Chief Executive Officer Darren Wilder said: “Fairvest has made pleasing headway in restructuring its portfolio in the past three years towards becoming a retail-only REIT servicing low-income communities in South Africa by disposing of non-core assets and reinvesting in retail-focused properties. 

Fairvest has again made excellent progress in reducing vacancies to 4.3%, achieving notable like-for-like net property income growth of 7.2% and positive rental reversions of 3.6%.

Operations

Fairvest experienced positive letting activity and a strong performance from the portfolio, with 531 new deals and 476 renewals concluded during the year. Vacancies decreased from 4.5% to 4.3% at 30 September 2024, with an aggregate tenant retention of 85.7%. Positive rental reversions improved from 2.8% to 3.6%. Average gross rental increased by 7.8% to R127.52 per m2 (2023: R118.27). The weighted average lease escalation across the portfolio was stable at 6.6%, with a weighted average lease expiry of 28.6 months. Fairvest continued to invest in the quality of its portfolio with capital expenditure of R274.3 million, a 44.1% increase on the prior year. 

Changes to the portfolio

Six disposals valued at R280.3 million were finalised during the year at an average yield of 1.2% and a 0.4% discount to book value. The majority of the disposals comprise three Office properties, which, combined, had a vacancy of more than 25%.

Fairvest has been a shareholder in Dipula since 2014 and has recently increased its shareholding from 5.0% to 26.3%. Neither company is under cautionary. 

Fairvest has been public regarding its strategy to grow by acquisition in order to progress towards becoming a retail-only REIT of market-appropriate size.  Fairvest has issued approximately R1 billion in equity to acquire an additional investment in Dipula.

Over the past two decades, Dipula has significantly reduced its exposure to the office sector while increasing its focus on retail, all while building strong internal management capabilities. Its stated objective has been to scale up and expand its retail portfolio.

Dipula's CEO, Izak Peterson, commented: “Fairvest’s further acquisition of shares in Dipula is a testament to the success we've had in growing the company. We look forward to exploring creative ways to unlock value together on a collaborative basis. Our portfolios are of similar size and sector exposure, and we share a similar outlook on the real estate sector and black economic empowerment”.

The CEO of Fairvest, Darren Wilder, said: “We have known the CEO of Dipula, Izak Peterson, for many years, during which we have been a supportive shareholder of Dipula.  We are delighted to be able to increase our shareholding in Dipula, a business we know and like, which has a lot of similarities to Fairvest’s business.  We hope to take this relationship to the next level”. 

Debt funding

At year-end, the Group had loans amounting to R4.2 billion. After accounting for cash and cash equivalents results in a loan-to-value (LTV) ratio of 33.3%, unchanged from the previous year. This LTV ratio remains comfortably below the Group and portfolio LTV covenant limit of 50% for its facilities.

The weighted average interest rate for the year decreased to 9.70% from 9.74% in September 2023. The weighted average maturity is 1.6 years. As of 30 September 2024, the Group had cash on hand and undrawn debt facilities of approximately R419.1 million available for growth initiatives. The Group has interest rate swaps amounting to R2.9 billion, which hedge 68.6% of its debt. These interest rate swaps have a weighted average maturity of 1.2 years.

Environmental, Social and Governance Projects 

The Group has made significant progress with its integrated backup power strategy to ensure business continuity during adverse conditions. Currently, around 46% of the portfolio GLA has access to either partial or complete backup power.

During the year, the number of solar plants increased from 38 to 42, resulting in a total installed capacity of 20.3 MWp. These plants provided 10.6% of the combined portfolio’s electricity needs for the period. Clean, renewable energy generated during this time amounted to R41.1 million. A further 12 plants are currently undergoing feasibility assessments, approvals, and implementation, which will add 4.3 MWp of capacity.

Six fuel savers are installed that integrate the solar plants with the generators to enable diesel savings and facilitate higher renewable energy usage during power outages.

A range of water management and water savings projects are underway, including 21 groundwater harvesting plants in operation and the strategic installation of 26 smart monitoring equipment to enable early leak detection.

Outlook

Since the establishment of the Government of National Unity, sentiment has improved, inflation is under control, and interest rates are expected to decrease. We anticipate net property income growth across all sectors on a like-for-like basis for the 2025 financial year, with the portfolio being operationally strong and well-positioned for growth.

The Group remains dedicated to transitioning towards a retail-focused fund by selling non-core assets and investing in retail properties. Significant progress has been made over the past three years.

Distributable earnings per B share is expected to be between 45.00 cents and 46.00 cents per share, an increase of between 4.0% and 6.3% for the 2025 financial year. Distribution per A share will increase by the lesser of 5% or the most recent Consumer Price Index, as specified in the Company’s Memorandum of Incorporation.

The Board has resolved to maintain the current dividend payout ratio of 100% of distributable earnings as a dividend.