We’re cheap compared to international like-for-like peers – Equites CEO Andrea Taverna-Turisan

Warehousing and logistics focused property fund Equites has been a standout performer within the South African listed property universe since listing in 2014. Equites chief executive Andrea Taverna-Turisan unpacked the real-estate investment trusts half-year results, with the most important financial line items improving on the prior period. Andrea says that although Equites is trading at a premium to its book value on the local bourse – which is very unusual for property counters – he states that like-for-like international peers are trading at far greater premiums due to the attractiveness of the asset class. – Justin Rowe-Roberts

Andrea Taverna-Turisan on the South African property valuations remaining flat on the prior period: 

I think we were quite conservative there. We’ve got nine properties there – I think six of them were externally valued and very, very conservative. I mean, I think we were quite conservative. I mean, there was not much that was up and there was not much that was down. A lot of it was actually very flat. We did value 70% of the portfolio externally. Whilst the node – I completely agree with you – is seriously desirable and I think the Attacq team have done a phenomenal job in unlocking it all. We’re very pleased with the two buildings and the one building in construction that we will be going into a 50/50 with (Attacq) probably in the next couple of weeks. We’ve got Competition Commission approval. We are very familiar with it, but also we like it a lot.

On the ten-fold increase in the use of solar power:

We started it probably about two and a half years ago on the basis that we wanted to use the cost increases that were being pushed through by Eskom on a year-to-year basis. We wanted to use that as a way to attract quality tenants if you like. And our strategy on photovoltaic (PV) is that it is actually given to our clients. So if you are one of our tenants and you’re one of the buildings that does have PV on the roof, you do receive that completely for free. It is an integral part of the building, which we believe to give the benefit of to the tenant. And I think it’s definitely worked. We’ve got a lot of very happy clients.

On Equites trading above its net asset value per share:

Well, if you were going to compare us to our international peers we are trading at a significant discount. They’re trading at significantly higher premiums than we are. I think the sector, if you look at it globally, was trading at a substantial premium because of the desirability of the asset class. But also, I think the scarcity factor is driving rental growth and especially in a market like the UK, where there is definitely a lack of land that can be developed with these massive boxes. And the consequence of that is that land prices that meet the expectation of the tenants are few and far between. Which means pricing goes. Building cost is also starting to go in the UK as well. You have building inflation that’s coming through pretty aggressively at the moment. And so the consequence of that is you’re actually seeing significant rental growth. So in South Africa, if we get a bit of growth in the economy, but substantial growth that gets us beyond the pre-Covid levels and we can start pushing on from there. I mean, there’s definitely construction inflation with steel prices having moved dramatically this year. We saw the first time, I think in a couple of years we actually see some rental sort of movement, should we say. Which is positive.

On work from home vs the traditional office set up: 

I’m old school. I’m a traditional set up kind of guy. I’m of the opinion that there’s certain administrative functions that you can execute from home. And I think the need to maybe be in the office five days a week, maybe that gets curtailed.

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