Fairvest expects dividend growth to recover
Fairvest Property Holdings, owner of malls in townships and small towns, says its dividend will increase up to 2% in its full financial year to June 2021 as its bias towards lower-income shoppers is paying off.
Fairvest declared an interim dividend of 10.590c and is on track for a total of 21.038c or better in the year to June 2021.
CEO Darren Wilder said the fund’s shopping centres tend to serve lower Living Standards Measure (LSM) shoppers and held up well because those customers buy mostly essential goods sold throughout the different levels of lockdown.
Fairvest has 43 properties with 250,911m2 of lettable area, valued at R3.425bn.
The group grew income returns unlike many listed property funds. Most listed property funds saw their dividends shrink in the year to December 2020 or warned they will shrink in the year to June 2021.
Real-estate investment trusts (Reits) must pay at least 75% of their distributable income as dividends each financial year. Historically, most SA Reits have paid out 100% of this income but in 2020 some paid 90%-95%.
Fairvest committed to paying 100% in its 2021 year to June, having paid out 100% of its distributable income in the year to June 2020. The group achieved a 7.2% rise in distributable income in the six months to end-December compared with the previous six months when SA was under hard lockdown.
Compared with the preCovid-19 corresponding period to end-December 2019 the distribution fell 5.1%. On a one-, three-, five- and 10-year basis, Fairvest was in the top three of the JSE’s 28 SA-based Reits in total return performance, which includes share price appreciation and dividend growth.
Wilder said Fairvest’s specialist, niche positioning of smaller neighbourhood centres with grocery-anchored assets with a focused, hands-on management team was resilient during the Covid-19 pandemic. Recovery was faster than expected and without significant increases in vacancies.
Food retailers countrywide showed the most resilient trading densities of all merchandise categories. Smaller format retail outlets outperformed as consumers redirected their spending power towards convenience shopping closer to home, according to Wilder.
Total property revenue rose 2.3% to R274.2m on income growth in the historic portfolio and acquisitions in the latter half of the previous financial year, offset by the Tokai Junction disposal. Net property income rose 4.6% to R176.5m from R168.661m.
Wilder said Fairvest’s balance sheet remained strong, with a conservative loan-to-value (LTV) ratio and a comfortable interest cover ratio. LTV measures the value of a company’s debt relative to its assets. Fund managers prefer LTVs of 35%40%, as a higher ratio could imply financial distress.
The LTV ratio fell to 32.2% from 36.3% at end-June largely on the Tokai Junction disposal in the period, offset by further investment in solar projects.
The share price was up 2.78% at R1.85 by midday on Thursday, and up 5.26% year to date.
Senior fund manager for listed property at Stanlib Nesi Chetty said Fairvest delivered strong results. Vacancies reduced to 3.8%. “They are still managing to see decent like-for-like portfolio growth of 3.4%,” he said. “We continue to favour these types of assets mostly groceryanchored centres. The reported result at Fairvest is very strong, even with all the rental relief and deferments they would have negotiated with some tenants over the last year,” he said.