Fairvest Limited, the JSE-listed real estate investment trust (Reit) is on track to meet its earnings and dividend guidance, CEO Darren Wilder said on Monday September 12.
Wilder has been in charge of Fairvest for a number of years during which he has reworked the Reit’s strategy such that it focuses on being a retail centre owner. These assets have tended to be in semi-urban areas and small towns. Then in 2021, Fairvest acquired a majority stake in Arrowhead Properties, a diversified property fund. Eventually, the two groups merged in early 2022, with Wilder being CEO of a new, bigger Fairvest.
This meant Fairvest would effectively own a number of retail centres but also offices and industrial properties, which were previously in Arrowhead’s portfolio. Wilder said the merger would not weaken Fairvest’s earnings going forward, despite the offices having challenges like relatively high vacancies as more people work from home permanently post the pandemic and businesses shut their doors amid an economy without growth momentum. Fairvest’s aim was to sell its offices and industrial properties so that it was purely a retail fund.
“We will recycle out of industrial, office and residential assets and move to owning retail assets only. This is as we continue to simplify our business,” said Wilder.
Fairvest will dispose of its entire office portfolio, which includes 38 properties that account for 26.6% of the fund’s assets by space and contribute 25% to revenue. The properties include 10 offices in Houghton, Rosebank, Sandton and Pretoria which have a 73% vacancy rate. Once these ten are sold, this will reduce overall vacancies to 5%. Office vacancies across the portfolio sit at 15.4%.
The company would achieve a weighted average growth on lease expiry of between 2% and 6% and maintain vacancies at below 7% of its portfolio’s total gross lettable area. Its loan-to-value (LTV), which measures its debt compared with its asset base, would remain below 40% for the foreseeable future.
“We expect our earnings to grow as per guidance; between 0% and 5% ahead of RLP guidance,” said Wilder.
Fairvest’s total portfolio is worth R11.8bn, spanning 1 149 170m2 of gross lettable area, and the company has a market capitalisation of R5.5bn. The average value per property in its portfolio is R84m. As much as 48.5% of its properties are retail, 26.6% are office and 24.9% are industrial. It also owns 61% of Indluplace Properties, which is a residential fund and 5.1% of Dipula Income Fund, which is a diversified group.
Fairvest has been a reliable investment for more than a decade, with it growing dividends at rates above consumer price inflation each year.