Low-risk tenant base helps Fairvest weather the storm
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PRETORIA – Fairvest, the listed real estate investment trust (Reit), anticipates distribution growth of between 8 percent and 10 percent for its 2019 financial year despite the lacklustre economic outlook for South Africa.
Chief executive Darren Wilder said on Tuesday that they expected to see weaker trading performances from their tenants but the portfolio with its low-risk tenant base remained well positioned to continue to achieve strong sustainable property growth despite the macroeconomic headwinds.
Wilder’s comments follow Statistics SA reporting that the economy had shrunk 0.7 percent in the second quarter, falling into a technical recession.
Fairvest has a portfolio of 44 properties valued at almost R3 billion, with 95.4 percent of these comprising retail properties.
The retail assets were weighted towards non metropolitan and rural shopping centres, plus convenience and community shopping centres, servicing the lower-income market in high-growth nodes close to commuter networks.
Wilder said that while they were seeing a fall in turnover from the anchor tenants and almost flat trading densities, the number of shoppers coming to their centres remained fairly stable but their expenditure was under pressure.
But Wilder said a large portion of business in their centres was from home-remittance income - from people in the larger cities sending money home to their parents, and social grant income.
“That portion of the market has a very high percentage of disposable income in comparison to the other markets. They are not shopping for watches and jewellery. It’s basic shopping and they are there every day spending R60 to R80 a basket.”
Wilder added that Fairvest had limited exposure to retailers that were under pressure, such as Edgars. “We have been strategic in our acquisition process and avoided those kinds of assets"