Successful capital raises of R206.7 million, attractive acquisitions and steady growth in property valuations contributed to a net asset value increase of 20.8% to R1.60 billion at 31 December 2016. Net asset value per share increased by 1.9% to 205.52 cents per share, relative to a current share price of 185 cents.
The company said that annualised net property income increased by 10.4% compared to the previous year, a function of low vacancies at 4.1%, selective acquisitions, cost containment, as well as gross rentals that trended upwards across the portfolio.
Fairvest declared an interim dividend distribution of 8.953 cents per share for the period, which was within the issued guidance range of 9% - 10% growth.
Chief Executive Officer, Darren Wilder says: “We are pleased that Fairvest’s consistently good performance over the past few years is providing shareholders with the type of returns that has positioned the company as one of the top performing property funds over the past 12 months. Our focus is to steadily deliver on key performance metrics, which includes solid distribution growth, value adding acquisitions and a strong emphasis on operational excellence.
Fairvest is a Real Estate Investment Trust (“REIT”), with a unique focus on retail assets weighted toward non-metropolitan and rural shopping centres, as well as convenience and community shopping centres servicing the lower LSM market, in high-growth nodes, close to commuter networks. The Fairvest property portfolio is geographically diversified across South Africa and consists of 41 properties, with 193 580m² of lettable area and valued at R2 082.1 million. The portfolio features a high national tenant component of 76.6%, tenant retention of 79.1% and a weighted average lease term of 40 months.
Revenue grew by 20.6% to R162.2 million, due to income growth in the historic portfolio as well as the acquisitions during the period. Weighted average gross rentals increased by 3.0% to R102.36/m² at 31 December 2016, compared to R99.40/m² at 30 June 2016.
Costs were well contained with the net property expense ratio (expenses net of recoveries) improving to 16.3% compared to 17.3% for the previous financial year. The pleasing improvement was supported by a continuous strong focus on cost containment, as well as more efficient recoveries of municipal charges.
Distributable earnings increased by 29.8% to R69.8 million.
Wilder said that the property portfolio value increased by 8.2% to R2 082.1 million, aided by a R111.9 million acquisition during the period and capital expenditure of R17.9 million. This was offset by the disposal of the SASSA House asset for R40.0 million. The historic portfolio increased by 4.1% compared to 30 June 2016. The average value per property increased by 2.9% to R50.8 million, while the average value per square meter increased by 3.9% to R10 756/m².
Fairvest transferred three new properties during the period, which included the Mqanduli and Tabankulu Boxer centres in the Eastern Cape, as well as the Macassar Shoprite in the Western Cape. The company also pursued further value enhancement projects, with R16.2 million spent on projects at Parow Valley Spar, Nyanga Junction and Shoprite Macassar amongst others. Fairvest also announced yesterday, the acquisition of Shoprite Empangeni for R172,7 million. Wilder said the attractive property is ideally suited to the company’s investment niche of acquiring retail assets that target the underdeveloped and high growth, lower LSM consumer market.
During the period under review, 32 new leases were concluded on 7 077m². Renewal activity was positive with a 7.9% positive reversion achieved on the 16 107m² of leases that were renewed during the period.
Fairvest remains conservatively geared with a loan to value ratio of 23.0%, which provides headroom for further expansion. The portfolio is sufficiently hedged to minimize the impact of potential interest rate increases. As at 31 December 2016, 89.7% of the debt was fixed either through swaps or fixed rate loans, with a weighted average expiry for the fixed debt of 24 months.
Wilder said: “Fairvest has delivered a compound annual growth rate of 31% in net asset value and 18% in distributions since 2013. This performance is the product of a single-minded focus on both our investment proposition and on operational excellence. Given our robust balance sheet and a quality portfolio with strong fundamentals, we remain confident that Fairvest should be able to achieve distribution growth of between 9% and 10% for the 2017 financial year”.