Equites Property Fund, the specialist owner and developer of prime logistics assets in SA and the UK, will sell core and noncore logistics properties in SA valued at R2.8bn to strengthen its balance sheet.
In a pre-close investor presentation on Tuesday, the company said it had launched a disposal programme to be implemented in three phases beginning in March.
The selling of assets is one of the six focus areas for the financial year. “We are experiencing strong demand in the market for our assets,” the company said.
JSE-listed Equites owns prime logistics assets in SA and the UK valued at R26.3bn at the end of August. Its tenants are multinationals that are prepared to sign leases for 10, 15 and 20 years and who, given their commercial might, tend to meet rental payments on time.
At the beginning of 2023, Equites reached a binding agreement to sell R600m of assets in SA and is in advanced discussions to sell two properties in the UK for R1.1bn. The sale transfers are expected in March.
Phase two will see Equites sell R700m of assets in SA with transactions expected to be concluded in June. Equites said further disposals planned for the next nine months include the Pick n Pay distribution centre in KwaZulu-Natal.
The third phase expected to be concluded in June 2024 are assets valued at R1.5bn in SA and considered for disposals. These include a combination of core and noncore assets.
Due to the disposals, its loan-to-value — a key measure of the financial health of a property company will increase to between 35%-40% in the short-term, with a medium-term target range of 30%-35%. At end-August, its loan-to-value increased from 31.5% to 33.3% mainly due to development capital expenditure of R977m in SA and the UK.
The company said there was strong demand for A-grade warehousing facilities in SA and this is expected to drive rental growth within its portfolio. In 2022, rentals averaged R65/m2 — will reach R78/m2 in 2023 and peak at R85/m2 in 2024.
Its 13.9 years group weighted average lease expiry is expected to exceed this by 2025. SA currently at 13.3 years will peak to over 14 years during the same period as the company focuses on building resilience particularly with Shoprite.
On February 16, Equites said it will, through a sale and development lease agreement, spend R1.16bn on acquiring and developing a prime logistics park for retailer Shoprite in KwaZulu-Natal.
RFL will lease the existing park to Shoprite and extend the property for more than R422m. Equites’ interest in the Shoprite portfolio will be about R4bn upon completion of all developments.
Shoprite will lease the park for 20 years on a triple net lease with the right to renew for three additional 10-year periods and increase the portfolio’s weighted average lease expiry period of 13.9 years.
A triple net lease agreement is whereby tenants pay all the running costs of the property leased such as maintenance, security, rates and taxes.
Equites said that due to triple net leases there are no cost leakages as a result of increased load-shedding and costs of running generators. The company will continue with its 100% dividend payout ratio. Its guidance for distribution per share growth remains 4%-6% for the 2023 financial year.
During morning trade on Tuesday, its share price lost 1.16% to R15.29.
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