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Equites Property Fund has been the standout Real estate investment trust (Reit) on the JSE, bucking the trend of the sector for the better part of the last three years. In this interview with BizNews editor-at-large Jackie Cameron, the CEO of Equites dissects the reasons for the company’s outperformance relative to its peers and the future prospectives of the logistics and warehousing real estate asset class. – Justin Rowe-Roberts
Equites CEO on its UK diversification strategy:
I’d say somewhere in the region of just north of 30%, and it’s all in the United Kingdom. My history exposed me to being part of a consortium of people that owned a whole load of warehouses in the United Kingdom. I proposed a situation to my partners in that business to either bring that portfolio into Equities or to look to develop it through an institutional platform. My partners didn’t think that was a good idea.
So I removed myself from that partnership at the time. I got paid out and then came to my board and recommended that we use the UK as a platform to hedge our South African investment in a first world currency. The board approved that and the rest is history. We went into a market which, as it turned out, was at the cutting edge of commerce.
On whether Equites would venture into other real estate asset classes:
No, we are a logistics fund and we came to market with that. I think one of our successes has been that we’ve stuck to our knitting. We’ve been very true to what we said we would do and how we would do it. Our expertise is in development as well. We fundamentally understand our product inside out.
Where we get tenants that partner with us, it really is a partnership and we hold their hand through the process. That has happened with multiple partners in various buildings across our portfolio.
On how Equites identifies opportunities:
We actually identify areas that we want to be in and we end up controlling land in those areas. The reason we want to be in those areas is that we believe that there will be good rental growth opportunity.
On the attraction in investing in Equites:
I think it’s transparency. We’ve got a weighted average lease expiry profile of north of 10 years, which basically means that there’s a lot of guarantee that rental income will be coming in. We don’t play in any other parts of the property sector.
The combination of that gives the opportunity for good rental growth, which translates into an improved income profile over time. Which in return will hopefully have a positive spin on on the share price.
On the challenging South African macroeconomic environment:
I’d like to think that Mr Ramaphosa is putting steps in the right direction in terms of really getting to grips with the historic corruption and that money is being put to use in a more efficient way for the benefit of all South Africans. I do believe that as we grow the middle class, accountability will become much more important across the country.
I think we’ve got quite a lot to be positive about – but we do have some massive challenges. The difference between winning and losing in a very competitive world is small. We as Equites remain positive about South Africa.
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