Fairvest has warned that SA’s high inflation, interest-rate hikes, power cuts and dysfunctional local municipalities will bog down economic growth and create a tough operating environment for the owner of retail centres in rural areas and small towns.
“Despite these impediments, Fairvest continues to successfully implement the strategic objectives of the group by de-risking the balance sheet, reducing vacancies and disposing of noncore assets,” Fairvest CEO Darren Wilder said in the results for the six months to end-March of the company, valued at R4.23bn on the JSE.
The real-estate investment trust (Reit) declared a higher interim dividend of 64.60c per A share, but a lower one of 20.97c per B share at a payout ratio of 100% and reaffirmed its guidance of between 40.50c-42c for B shares for the full financial year.
Net operating income, revenue minus property expenses, rose 5% to R561.2m and vacancies improved by 1.23 percentage points to 5.96%.
The portfolio of the diversified real estate investment trust (Reit), valued at R11.9bn, comprises 137 retail, office and industrial properties with a gross lettable area (GLA) of 1.13-million m², about the size of 157 soccer pitches. Just more than two-thirds of these are retail and just over half of the properties by GLA are in Gauteng.
Fairvest and Arrowhead Properties merged during the 2022 financial year as Fairvest looks to become a convenience retail fund by selling off noncore assets.
It also owns a 60.9% stake in residential-focused Indluplace Properties and a 5.1% interest in diversified Reit Dipula, but during the reporting period SA Corporate Real Estate announced that it aimed to buy Indluplace.
Fairvest welcomed the proposal as it looks to get rid of residential interests.
In other financials, distributable income from Fairvest’s operations improved 0.9% to R308.5m, while total distributable income, which includes dividends from Indluplace and Dipula, declined 2.8% to R340.3m.
Net asset value (NAV) per share, used to assess the value of a Reit, decreased 8% to R13.71 for A shares and 2.9% to R4.77 for B shares.
The group’s debt stood at R4.8bn, presenting a loan-to-value (LTV) ratio of 38.4%, a slight increase from September 2022.
To offset the impact of load-shedding and the ongoing problems at state-owned power utility Eskom, Fairvest continues to invest in back-up power solutions and alternative energy sources such as solar systems.
It has 38 fully functional solar plants providing 11.7% of the portfolio’s total electricity demand.
“Over a six-month period, Fairvest spent R8.3m in diesel, recovering R7.2m,” it added.
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