Property group Fairvest is looking to refinance all its debt that matures in the next 12 months as its finance costs come down after several interest rate cuts by the SA Reserve Bank.
“At face value the current liabilities are higher than the current assets. However, all debt facilities expiring in the next 12 months are expected to be refinanced. Furthermore, the group has access to undrawn debt facilities of R469.6m,” the company said, after the release of its interim results on Friday.
The group reported positive letting activity in the six months to end-March, with 236 new deals and 216 renewals concluded over the period under review.
This saw the company post half-year revenue of just more than R1bn, while net income came in at R453.6m compared to R329.85m a year ago.
The group has entered into interest rate swaps to hedge its exposure to interest rate fluctuations on its debt. The interest rate swaps of R3.2bn equate to 70.8% of debt being hedged.
At the end of the reporting period, Fairvest had loans of R4.4bn.
The company said its finance costs in the period reduced largely due to the Bank lowering the repo rate over the past 12 months.
The group, which owns 127 retail, office and industrial properties worth nearly R13bn, last week beefed up its portfolio, after concluding agreements with various parties to acquire five retail properties located in KwaZulu-Natal and the Western Cape for R477.7m.
“The acquisitions are consistent with the group’s strategy of investing in retail assets servicing the previously disadvantaged communities and located close to community centres and transport networks,” CEO Darren Wilder said.
About 70% of the company’s revenue is generated from its retail properties. Like other property companies, Fairvest reported an increase in property costs as administered prices surge.
The landlord’s property expenses increased by 8% in the period. It said this was largely driven by above-inflation increases in municipal costs enforced by various municipalities and Eskom.
Wilder said the company was upbeat about its prospects.
“The forecast assumes no material deterioration in the prevailing macroeconomic environment, no major tenant or corporate failures, and no occurrences of civil unrest,” he said.
“It further assumes that tenants remain able to absorb increases in municipal and utility costs. Forecast rental income is based on contractual lease terms and expected market-related renewals.”
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