Fairvest Limited has declared an interim distribution of 67.83 cents per A share and 21.24 cents per B share for six months ended March 2024.
“Fairvest is operationally strong and agile in a tough environment. We are very pleased with the Group’s performance in the past six months. We generated strong like-for-like net property income growth of 7%, relative to 4.4% at year-end. We achieved positive leasing, with rental reversions of +3% relative to +2.8% at year-end and increased the weighted average lease expiry from 29 to 31 months over the same period. We also continued to dispose of non-core assets and strengthened our balance sheet with the proceeds,” comments Fairvest’s CEO, Darren Wilder.
The property fund’s vacancies increased from 4.5% as at 30 September 2023 to 5.3% with gross lettable area (GLA) of 133 149m2 renewed at a positive rental reversion rate of 3% and an aggregate retention rate of 87.1%. New leases in respect of 80 092m2 were concluded during the reporting period with the Group’s weighted average lease expiry (WALE) sitting at 31 months.
Fairvest’s property expenses increased by 8.8% mainly driven by above-inflation increases in municipal costs.
The Group’s strategic objective remains to continue its move towards a retail-focused fund by disposing of non-core assets. Since the merger with Arrowhead Properties in January 2022, Fairvest has successfully concluded disposals exceeding R1.3 billion. Three office disposals valued at R259.5 million were concluded during the period at a 0.4% premium to book value. These offices had a 25.5% average vacancy rate. Three more properties valued at R20.8 million are currently classified as held-for-sale pending registration and transfer. The Group continued to invest in its property portfolio over the interim reporting period with total capital expenditure of R113.9 million incurred.
Fairvest reduced its net debt ratio (LTV) from 33.3% to 32.6% through disposals and remains well within the Group and portfolio LTV covenants for its facilities. The weighted average interest rate for the period reduced to 9.63% (September 2023: 9.74%) The debt portfolio had a weighted average maturity of 1.9 years and 76.9%% of the debt was hedged. The interest rate swaps have a 1.3-year weighted average maturity. As at 31 March 2024, the Group had cash on hand and undrawn debt facilities of approximately R651.9 million to apply towards growth.
Fairvest anticipates net property income growth, on a like-for-like basis, to exceed inflation and positive renewal reversion from all sectors for the full financial year, despite the challenging operating environment that is expected to persist.
It remains committed to its strategic objective of transitioning towards a retail-focused fund by disposing of non-core assets and this focus will continue throughout the remainder of the 2024 financial year. Since the merger, the Group has also increased its shareholding in certain profitable co-owned retail assets, with a further four co-owned retail assets identified in which the minority shareholding will be acquired at accretive terms, aligning with the Group’s strategic objectives.
Given the substantial progress made in implementing our stated strategy and optimising the portfolio, distributable earnings per B share are now expected to be at the upper end of the guidance range issued in November 2023 of between 41.50 cents and 42.50 cents per share (September 2023: 41.29 cents per share). The current dividend payout ratio of 100% of distributable earnings will be maintained.
