Fairvest, owner of retail centres in rural areas and small towns, sold more than R1bn worth of noncore assets in its most recent financial year as it transitions to a retail-focused real estate investment trust.
The disposals are in line with its objective to move towards becoming a retail-focused fund. Noncore disposals will continue with proceeds used to reduce loan to value.
“We are seeing buyers in the market, but we will only sell when we can achieve best prices for our assets,” CEO Darren Wilder told Business Day.
Wilder said while the focus remains to sell noncore assets to achieve its strategic objective, they are not willing to dilute earnings for the sake of selling.
Of the sold assets, seven valued at R338m were finalised at an average yield of 10.5% and a 3.2% premium to book value. A further six properties valued at R307.3m are held for sale, pending registration and transfer.
The group’s portfolio of 134 properties in SA — 74 retail, 34 office and 26 industrial — is valued at R12bn and has a gross lettable area (GLA) of 1.1-million square metres, about the size of 158 soccer pitches. It also holds a 5% stake in Dipula Income Fund.
Leasing activity increased with 391 new leases signed at the end of August from 188 in March. Renewals increased from 239 to 457.
Vacancies reduced from 5.96% to 5.3%. Rental reversions were positive at 2.8% overall with retail recording 3.3%, office minus 0.4% and industrial 5.8%.
Like-for-like net property income increased 4.4%, helped by vacancies improving 1.4 percentage points to 4.5%, but total distributable income fell 5.4% to R673.5m.
Wilder said SA Corporate Real Estate Limited acquired all the issued shares of Indluplace at R3.40 per share, equating to R651.4m for Fairvest’s shareholding.
Fairvest CFO Jacques Kriel said net debt ratio reduced from 38.1% to 33.3% due to asset disposals. Interest rate cover ratio is 2.5 times — above the two times cover required by its funders.
At year-end, Fairvest had cash and undrawn debt facilities of about R1bn with consolidated debt pool comprising R3.1bn of debt facilities, of which R2.1bn is new.
The company, which has a dual-class share structure to cater for investors with different risk profiles, forecasts distributable earnings per B share will improve 0.5%-2.9% to 41.50c-42.50c in the financial year ahead.
Fairvest will pay a final dividend of 67.9361c per A share and 20.32351c per B share.
Update: November 29, 2023
This article has been updated with new information from Fairvest management.
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