Fairvest stays bullish in spite of soft growth

FAIRVEST is bullish about its prospects despite the challenging economic environment and slower economic growth.

The company is a JSE-listed real estate investment trust focused on non-metropolitan retail assets and rural shopping centres.

Fairvest shares on the JSE rose 9.5 percent to close at a record high of R2.19.

Darren Wilder, the chief executive of Fairvest, said yesterday that the fund remained in a strong and healthy position for delivery on future prospects and management was confident that distribution growth at the upper end of the range of between 9 percent and 10 percent was still achievable for its 2015 financial year.

Wilder attributed this to the positive letting of vacant space during the latter half of the six months to December, which positioned Fairvest well for strong further growth in its 2016 financial year.

Fairvest reported yesterday 10 percent growth in interim distributions per linked unit to 7.427c in the six months to December from 6.750c in the previous corresponding period.

Wilder said the interim distribution was at the upper end of the guidance previously issued of between 9 percent and 10 percent growth in distribution and represented a 27.6 percent annualised return to shareholders for the 2014 calendar year.

Market capitalisation

Fairvest’s current market capital has increased by 23.5 percent to R1.05 billion from R854.7 million in December.

“Our promise to shareholders is to invest in quality retail assets with sustainable income streams to maximise stakeholder value creation.

“We are pleased with the progress we have made this period in fulfilling that promise,” he said.

Fairvest owns and manages a portfolio of 31 properties, with 123 087 square metres of lettable area valued at R1.1bn.

Apart from the group’s retail assets in non-metropolitan and rural shopping centres, it also focuses on convenience and community shopping centres servicing the lower living standards measure market in high-growth nodes close to commuter networks.

Fairvest provided an update on a number of recent acquisitions, including its agreement to acquire the 8 543m2 Sibilo Shopping Centre in Postmasburg in the Northern Cape for R95m; the Richmond Shopping Centre in KwaZulu-Natal for R61.5m; and the Bethal Cosmos Centre in Mpumalanga for R59m.

Wilder said the Richmond and Sibilo shopping centre acquisitions were still subject to certain conditions, but the Richmond Shopping Centre should be transferred by the end of this month and the Sibilo centre by June.

Fairvest increased revenue by 42.5 percent in the six months to December to R89.4m because of income growth in the historic portfolio and acquisitions during the previous year.

Net profit from property operations increased 37 percent to R59m. Administration expenses rose 23.3 percent to R5.8m.

Property expenses as a ratio of revenue on a gross basis remained in line with the prior year at almost 36 percent, with increases to rates and taxes and other government services being offset by cost containment within the portfolio.

Vacancies reduced to 3.9 percent from 7 percent.

Wilder attributed this mainly to some positive letting during the period and the sale of the vacant Gingindlovu property.

“New leases were concluded on 2 572m2 of the vacant space prior to the period end, which only commences in the first quarter of 2015 and will reduce the vacancy percentage further to 1.8 percent,” he said.

Gross rentals across the portfolio trended upwards, with an 8.4 percent yearon-year increase in the weighted average rental in the reporting period.