Fairvest Limited has published its results for the year to September 2023, declaring an annual distribution of 132.53 cents per A share and 41.29 cents per B share.
According to CEO, Darren Wilder, the company has made excellence progress in de-risking its balance sheet, reducing vacancies, and disposing of non-core assets. “Fairvest is pleased with its disposals of just under R1 billion this year, as well as achieving like-for-like net property income growth and positive rental reversions. This is notwithstanding exceptional headwinds in the form of a weak economy, high interest rates, and sustained load shedding. Fairvest is operationally strong and agile in a rapidly changing environment.”
The company reported a strong performance from its portfolio with vacancies having decreased from 5.9% in the prior year to 4.5% during the reporting period with an aggregate retention of 86.5% of gross lettable area (GLA). Rental reversions were positive at 2.8% overall, comprising retail +3.3%, office -0.4%, and industrial +5.8%. The weighted average lease escalation across its portfolio was 6.6% with retail at 6.5%, office at 6.9%, and industrial at 7%. The weighted average lease expiry (WALE) was 29 months.
Its expenses were well contained at 1% growth, despite most expense items increasing in line with inflation. The group continued to invest in its portfolio, incurring capital expenditure (capex) of R190.3 million, of which R26.2 million was for further solar investments.
Its objective remains to continue its move towards a retail-focused fund through the disposal of its non-core assets. During the year, its total disposals amounted to R989.3 million, with seven disposals valued at R338 million and finalised at an average yield of 10.5% with a 3.2% premium to book value. SA Corporate Real Estate Limited also acquired all the issued shares of Induplace at R3.40 per share, equating to R651.4 million for Fairvest’s shareholding. The scheme was concluded at the end of July 2023. A further six properties valued at R307.3 million are currently being held for sale, pending registration and transfer.
Fairvest reduced its net debt ratio from 38.1% to 33.3% through these disposals and it is now well within the group and portfolio LTV covenants for its facilities. The weighted average interest rate for the year was 9.74% (2022: 8.97%), increasing in line with the SARB repo rate. The weighted average maturity of the debt was 2.2 years, with 64.8% of the debt being hedged. The interest rate swaps have a 1.6-year weighted average maturity.
The group interest cover ratio (ICR) is 2.5 times, which is above the two times cover required by its funders and well above the portfolio ICR covenants of all funders.
“At year-end, the group had cash on hand and undrawn debt facilities of approximately R1.0 billion to execute its strategic initiatives”, said CFO; Jacques Kriel. It also finalised a syndicated loan process to re-finance various maturities and streamline the borrowing structure which has resulted in a new consolidated debt pool consisting of R3.1 billion of debt facilities, of which R2.1 billion are new. The average margin to three-month JIBAR achieved on the new facilities is 1.62%.
Fairvest again expects net property income growth from all sectors, on a like-for-like basis, for the 2024 financial year. Combined with synergies achieved through the merger, this should generate growth in distributable earnings per B share, with the anticipated distribution per B share to be between 41.50 cents and 42.50 cents per share for the 2024 financial year, despite the significant increases in interest rates during the year. Distribution per A share will increase by the lesser of 5% or the most recent Consumer Price Index (CPI). The Board has resolved to maintain the current 100% dividend payout ratio of distributable earnings.
