<\/p>\n
You can also listen to this podcast on iono.fm here.<\/p>\n
SIMON BROWN: I\u2019m chatting with Andrea Taverna-Turisan, CEO of Equites Property Fund. Andrea, appreciate the time. Distribution of 5.3%. Your like-for-like rental growth 5.3%. Good numbers in the inflation environment \u2013 particularly your like-for-like rental growth. We could probably say, I don\u2019t know, 3%-odd inflation. You\u2019re getting a little ahead of that.<\/p>\n
ANDREA TAVERNA-TURISAN: Interesting. I think our rental growth in South Africa was slightly better than that. I stand to be corrected \u2013 I think it was 6.7%. Our distribution growth was 5.3%.<\/p>\n
Your natural growth is probably a little bit lower than that, but we do have the benefit of these long-dated leases in our portfolio with very, very low vacancy. It\u2019s 0.2% vacancy. It means that we were able to distribute through to shareholders.<\/p>\n
So we are obviously extremely pleased with the outcome. The South African portfolio in particular behaved extremely well in the last financial year and it looks like it will do for a couple of years to come still.<\/p>\n
Read: Equites gains from e-commerce growth<\/p>\n
SIMON BROWN: Yes. A 0.2% vacancy is to all intents and purposes full. Your tenants are mostly A-grade. In a sense a very de-risked portfolio. To your point, a good couple of years locally ahead.<\/p>\n
ANDREA TAVERNA-TURISAN: I know we have one institutional shareholder that is quite long on us and basically deems us to be a \u2018bond proxy\u2019, as they say. It\u2019s a bond-like coupon that you get which grows a little bit every year and technically should be safe as houses. I think that is probably a realistic reflection of what our business is. We\u2019re never going to give you 20% growth, but we\u2019re also not going to fall off a cliff.<\/p>\n
SIMON BROWN: Absolutely. What you are doing, though, is some speculative developments \u2013 although in the scope of things they\u2019re quite small. There\u2019s one at Jet Park, 17 500 GLA [gross lettable area]. They are small, but you\u2019re seeing demand for them.<\/p>\n
ANDREA TAVERNA-TURISAN: Yes. I find amazing the number of businesses that are making very important decisions in their lives and don\u2019t plan ahead. Obviously we look to play a role in that market. As you said, they\u2019re not massive buildings but they\u2019re decent-sized buildings nonetheless. We have a portfolio of about 1.5\u00a0million square metres.<\/p>\n
So to speculate, on sort of 20\/30\u00a0000m\u00b2 of space we believe that\u2019s a risk worth taking kind of thing.<\/p>\n
Read: Equites bullish on SA property space<\/p>\n
SIMON BROWN: I take your point \u2013 absolutely small. But you have the new logistics facility for Tiger Brands. Even that\u2019s around 90\u00a0000m\u00b2. That, of course, goes in tenanted. And you say \u2018around\u2019. These are not the warehouses of our youth. These are state of the art facilities.<\/p>\n
ANDREA TAVERNA-TURISAN: That\u2019s correct. You sum it up. And I think what maybe a lot of people don\u2019t understand is that the technology and the investments that these organisations make inside the building are normally worth more than the actual building itself.<\/p>\n
So, while they\u2019re signing 10-year leases, the likelihood is they\u2019ll probably be amortising that equipment over a sort of 20\/30-year period, so we see them as tenants that will be there for the long haul.<\/p>\n
I suppose the biggest risk to any business is tenant failure, and no one is immune to that. We\u2019ve seen some incredible businesses that everybody thought were the darlings of the world exist no more. So we must never be sort of arrogant that no one can fail. Things can fail, and we\u2019re mindful of that.<\/p>\n
What\u2019s quite nice about our business is that we do conditioning reports on our buildings every year \u2013 in fact twice a year.<\/p>\n
A mini report at half year, and a full report at year-end to ensure that our tenants maintain our buildings appropriately.<\/p>\n
But during that process our operations guys get to see what\u2019s going on inside those buildings. Obviously, if a business is not doing so well, you see very quickly that the warehouse is empty.<\/p>\n
Read: Equites hikes dividend as strong logistics portfolio delivers<\/p>\n
SIMON BROWN: [Chuckles] I take your point. You walk in and there\u2019s nothing there and okay, something\u2019s not going well here.<\/p>\n
ANDREA TAVERNA-TURISAN: Yes, exactly.<\/p>\n
SIMON BROWN: You\u2019ve some debt expiring, but a really strong balance sheet. You have good cash. You have cash coming from some UK sales. We\u2019ll touch on that in a moment. Your LTV [loan-to-value] is 35.1%. The balance sheet is looking really, really good.<\/p>\n
ANDREA TAVERNA-TURISAN: Yes. The treasury team has done sterling job. Cost of debt low. LTV was 35.1% at period end but, as you said, with the UK sale that\u2019s probably sitting plus\/minus around 25% now.<\/p>\n
We have a portfolio of developments coming through the system, already contracted, of about 160 000m\u00b2. And just to give you context, the value of that is probably about R1.8 billion. And then we\u2019re currently in process of RFT [Request for Tender], where we are in every instance one of only two bidders left in the process for a further 170 000m\u00b2, which is a further R2 billion.<\/p>\n
We probably won\u2019t win them all. It\u2019s impossible to win them all, but we\u2019d like to think we\u2019ll get a fair share of that.<\/p>\n
Read: Equites spends R3.2bn on new developments<\/p>\n
SIMON BROWN: Are you seeing certain sectors like FMCG [fast-moving consumer goods], for example, showing more demand \u2013 or is it spread across the economy?<\/p>\n
ANDREA TAVERNA-TURISAN: Across the board we are seeing it from retailers. We are seeing FMCG, we\u2019re seeing it in third-party logistics, and we\u2019re also seeing it quite a lot. Also last-mile delivery guys.<\/p>\n
SIMON BROWN: Let\u2019s touch on the UK. Whenever we chat, you have been sort of exiting. As you said, there were five more properties announced earlier this week. How much business is left in the UK? What percentage is still in the UK?<\/p>\n
ANDREA TAVERNA-TURISAN: Oh, it will be a single figure now. A single-figure percentage. This was the big one, if you like. That finally closed on Tuesday, which was a process. I\u2019m obviously very pleased with the outcome. What it does do now is it frees up the capital to focus on what we\u2019ve got here. It also frees up executive time and, I suppose, my mind in particular, to really drive the new business element of our business.<\/p>\n
Read:
Equites looks to exit UK, turns focus locally
Equites mulls UK exit to focus on SA market<\/p>\n
The joint ventures, the likes of Shoprite, have taught us a few tricks in terms of how to use the Reit joint-venture status to the benefit of the tenant, and we believe that there could be scope for some meaningful sale-and-leaseback opportunities in the next two to three years.<\/p>\n
Over and above that, there\u2019s a really, really healthy development pipeline coming through. Within that, obviously we\u2019ve got a great relationship with Shoprite where we continue to learn every day from them.<\/p>\n
Also they continue to just go from strength to strength, and we don\u2019t think that their requirement is fully \u2013 what\u2019s the right word? \u2013 reached, if you like. We believe that there\u2019s a bit more coming from them in the next sort of two to three years as well. So that will all add to the pie.<\/p>\n
Read: Equites reports solid results, says Shoprite deal is still on<\/p>\n
SIMON BROWN: Every time I speak to Pieter Engelbrecht, he\u2019s telling me that there\u2019s a lot coming for a long time still, and I would never bet against it. And an LTV [loan-to-value] in the mid-20s, a lot of capacity there, a lot still to do.<\/p>\n
We\u2019ll leave it there. Andrea Taverna-Turisan, CEO of Equites Property Fund, appreciate the time.<\/p>\n
#shines #Equites #Property #Fund #exit<\/p>\n","protected":false},"excerpt":{"rendered":"
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