Fairvest reports robust interim distributable income growth and acquires five properties

Fairvest, which Friday announced the acquisition of five properties for R477.7 million, increased its interim distribution for its B share by 8.8%, a performance well above inflation and which ranks it among the leaders in South Africa’s REIT sector at present.

Fairvest owns and manages a portfolio of 127 retail, office, and industrial properties, valued at R12.5 billion. During the six months to March 31, the group increased its stake in Dipula Properties to 26.3% from 5%, which was accretive to earnings and loan-to-value.

“Fairvest is making progress in transforming its diverse portfolio by improving the quality, while pursuing its aim of becoming a retail-only REIT servicing low-income communities in South Africa. The portfolio transformation is taking place at a slow and measured pace,” CEO Darren Wilder said in an interview.

The strategy involves disposing of non-core assets and reinvesting in retail-focused properties - about 70% of revenue is currently generated from retail properties, he said.

Consistent with this plan, Fairvest acquired five retail properties in KwaZulu-Natal and the Western Cape: Nquthu Shopping Centre, Ulundi Shopping Centre, Eyethu Junction, and Shoprite Manguzi in KwaZulu-Natal. These shopping centres have key food retailers, including Shoprite, Boxer, and SuperSpar, as anchor tenants.

Also, an agreement was reached to acquire Thembalethu Square, outside George in the Western Cape, which is anchored by Shoprite and Boxer. Fairvest owns 51% of the issued shares in the new acquiring company. Wilder said they were “always on the lookout” for assets that fitted their strategic focus.

Fairvest disposed of one industrial property valued at R24m during the period and at a 14.3% premium to book value. Capital expenditure of R139m included R19.8m for further investments in solar initiatives. The group also invested R76.6m in fibre network infrastructure, which earns rental income.

“The portfolio continues to benefit from the disciplined execution of our strategy - vacancies remain consistently low, tenant quality has improved and the portfolio remains operationally robust. These solid fundamentals, combined with conservative balance sheet management, position the group for sustained growth,” said Wilder.

There was positive letting activity in the six months, with 236 new deals and 216 renewals. Vacancies edged up to 5.5% from 4.3%. The entire 8% increase in property expenses was linked to higher municipal costs. Excluding this, operating expenses decreased by 1.9%. Property expenses were expected to increase around 7% for the year, said Wilder.

Net loans of R4.4bn represented a loan-to-value of 31.8%, a reduction from 33.3% at the September 2023 year end. Cash on hand and undrawn debt facilities stood at R547.4m by the end of the interim period.

Progress was made on the business continuity strategy - around 48.3% of the portfolio's gross lettable area has access to either partial or complete backup power.

The number of solar plants stood at 46, with total installed capacity of 21.9 MWp. These plants provided 16.7% of the combined portfolio’s electricity needs in the six months. Clean, renewable energy generated during this time amounted to R33.1m. A further eight plants were expected to add some 2.1 MWp of capacity.

Fairvest expected distributable earnings per B share to increase by between 8% and 10% for the 2025 financial year, which Wilder said represented an increase from the 4% to 6% guidance provided at the September 2024 year end.

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