change the logistics landscape in KwaZulu-Natal.

Other prominent South African retailers, such as Mr Price and Ackermans, also have logistics warehouse facilities close to the property.

The warehouse will boast a clear height to eaves of 15.8 m and yard depth in excess of 45 m.

Both companies place strong emphasis on sustainability in their assets from the outset and the facilities have been designed with increased steel tolerances to accommodate the installation of solar photovoltaic panels.

“The development will increase Equites’ footprint in the key logistics node of KwaZulu‑Natal and create further scale in our high-quality logistics portfolio. Importantly, the developed facility will also add to the quality, defensiveness and income predictability of Equites. We are excited to welcome Pepkor as a client,” says Taverna-Turisan.

Equites states that it has continued to focus on securing development deals with blue chip tenants in key logistics nodes and executing its development pipeline in both South Africa and the UK.

In South Africa, the group has grown its pipeline through tenant-driven developments.

The group is expected to achieve initial yields of between 7.90% and 8.90% in respect of the number of deals that have been concluded, including the Pepkor deal. This is at a level exceeding the acceptable rate of return for each development.

Equites concluded a development agreement for an Allied Electronics (Altron) distribution centre, and started the construction of a new 25 001 m² logistics campus for Altron in October 2019 at Equites Park – Meadowview, one of the Group’s premier logistics parks in Gauteng.

The building is expected to have a capital value of R222-million on completion, when the newly concluded 12-year lease will begin. Construction is expected to be completed by July.

Equites also concluded a development agreement for the construction of a Digistics distribution centre at Meadowview, Gauteng.

Construction of the 21 026 m² centre began in November.

The building is expected to have a capital value of R180-million on completion in October, when a new five-year lease will start with the tenant, with the option to renew for an additional five years.

Further, Equites concluded a development agreement with Sandvik Mining to develop about 22 599 m² of warehouse and office facilities in Plumbago, Gauteng.

The capital value of the project is about R271-million.

The ten-year lease (with a right to renew for a further five years) is expected to begin upon completion of the development in January 2021.

In the UK, Equites has continued to implement its low-risk strategy by focusing on premium logistics facilities built to institutional specifications in key logistics nodes, let to investment-grade tenants on long-dated full repairing and insuring leases.

The transactions below have been concluded in line with this strategy:

Equites has entered into an agreement to forward fund the construction of a modern distribution centre for a maximum commitment of £13.3-million to be let to Swiss multinational pharmaceutical group Roche Diagnostics, at The Hub, Burgess Hill. This development is expected to be complete in the next month.

It has also entered into an agreement to forward fund a DHL Sortation Centre with a maximum commitment of £12-million. The site is a proposed last mile parcel sortation centre which will be situated in Total Park, Leeds.