Fairvest Property’s dividend growth exceeds its February guidance

FAIRVEST Property Holdings, which is in the process of a single-step merger with Arrowhead Properties, lifted its dividend 4.9 percent to 22.063 cents per share for the year to June 30 after its non-metropolitan and rural-focused retail and convenience centres traded well through the pandemic.

At a time when most other real estate investment trusts have not provided distribution guidance, Fairvest has forecast another year of 4 to 5 percent growth. And the dividend for the year under review was also well ahead of the 0 to 2 percent forecast made by the group in February.

Loan-to-value ratio decreased to 31.4 percent from 36.3 percent, arrears fell to 2.8 percent from 4.4 percent, and the like-for-like portfolio value increased by 3.9 percent to R3.44 billion, said chief executive Darren Wilder.

Fairvest's property portfolio, situated in high growth nodes close to commuter networks, consists of 43 properties, with 250 896 square metres of lettable area.

Wilder said he was optimistic about the Arrowhead transaction, further details of which were expected to be announced “shortly”, and in terms of prospects for Fairvest.

“I am optimistic and confident our grocery-anchored retail shopping centres of about 12 000 square metres each, with 85 percent of lettable area comprising national tenants, will outperform most property asset classes,” he said in a telephone interview.

Level 3 lockdown restrictions in December 2020 and level 4 lockdown restrictions in June 2021 did result in certain tenants again being unable to trade, with restaurants, bars and liquor stores affected, but these represented a small portion of monthly billings and the restrictions were lifted again in February 2021 and July 2021.

Tenant retention was up slightly at 73.4 percent as at June 30.

For the six months to June 30, 2021, a final gross dividend of 11.473c per share was declared, 16.1 percent up on the prior corresponding period's 9.883c per share. Net asset value per share increased by 4 percent to 229.97c per share. Revenue was up by 3.4 percent to R550.1 million.

“(Our) assets proved more resilient during the Covid-19 pandemic with the recovery being quicker than anticipated, without significant increases in vacancies,” Fairvest said.

The group said it expected muted economic growth in the short- to medium-term given the uncertain global outlook, uncertainty about the lasting impact of the Covid-19 pandemic on the South African economy and record local unemployment.

The vaccine rollout in South Africa had gained traction over the past few months, but further waves of infections could continue, with trading restrictions for certain tenants being a possibility.

However, the focus on grocery anchored assets, servicing non-metropolitan and lower-LSM markets were expected to continue to stand the group in good stead, management said. Wilder said on average, the shopper at the group's centres was spending slightly less on their shopping basket, but the number in terms of people at the centres was the same.

As part of its sustainability initiatives, Fairvest continued to install photovoltaic rooftop solar systems on its properties, with 22 sites completed with another two in progress, all of which were operating within expectation. The value of the solar installation as at June 30 was R122.4m and related savings of R10.3m were realised in the year.

Tokai Junction was sold for R180m during the period, a price that represented a 10.5 percent premium to the June 30, 2019, valuation of the property.

Fairvest's shares closed 1.99 percent higher at R3.07 on the JSE yesterday.