Niched lower LSM retail property Real Estate Investment Trust Fairvest Property Holdings Limited, today announced a total distribution for the financial year to 30 June 2014 of 13.72 cents per linked unit. This represents a 30% increase on the prior year and exceeds the guidance issued to the market of 13.70 cents per linked unit. Chief Executive Officer, Darren Wilder says: “We are pleased with the progress we made in the past year with extracting value from the current property portfolio and the addition of four attractive properties to sustain value creation in future.”
Fairvest owns and manages a portfolio of 32 properties, with 125 520m² of lettable area valued at R1 109.1 million. The group focuses on retail assets in non-metropolitan shopping centres, as well as convenience, community and regional shopping centres servicing the lower LSM market in high-growth nodes, close to commuter networks.
Fairvest said that the weighted average contractual escalation for the portfolio at 30 June 2014 was 7.2%, mainly as a result of the high component of national tenants of 78.6% of the portfolio, which provides unit holders with a relatively low risk investment profile. Vacancies reduced from 9.0% to 7.0% during the period under review, despite a 24.8% increase in the lettable area of the portfolio. In addition, an agreement of sale is currently being negotiated on a vacant property which, if concluded, will reduce vacancies further to 4.6% of the portfolio. Rental activity was positive with a 7.8% escalation achieved on renewals and tenant retention for the year of 81.7%. As at 30 June 2014, the weighted average lease length in the fund was 41 months.
The interest bearing debt to asset ratio remains low at 20.1%, with targeted gearing levels of 35% to 40%, providing ample flexibility to take advantage of attractive acquisition opportunities. As at 30 June 2014, 46.2% of the debt was fixed, with the intention of increasing this percentage to 70% through careful acquisitions. The weighted average all-in cost of funding is 8.66% with a weighted average maturity of 34 months.
Chief Executive Officer, Darren Wilder concludes: “The group’s specific focus provide unique access to the underdeveloped and high growth, lower LSM consumer market. A portfolio of high grade national and regional anchor tenants, strong tenant retention and healthy renewal escalations bode well for the steady and consistent creation of value for Fairvest unit holders.“.
Fairvest is currently trading at 140 cents per linked unit which is at approximately a 12% discount to its net asset value of 159 cents per linked unit.
Investors have enjoyed an attractive annualised return of 18.9% since its recapitalisation in December 2012 and Fairvest is confident that a distribution growth of between 9% and 10% will be achievable for the 2015 financial year.