Industrial-focused landlord Equites Property Fund remains bullish despite economic headwinds in its two key markets – SA and the Brexit-hit UK. The counter raised R750 million last week in its second oversubscribed capital raise since the beginning of this year.
It raised R710 million in February, bringing the total it has raised on the JSE this year to R1.46 billion. For both book builds the fund was originally targeting R500 million. It is one of a handful of listed property companies to carry out capital raises over the past year.
In a Sens announcement on August 1, Equites confirmed that it raised R750 million through the issuance of 37 091 989 shares at 2022 cents per share. Equites sponsor Java Capital acted as sole bookrunner.
In an earlier statement announcing the bookbuild, it said it was authorised to issue the new shares at a maximum discount of 5% to the 30-day volume weighted average traded price per Equites share.
Five years of capital raising
Speaking to Moneyweb on Friday, Equites CEO Andrea Taverna-Turisan said the company had carried out capital raises every year since listing on the JSE in 2014. “With this latest bookbuild, we have raised just shy of R1.5 billion since the beginning of this year. Our focus will continue to be on the SA and UK specialist logistics property market, which is performing well despite economic issues in these countries.”
While Equites is eyeing acquisitions, Taverna-Turisan does not want to mention the specifics just yet. However, he says the latest capital raised will also go into its pipeline of logistics property developments. The fund has a property portfolio worth more than R12 billion, with around 68% of this in SA and the balance in the UK.
Taverna-Turisan says Equites opted for another capital raise to maintain its strong balance sheet. “If we took on debt to finance our development pipeline and possible acquisitions, our loan-to-value ratio could have breached the 40% mark and we did not want that. We also wanted to still have capacity to access debt if we have to,” he noted.
“The commercial property market is changing. For 30 to 40 years retail was king both in SA and the UK, but with the move to ecommerce and consolidation of warehouses, the logistics sector is growing globally. Equites has best-in-class logistics warehouses and we believe it will continue to do well,” he added.
Equites, which also listed on the A2X Markets last month, is the one of the top-performing South African real estate investment trusts (Reits). For its 2018 financial year ending in February, it posted distribution per share growth of 11.8%. Its share price is up some 5% this year.
Garreth Elston, chief investment officer at Reitway Global, says Equites’ attractiveness lies primarily in its offshore logistic properties, despite these being in “pre-Brexit Britain”.
He notes: “The logistics and warehousing sector has been the top-performing sector in global terms this year, continuing its strong run from last year. The UK’s logistics space has proven to be very resilient, and with the UK’s strong online shopping penetration, coupled to the desire for more efficient properties closer to the end-user, Equities’ UK properties have performed well.”
Elston says SA remains a challenging market, as local logistics demand cannot be uncoupled from a moribund economy.
“Despite this the Equites portfolio has performed well, and its metrics are positive. The concern for the company [and all its local logistics competitors] is that economic growth is vital to drive South African portfolio growth.”
“Equites remains one of a handful of sector specialists that provides South African investors with targeted, best-in-class exposure,” he adds.