June 3 18:11
Fairvest has released results for the six months to end-March 2024, declaring an interim distribution of 67.83 cents per A share and 21.24 cents per B share. The group is being transformed into a retail focused fund following its 2022 takeover of Arrowhead Property Fund.
“Fairvest is operationally strong and agile in a tough environment. We are very pleased with the group’s performance in the past six months. We generated strong like-for-like net property income growth of 7.0%, relative to 4.4% at year-end,” Fairvest CEO, Darren Wilder said.
“We achieved positive leasing, with rental reversions of +3.0% relative to +2.8% at year-end and increased the weighted average lease expiry from 29 to 31 months over the same period. We also continued to dispose of non-core assets and strengthened our balance sheet with the proceeds,” he said.
Vacancies increased from 4.5% at September 30 2023 to 5.3%. Gross lettable area of 133 149m² was renewed at positive rental reversions of 3.0% overall and an aggregate retention rate of 87.1% was achieved. New leases in respect of 80 092m² were concluded. The weighted average lease escalation across the portfolio was 6.6%. The weighted average lease expiry was 31 months.
Property expenses increased 8.8%, driven by above-inflation increases in municipal costs, according to Wilder.
Wilder said the group’s strategic objective was to continue its move towards a retail-focused fund by disposing of non-core assets. Since January 2022, Fairvest has disposed of properties worth more than R1.3bn. Three office disposals worth R259.5m were completed during the reporting period at a 0.4% premium to book value. These offices had a 25.5% average vacancy rate. Three more properties worth R20.8m are currently classified as held-for-sale pending registration and transfer. Fairvest invested in its property portfolio over the interim reporting period, spending R113.9m.
Fairvest reduced its loan-to-value (LTV) from 33.3% to 32.6% through disposals. It sat within the group and portfolio LTV covenants for its facilities. The weighted average interest rate for the period fell to 9.63% from 9.74% at the end of September 2023. The debt portfolio had a weighted average maturity of 1.9 years and 76.9%% of the debt was hedged. The group’s interest rate swaps have a 1.3-year weighted average maturity. As at March 31 2024, the group had cash on hand and undrawn debt facilities of approximately R651.9m to apply towards growth.
Fairvest invested in renewable energy, with an additional R27.4m invested in solar initiatives during the period. Fairvest operates 39 solar plants with 17.8MWp of installed capacity, which generated 14.4% of the combined portfolio’s electricity requirement for the period. Nine more plants are in stages of approval and implementation, which will add a further 5.2MWp of capacity. Five solar-generator integration projects have also been commissioned, and two more are currently under construction.
Water management was focus area, with 17 groundwater harvesting plants in operation and two more projects in the construction phase. Smart monitoring equipment was installed at 22 properties with another five on order and water savings projects are in operation at several properties.
Fairvest anticipated net property income growth, on a like-for-like basis, to exceed inflation and positive renewal reversion from all sectors for the full financial year.
Wilder said that given the substantial progress made in implementing its stated strategy and optimising the portfolio, distributable earnings per B share were 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 compared with 41.29 cents per share at the end of September 2023. The company’s dividend payout ratio of 100% of distributable earnings would be maintained.
As a real estate investment trust (Reit), Fairvest is required to pay a minimum 75% of its distributable income each financial year as a dividend.
alitair@propertyflash.co.za
