Equites H1: Logistics Moat Deepens, Growth Pipeline Ready

• DPS up; guidance intact; NAV rises as portfolio quality steps up and costs of debt fall.
• Prime SA logistics demand outstrips supply; vacancies around 1% and rentals trending higher.
• UK exit to unlock firepower; LTV targeted toward around 25% and development pipeline accelerating.

Introduction, who is Equites?

‍Equites Property Fund Limited (JSE: EQU) is South Africa’s specialist prime logistics REIT. Since listing, Equites has built and operated modern, ESG-compliant warehousing for blue-chip retailers, 3PLs and FMCG groups, under long, inflation-protected leases.

Market position & assets (what they own and where the value sits)

• Income-producing logistics portfolio: R28.3bn total property value (Aug ’25), focused on A-grade, large-format DCs with automation-ready specs and low obsolescence.
• South Africa core nodes: Riverfields (R21), Lords View, Jet Park, Waterfall, Meadowview and key Cape Town logistics corridors.
• UK assets (being exited): mature logistics assets in disposal process to recycle capital to SA at higher risk-adjusted returns.
• Land bank & access: 47 ha controlled, with 30–40 ha additional access, supporting pre-lets and selective spec development.
• Green & energy assets: 27.0 MW installed solar PV (PPAs in place), water-security initiatives (biological wastewater plant) and significant green-certified GLA with more in certification.

Investor Snapshot - 6 months to 31 Aug 2025

• Distribution per share: 69.04c (+3.8% y/y); FY26 guidance reaffirmed at 140.62–143.29c (up 5–7%).
• NAV per share: R16.93 (+2.7% in six months).
• Like-for-like SA rental growth: 5.1% (tracking back to 5.5–6.0% as reversions wash through).
• Leasing momentum: ~107,000 m² concluded; vacancy 1.5% at period-end, ~0.3% subsequently let.
• Portfolio metrics: WALE 14.1 years, weighted average escalation 6.1% (Shoprite 20-year leases at 5%); ~99% A-grade tenant income.
• Capital recycling: R668–700m disposals (SA and UK); UK DPD Burgess Hill sold for £17.65m at 5.0% yield.
• Balance sheet: LTV 37.2%; cost of SA debt ~8.3%; 97% of >1-year debt hedged; R3.4bn cash & undrawn facilities.
• Buybacks: R130m repurchased at ~R13.82/share (~16% discount to NAV at the time).

Strategy in action - Why the model works now

• Demand tailwinds: SA prime logistics vacancy sits near historic lows; new-build rentals up ~7.3% y/y as retailers re-tool supply chains, 3PLs expand, and e-commerce compresses delivery times.
• Spec with discipline: Two recent spec builds (Meadowview, Riverfields) substantially let pre- or near PC; next wave earmarked for Riverfields and Jet Park to catch time-sensitive demand.
• Flagship mandate: Preferred bidder on a ~90,000 m² Riverfields DC for a JSE-listed FMCG group (EDGE-certified, substantial solar/water), 10-year lease with 6% escalation; delivery targeted by June 2027 via the Tridevco partnership.
• Green advantage: Solar PPAs and water-security projects enhance tenant resilience, support valuations and open green-finance channels while advancing SBTi pathways.

Voices from management

• Andrea Taverna-Turisan, CEO: “Portfolio quality has stepped up—we’ve shed older, non-core assets and added compliant, future-fit facilities. With WALE 14 years, vacancies near zero and A-grade covenants, income visibility is high.”
• Riaan Gous, COO: “Renewals in key parks now track at or below market rentals, reducing reversion risk and smoothing earnings. Asset management depth and triple-net structures keep the portfolio resilient.”
• Laila Razack, CFO: “We’ve lowered our SA debt cost to around 8.25–8.3%, kept 97% of term debt hedged, and preserved R3.4bn liquidity. UK disposals should push LTV toward ~25%, giving us firepower for accretive SA growth.”

Why Equites screens as investable

1. Category leadership in prime logistics. High-spec DCs in dominant nodes with blue-chip tenants and long leases create annuity-like cash flows.
2. Visible growth levers. SA development yields, spec letting success, and a deep enquiry book (~268,000 m²) support organic growth; the Riverfields FMCG mega-DC is a needle-mover.
3. Balance-sheet optionality. UK exit recycles capital to higher-return SA opportunities, reducing LTV and strengthening returns on equity.
4. ESG as economics. 27 MW solar (with more PPAs signed) and water resilience are not marketing—they cut OPEX, protect NOI and lower discount rates.
5. Valuation underpin. Prior disposals at book/strong yields and NAV growth reflect asset quality; opportunistic buybacks at discounts are NAV-accretive.

Market update & way forward

‍Industrial remains the strongest SA commercial subsector: ultra-low vacancy, rising replacement costs and time-to-market pressures for retailers/3PLs keep rental power with landlords of institutional-quality assets. Equites plans to:

• Complete UK disposals (including Aviva/SpringBOX portfolio elements) and repatriate proceeds to SA, lowering LTV toward ~25%.
• Accelerate SA developments in Riverfields/Jet Park/other nodes, balancing pre-lets with selective spec where demand visibility is highest.
• Expand energy & water platforms (additional ~5 MW solar over 2–3 years; wastewater recycling), reinforcing tenant stickiness and valuation metrics.
• Maintain DPS growth in the guided 5–7% range, supported by above-inflation like-for-like rentals, lower finance costs and tight admin discipline.

Bottom line

‍Equites enters FY26 H2 with near-zero vacancy, long-dated leases, embedded escalations, and a reloaded balance sheet. Add a land-backed pipeline, credible green economics, and blue-chip demand, and you have what investors want from a logistics REIT: defensive cash flows today and visible, accretive growth tomorrow.

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