Fairvest, the listed real estate investment trust (Reit) which invests primarily in shopping centres in rural areas and small towns, on Wednesday released financial results for six months to end March 2022, wherein it proved itself to be a reliable dividend payer for its shareholders.
The company declared distributable income of 61.52 cents per A share and 21.33 cents per B share. These were the first set of financial results for the group since it took over Arrowhead Properties in January 2022.
The two groups merged on January 26, creating a property company holding a diversified portfolio of retail, office and industrial properties valued at a R11.77bn, across all of the country’s nine provinces.
Fairvest’s portfolio now comprises 143 assets with a gross lettable area of 1 160 585m2 , with retail properties representing 65%, office 24% and industrial 11% of the portfolio. The group also holds a 61% interest in residential property owner, Indluplace Properties, and an 8.6% interest in diversified landlord, Dipula Income Fund .
Fairvest CEO, Darren Wilder said that the property sector, along with South African economy, had been severely impacted by the ongoing effects of the Covid-19 pandemic, as well as the civil unrest and floods in Kwa-Zulu Natal. Despite this challenging environment, Fairvest reduced vacancies in the period and achieved a strong performance from its directly held property assets.
For the six months to end-March 2022, gross lettable area of some 139 000m² came up for renewal, of which more than 123 000m² was renewed or re-let, representing an aggregate retention 88.5% of GLA. Vacancies at the end of the period was 4.9% for retail and only 1% for industrial.
Office vacancies were 16.7%, as the sector remained under pressure in the wake of the pandemic, a weak economy and more and more people wanting to work from home. While the reletting required a negative rental reversion of 7.8% overall, the weighted average lease length was sustained at 28 months, despite the tough environment. The weighted average lease escalation across the portfolio was 6.7%.
The retail and industrial portfolios performed well in the tough economic cycle, while the majority of the office portfolio held its own in a sector under pressure. Wilder said that the team has identified only about a quarter of the office portfolio where performance was regarded as problematic, and these properties would receive special attention.
Fairvest made good progress towards moving toward its medium-term goal of a retail only fund focused on the under serviced market. The group has disposed of a number of properties over the past 18 months.
During the period under review Fairvest contracted for four disposals worth R61.6m at a 1.5% discount to book value, which Wilder said is commendable in the current environment. The disposals comprised two retail and two industrial buildings.
At the end of March, Fairvest had debt of R6.11bn, which represented a loan to value (LTV) ratio of 39.2%, well within the group and portfolio LTV covenants.