Darren Wilder, Chief Executive Officer of Fairvest
Fairvest Property Holdings Limited today announced a full year distribution of 15.106 cents per share, which represents a 10.1% increase of the comparable period and again exceeded the guidance previously issued of between 9% and 10% growth in distribution.
Chief Executive Officer, Darren Wilder says: “We are pleased with Fairvest’s performance over the past year. The company has consistently delivered on key performance metrics, which for 2015 include amongst others, a 41.4% annualised return to shareholders, a reduction in vacancies from 7.0% to 4.4%, a 16.0% increase in net asset value and a successful equity raising”.
Fairvest Property Holdings Limited is a property investment holding company and Real Estate Investment Trust (REIT), with a unique focus on retail assets weighted toward 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 has a market capitalisation of R1.049 billion.
The property portfolio at year-end consisted of 34 properties with a gross lettable area of 139 247m² and a total market value of R1 361.8 million, an increase of 22.8% from the previous year. While the increase is mainly attributable to acquisitions during the year, the historic portfolio increased by 10.5% from the previous year. The average value per property increased by 15.6% to R40.1 million, while average value per square metre increased by 10.7% to R9 780/m².
Revenue for the year ended 30 June 2015 increased by 26.2% to R18.9 million as a result of income growth in the historic portfolio as well as the acquisitions during the past year. Net profit from property operations increased by 22.4% to R122.2 million, while administration expenses were contained to a 20.2% increase to R12.1 million. Distributable earnings increased by 42.7% to R85.2 million.
Cost containment remains a key imperative, with gross recurring costs at 36.8%, while net recurring cost to revenue decreased further from 17.7% to 17.3%. Managing utilities expenditure is critical with municipal services, rates and taxes now constituting 65.3% of total expenses. Significant focus continued to be placed on monitoring and managing municipal costs and valuations and strengthening our recoveries processes and efficiencies.
Vacancies reduced from 7.0% to 4.4% as a result of active letting strategies and tenant retentions were maintained at 81.0%. Fairvest concluded renewals for 21 731m² and new leases of 8 742m². New leases that will commence post period-end will reduce vacancies further to 2.6%. The average lease term remains in excess of 3 years. There was a strong focus on arrears management in light of the tough economic conditions that prevailed. Arrears were successfully reduced to 1.9% of revenue.
Gross rentals across the portfolio trended upwards, with a 6.4% increase in the weighted average rental to R91.85/m2 at 30 June 2015 compared to R86.35/m2 at 30 June 2014. The weighted average contractual escalation for the portfolio increased from 7.2% to 7.4%. The relatively low contractual escalation percentage is mainly as a result of the high national tenant component of 78.5% of the portfolio, which provides unitholders with a relatively low risk investment profile.
The interest bearing debt to assets ratio reduced to 19.0%, following our successful equity placement of R137.1 million in April 2015, a portion of which was utilised for the acquisition of the Redefine property portfolio and the Sibilo asset which transferred in August 2015. Prudent debt management is critical to our long-term success. Our long-term target is to maintain the loan-to-value ratio at, or below a conservative 35%, while our hedging strategy targets a minimum of 70% of total borrowings to be at fixed interest rates. The ratio of fixed rate debt has improved from 46.2% to 73.2%.
Chief Executive Officer, Darren Wilder concludes: “Our promise to shareholders is to invest in quality retail assets with sustainable income streams in order to maximise stakeholder value. We are pleased with the progress we have made during this period in fulfilling that promise. Despite the tough economic conditions that prevail, we are confident that we should be able to maintain the distribution growth of between 9% and 10% for the 2016 financial year. We will remain conservatively geared and sufficiently hedged to minimize the impact of the anticipated rise in interest rates, while continuing to look for yield enhancing acquisitions and developments that are in line with our strategy.”
