Fairvest lifts forecasts as it focuses on growing its retail asset base

Fairvest Property Holdings CEO Darren Wilder Picture: Supplied

Fairvest Property Holdings CEO Darren Wilder Picture: Supplied

Published Jun 4, 2024


Fairvest Property Holdings, the JSE’s largest SA-focused REIT, lifted like-for-like property income 7% in the six months to March 31, well up from the 4.4% reported at the previous year-end and has also lifted its guidance for the full year.

An interim distribution of 67.83 cents per A share and 21.24 cents per B share was declared, with the A share and B share up 5% and 1.38% compared with the same period in 2023. Fairvest has a R11.8 billion portfolio of 131 properties, comprising 74 retail, 29 office and 28 industrial properties countrywide.

“Fairvest is operationally strong and agile in a very, very tough environment. We are very pleased with the performance in the past six months,” CEO Darren Wilder said. He said their aim to become a South Africa retail-focused property company was based on their experience that a focused property company like this would outperform a company with diversified assets.

At present about 70% of Fairvest’s revenue and 52% of gross lettable area comprised retail assets. The disposal and recycling of other assets would not be rushed or undertaken at the expense of shareholder or appropriate returns on those assets, Wilder said in an interview.

He anticipated another good financial performance in the next six months, which is why they had forecast dividends at the upper-end of their guidance. Net property income growth on a like-for-like basis was expected to exceed inflation from all sectors for the full year. This was even though the challenging operating environment was likely to persist.

“Given the substantial progress made in implementing our strategy and optimising the portfolio, distributable earnings per B share are now expected to be at the upper-end of the guidance range issued in November, 2023 of between 41.50 cents and 42.50 cents per share (September, 2023: 41.29 cents per share). The dividend payout ratio of 100% of distributable earnings will be maintained,” the group said in a statement.

Positive leasing was achieved in the first half, with rental reversions of +3% relative to +2.8% at year-end and increased the weighted average lease expiry from 29 to 31 months over the same period. The aim was to improve the average lease expiry to 36 months, he said.

The balance sheet was strengthened with the proceeds from the disposal of non-core assets.

Vacancies increased from 4.5% at September 30, 2023 to 5.3%, while the aggregate retention rate was at 87.1%. New leases for 80 092 square metres were concluded.

Property expenses increased 8.8%, mainly driven by above-inflation municipal costs. Wilder said expenses and administration costs had been well maintained,

Since the merger in January 2022 with Arrowhead Properties, Fairvest had done more than R1.3bn of disposals.

In the past six months, three office disposals valued at R259.5 million were concluded at a 0.4% premium to book value. These had a 25.5% average vacancy rate. Three more properties valued at R20.8m were being held-for-sale pending registration and transfer.

The loan to value ratio decreased from 33.3% to 32.6% through disposals.

There was R651.9m cash on hand and undrawn debt facilities to apply towards growth.

An additional R27.4m was invested in solar initiatives during the period. Fairvest currently operates 39 solar plants with 17.8MWp of installed capacity, which generated 14.4% of its combined portfolio’s electricity requirement for the period.

Nine more plants were in various stages of approval and implementation, which would add a further 5.2MWp of capacity. Five solar-generator integration projects had also been commissioned, and two more were under construction.

Water management was also a significant focus area, with 17 groundwater harvesting plants in operation and two more projects in the construction phase. Smart monitoring equipment had been installed at 22 properties with another five on order and water savings projects are in operation at several properties.