Equites Property Fund interim HEPS down 64%

Equites Property Fund, a specialist logistics property group, recently reported a mixed financial performance with interim revenue increasing by about 9 per cent, but headline earnings plummeting by 64 per cent. The group attributed these challenges to a capital-constrained and higher interest rate environment. Andrea Taverna-Turisan, the CEO of Equites Property Fund, shed light on the factors that weighed on earnings during this period in an interview with CNBC Africa. Taverno-Turisan highlighted the impact of rising interest rates in both the UK and South Africa, leading to constraints on capital availability. The company's debt profile, despite being hedged, faced challenges as hedges matured, eroding earnings. As a result, Equites had to revise its strategy after years of successful portfolio growth to address the changing market dynamics. This adjustment included selling non-core assets and recycling capital to strengthen the balance sheet and support the development pipeline. Taverno-Turisan emphasized the importance of maintaining a robust balance sheet for a property counter, especially in a capital-constrained environment. Equites aims to reduce its loan-to-value ratio to around 35 per cent by year-end while ensuring sufficient capital for its development projects. However, the CEO acknowledged the cost implications of market conditions, such as construction inflation driven by steel price movements and currency fluctuations. Despite these challenges, Equites witnessed significant rental growth in both South Africa and the UK, signaling resilience in the property sector. Taverno-Turisan highlighted the critical role of property as a long-term investment, emphasizing the need to navigate through market cycles patiently. The CEO also discussed Equites' record low vacancy rates, attributing the high demand for top-quality space to global trends favoring efficient and modern facilities. Furthermore, the supply chain disruptions caused by the pandemic have bolstered the demand for high-quality logistics properties, driving occupancy rates to historic lows. Looking ahead, Equites expects growth primarily from its South African operations due to more favorable market conditions compared to the UK. The company faces challenges in allocating capital effectively in the UK market, given the prevailing interest rate and gearing dynamics. Despite the uncertainties, Taverno-Turisan remains optimistic about the long-term prospects of the property market, citing strong demand drivers and rental growth potential. The interview with the Equites CEO provides valuable insights into the company's strategic responses to market challenges and its outlook for future growth.