Fairvest Property Holdings delivers 10.03% distribution growth

Posted On Monday, 02 March 2015 20:37 Published by
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Niche retail Real Estate Investment Trust (REIT), Fairvest Property Holdings Limited announced an interim distribution of 7.427 cents per linked unit, a 10.03% increase of the comparable period which is at the upper end of the guidance previously issued of between 9% and 10% growth in distribution.

Darren Wilder

This represents a 27.6% annualised return to shareholders for the 2014 calendar year and Chief Executive Officer, Darren Wilder says: “Our promise to shareholders is to invest in quality retail assets with sustainable income streams in order to maximise stakeholder value creation. We are pleased with the progress we have made this period in fulfilling that promise.’ 

Fairvest owns and manages a portfolio of 31 properties, with 123 087m² of lettable area valued at R1 104.6 million. The group focuses on retail assets in 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 current market capitalisation for Fairvest is R1 055.3 million, up from R854.7 million at 31 December 2014.

Revenue for the six months ended 31 December 2014 increased by 42.5% to R89.4 million as a result of income growth in the historic portfolio and the acquisitions during the previous year. Net profit from property operations increased by 36.5% to R59.2 million, while administration expenses were contained to a 22.8% increase to R6.0 million despite the new acquisitions, resulting in debenture interest increasing by 60.7% to R39.0 million.

Fairvest said that the weighted average contractual escalation for the portfolio at 31 December 2014 was steady at 7.2%, mainly as a result of the high national tenant component of 79% of the portfolio, which provides unit holders with a relatively low risk investment profile. Pleasing progress was made on reducing vacancies during the period under review, from 7.0% to 3.9%. New leases that were concluded post period-end will reduce vacancies further to 1.8%. Tenant retention for the year was 79.1%, mainly due to an Ellerines lease that was cancelled. Fairvest said it is currently in negotiations to re-let this space to a National tenant.             

Current interest bearing debt to asset ratio remains conservative at 20.9%, with targeted gearing of 35% to 40%, providing ample flexibility to take advantage of attractive acquisition opportunities. As at 31 December 2014, 46.7% of the debt was fixed, with the strategic objective of increasing this percentage to 70%. The weighted average all-in cost of funding reduced marginally to 8.61%, with a weighted average maturity of 35 months.

Chief Executive Officer, Darren Wilder concludes: “The group’s focus on retail properties in the high growth, lower LSM consumer market and its quality assets provide attractive access for investors to this underdeveloped end of the property market. If the current market conditions persist, Fairvest remains confident that distribution growth at the upper end of the range of between 9% and 10%, as previously reported, will be achievable for the 2015 financial year, while strong occupancies, a healthy lease expiry profile and positive letting during the latter part of the reporting period bodes well for the 2016 financial year.’

 

 

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