Fairvest has exceeded its distribution guidance for its “B” shares by 4.4% in its first annual results to be released following the merger in January with Arrowhead Properties.
Dividends equal to 100% of distributable income at 126.22 cents per A share and 43.29c per B share were declared.
The merged entity, named Fairvest Limited, currently holds 141 retail, office and industrial properties with a lettable area (GLA) of 1 150 862 square metres, valued at R12.1 billion. The properties are in all provinces, with 50% of the GLA in Gauteng.
Retail properties represent 65% of the portfolio, office 24% and industrial 11% by revenue. The company also holds a 61% interest in residential property owner Indluplace, with 119 residential properties valued at R3.4bn, as well as a 5.1% interest in Dipula Income Fund.
Fairvest CEO Darren Wilder said the merger process was going well, with the staff integrated, and now they were working on the systems and back-office integration.
The trading in the mainly rural or regional focused retail centres was “robust”, the industrial portfolio was performing well, and of 36 office properties, six held 70% of the group’s vacancies, and the focus was on these properties.
He said the weak South African economy, higher interest rates and severe load shedding, as well as the remaining effects of the pandemic, civil unrest and floods, had created a challenging operating environment in the past year, but the group had focused on levers within its control.
Currently it was focused towards a suitable structure for the new entity, de-risking the balance sheet, reducing vacancies and a disposal process for non-core assets. Expense growth was limited to 1.4% in the past year.
He said in the past year they had achieved stable performance in the direct portfolio following the merger, reduced vacancies, disposed of seven properties with a further seven transacted, pending transfer, and had reduced the company’s loan-to-value.
“Fairvest is operationally strong and well-positioned for growth,” he said.
The focus on leasing had a positive impact – vacancies had peaked at about 8% mid-year, but strong letting and tenant retention of over 87% had reduced vacancies to 5.9% by year-end. Vacancies in the office portfolio had been brought down from 16.7% at the interim stage to 13.6%, industrial vacancies were maintained at a low 1% and retail vacancies reduced from 4.9% at the interim stage to 4.3%.
He said Fairvest’s medium-term goal was to return to a retail-only fund focused on the under-served market. Currently, 65% of the fund’s revenue comprised retail.
Net property income from the core portfolio, on a like-for-like basis, was forecast to increase by between 2% and 4% for the 2023 financial year.
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