Fairvest will pay out its full distributable income after releasing its first results since merging with Arrowhead in January to become the largest SA-focused real estate investment trust (Reit) and expects it to increase in its 2022 financial year.
The company announced on Wednesday, in its results for the six months to end-March, that it will pay out 61.52c for every A-class share and 21.33c for a B-class share, amounting to a total payout of R350.2m.
This is a slight increase of 0.1% year-on-year, but the company forecasts this will rise to 126.22c and 41.48c for its 2022 financial year, based partly on the assumption that tenants can absorb increases in municipal and utility costs, with these costs making up by far the most of Fairvest’s operating costs with 64%.
The upbeat forecast is despite CEO Darren Wilder expecting the tough operating environment to continue in the short to medium term as record high unemployment persists, local economic growth remains dampened and the Reserve Bank hikes interest rates to battle higher inflation, in part caused by the war in Ukraine.
He added that the pandemic, the civil unrest in July 2021 — during which 21 of its properties were damaged — and the recent floods in KwaZulu-Natal also affected the local property sector.
“The remainder of the 2022 financial year will be used to focus on further bedding down the merger and implementing our new strategic direction,” the company said.
The tenant retention rate is at 88.5% while vacancies were reduced to 7.2%. Office vacancies remain the highest, with 16.7%, followed by retail at 4.9% and industrial with 1%.
Fairvest’s portfolio comprises 143 retail, office and industrial properties valued at R11.77bn, with an average value of R82.3m, and gross lettable area (GLA) of 1.16-million square metres. Just less than half of its GLA is retail, more than 25% is office space and the rest industrial.
Some properties are held directly and others indirectly through subsidiaries. Fairvest has a 61% stake in Indluplace and an 8.6% interest in Dipula. Gauteng generates most of its revenue, more than one third.
The company is expanding its solar plants as load-shedding and other problems at Eskom persist. It operates 33 solar plants, which supply 14.2MW, almost 10% of its electricity, and a further six solar plants are under construction, which will add 2.4MW.
Fairvest Property, first listed on the A2X in October 2019, relisted on the A2X in May.
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