Distributions increased by 10.04% year-on-year, exceeding market guidance and culminating in distribution growth of more than 10% for the fourth consecutive year. Chief Executive Officer, Darren Wilder says: “The resilience of the Fairvest portfolio is particularly evident in these tough conditions and this, together with our strong focus on delivering on value extraction and key operational metrics, have again paved the way for a continued creditable performance and sustained value creation”.
The consistent performance has been recognised by investors - Fairvest was the top performing Real Estate Investment Trust (REIT), for the year ended 30 June 2017 with a 38.5% annualised return and amongst the leading REITS in terms of performance over 3 and 5 years.
Over the next 24 months of trade, Fairvest will strategically focus on and target retail assets weighted toward rural and community shopping centres servicing the lower LSM market, in high-growth nodes, close to commuter networks. The Fairvest portfolio is geographically diversified across South Africa and consists of 41 properties, with 194 311m2 of lettable area and valued at R2.2 billion. The portfolio features a high national tenant component of 75.3%, tenant retention of 72.8% and a weighted average lease term of 38 months.
Annual results highlights
- Distributable earnings increased by 31.2% to R143.9 million
- 2017 distribution increased by 10.04% to 18.333 cents per share
- Like-for-like annualised property income increased by 9.3%
- Total property portfolio value up 14.5% to R2.2 billion
- New equity raised of R224.5 million
- Net asset value up 8.2% to 218.18 cents per share
- Vacancies remain low at 4.7% of the total lettable area
- Low gearing at 22.4% loan-to-value(LTV) provides ample scope for expansion
- Distribution growth of 9% to 10% cents per share expected for the year to 30 June 2018
Successful capital raises of R224.5 million, attractive acquisitions and steady growth in property valuations contributed to a property portfolio value increasing by 14.5% to R2.2 billion. The net asset value increased by 29.8% to R1.72 billion from R1.33 billion. On a per share basis, the net asset value increased by 8.2% to 218.18 cents per share, relative to a current share price of 200 cents.
The company said that like-for-like annualised property income increased by 9.3%, a function of low vacancies at 4.7%, as well as gross rentals that trended upwards across the portfolio, with a 4.6% increase in the weighted average rental to R103.99/m2 at 30 June 2017. The weighted average contractual escalation for the portfolio was 7.4% at 30 June 2017.
Fairvest declared a dividend of 9.38 cents per share for the six months to 30 June 2017, which is a 10.49% increase from the comparable period. The total dividend distribution for the year is 18.333 cents per share.
Revenue grew by 18.4% to R331.1 million, due to income growth in the historic portfolio as well as the acquisitions during the period. A strong focus on cost containment and more efficient recoveries of municipal charges improved the net property expense ratio (expenses net of utility recoveries) to 15.5%, relative to 17.3% for the previous financial year.
Wilder said that the property portfolio increased by 14.5% to R2.20 billion. The growth is attributable to acquisitions to the value of R113.5 million, as well as capital expenditure incurred of R35.7 million, offset by the disposal of the SASSA House asset for R40.0 million. Three new properties were acquired during the period, including the Mqanduli Boxer and Tabankulu Boxer in the Eastern Cape and Macassar Shoprite in the Western Cape. The value of the historic portfolio increased by 10.1% compared to 30 June 2016. Asset quality continued to improve, with the average value per property increasing by 8.9% to R53.8 million, and the average value per square meter by 9.6% to R11 345/m2.
During the period under review 71 new leases were concluded with a total GLA of 16 774m2. Fairvest successfully renewed 27 336m2 of leases with a positive reversion of 7.5% being achieved.
Fairvest remains conservatively geared with a loan to value ratio of 22.4%, of which 87.1% was fixed either through swaps or fixed rate loans, with a weighted average expiry for the fixed debt of 18 months.
Wilder said: “Fairvest has delivered a significant return to shareholders in the past year as investors recognised the compounding effect of our consistent performance over a number of years. This performance is underpinned by our unique investment proposition, as well as single-minded focus on operational excellence. While mindful of the prevailing economic and political challenges in South Africa, we believe our portfolio is well-positioned and we remain confident that Fairvest should be able to achieve distribution growth of between 9% and 10% for the 2018 financial year. We will also continue to actively pursue yield accretive acquisitions to further enhance the portfolio.”