Equites board completes UK exit to fund SA logistics push

Equites Property Fund has effectively completed its withdrawal from the United Kingdom, a board-level strategic decision that now frees the specialist logistics real estate investment trust to redeploy capital into South Africa, where management judges returns to be more attainable under its stated investment mandates.

The disposal of five UK properties has substantially concluded the group’s British exit, and the financial effects of that decision are visible in its half-year results for the six months to August. The sale reduced the group’s loan-to-value ratio from 35.1% to 28.1% at end-August, largely reflecting the disposal of its Aviva portfolio, and left it with R2.9bn in cash and undrawn facilities available to fund further investment. Management has committed to using that balance sheet capacity to fund growth while gradually restoring gearing towards target levels and sustaining distribution growth.

Chief executive Andrea Taverna-Turisan framed the exit as a response to market conditions that constrained the fund’s ability to meet its return targets. Elevated UK gilt yields and subdued rental growth, he said, had limited the scope for further capital appreciation in Britain’s logistics market, while high acquisition and development costs in the country made it harder to achieve the group’s return objectives. The decision to sell, in other words, was an accountability of sorts to the fund’s own performance benchmarks rather than a reaction to any single transaction.

Three UK assets remain to be sold: DHL Leeds, Thrapston and Basingstoke. The disposal process for DHL Leeds has begun, with a sale expected within the next 12 months. A rent review lifted that property’s base rent by 53% to £98.71 per square metre, strengthening its income ahead of the sale.

Meanwhile, in South Africa, the group spent R600m on developments and acquisitions during the half-year and carries a R2.4bn investment pipeline. Seven developments are under way, with a combined capital value of R2.4bn on completion and R1.3bn still to be spent. The projects are expected to generate yields on cost of 8%-9%, above the group’s marginal cost of debt. Most are prelet to tenants including Tiger Brands, Takealot, Shoprite, DHL and Premier FMCG, with completion scheduled between September 2026 and August 2027.

Management’s stated rationale for the local pivot rests on demand fundamentals: retailers modernising distribution networks, third-party logistics operators expanding fulfilment capacity, and consumer goods companies seeking more efficient facilities, all competing for a supply of modern warehouses that continues to fall short of prime availability.

The half-year numbers indicate the strategy is being executed within guidance. Distributions per share rose 5.1% to 72.57c, supported by like-for-like rental growth of 5.3% in the South African portfolio, while net asset value per share increased to R17.43. The group reaffirmed its full-year distribution growth guidance of 5%-7%, targeting 147.7c-150.5c per share.

Taverna-Turisan said the group’s development track record continued to create opportunities for expansion. “Our track record of developing world-class facilities for our clients continues to unlock opportunities for the fund to grow,” he said.

The fund is also directing capital into operational infrastructure across its portfolio, with installed solar capacity of 28.2MW covering 75% of its properties, and a water-reuse facility at Riverfields scheduled to begin operating in the second half of the 2027 financial year. These commitments sit alongside the core mandate of redeploying UK exit proceeds into South African logistics, a pipeline management says is sized to absorb the freed-up capacity while keeping gearing and distribution commitments on their stated course. Whether the remaining UK sales, starting with DHL Leeds, land on schedule will shape how quickly that redeployment is complete.