JSE-listed Fairvest Property Holdings delivered a guidance-beating 5% increase in distributions a share to shareholders of 22.06c for the financial year ended June 30.

The company on September 13 noted that it had been a challenging period for retail-focused real estate investment trusts (Reits) such as Fairvest.

Against a backdrop of low economic growth and a weakened global macroenvironment, exacerbated by the impact of Covid-19, Fairvest said it had achieved a strong performance, with the valuation of the group’s asset portfolio having increased by 3.9% year-on-year to R3.44-billion.

Moreover, arrears reduced to 2.8% of revenue and vacancies reduced to 3.7% of total lettable area.

The group’s loan-to-value (LTV) ratio lowered to 31.4%, well within bank covenant levels.

CEO Darren Wilder said Fairvest was able to stay close to tenants and help them navigate their way through the various trading restrictions.

“In many cases, we granted both rental credits and deferrals which enabled many businesses to remain trading, which contributed to lower vacancies and arrears as compared to the prior year,” he pointed out.

In the past year, as part of its environmental, social and governance and sustainability initiatives, Fairvest invested R20.5-million on photovoltaic rooftop solar installations at 22 sites across its portfolio.

The value of the installations, at period end, was R122.4-million, with savings to the value of R10.3-million having realised during year.

“The group achieved a strong set of results, delivering on all key metrics. Revenue increased by 3.4% to R550.1-million and net profit from property operations increased by 7.5% to R354.9-million.

“Our collection and vacancy metrics both improved during the year and, notwithstanding the impact of the civil unrest which took place after the year-end, early signs are that this trend will continue into full year 2022,” CFO Jacques Kriel said.

Management expects Fairvest (after the asset manager internalisation) to deliver a 4% to 5% growth in distributions for the 2022 financial year.

CIVIL UNREST UPDATE

Post the year-end, the group had 12 properties across KwaZulu-Natal and Gauteng negatively impacted by the civil unrest.

The majority of tenants have resumed trading, with only a negligible minority of those affected (seven tenants) electing to cancel their lease agreements, with reletting already under way.

Total loss of rental claims to date amounted to R6.8-million and this amount was expected to increase marginally as the group completes the claims process.

Total capital expenditure incurred to date amounted to R9.4-million, which had all been claimed from the South African Special Risk Insurance Association.

PROSPECTS AND OUTLOOK

At last week’s general meeting, the majority of Fairvest shareholders voted in favour of the resolutions relating to the share swap transaction with Arrowhead. The transaction remains subject to conditions precedent, including Competition Commission approval.

However, Fairvest intends to exercise its rights as an Arrowhead shareholder to unlock value for shareholders of both Arrowhead and Fairvest, an initiative that has been received positively by shareholders in both companies.

Fairvest said the two companies continue to engage constructively regarding a single-step merger and shareholders will be kept informed of the outcome of this engagement.

Although both the global macro-outlook as well as the lasting impact of Covid-19 on the South African economy remain uncertain, the group noted that it remains well positioned, with its clearly focused strategy servicing non-metropolitan and lower-living standards measure markets of mainly grocery anchored assets.

These assets proved more resilient during the pandemic, with the recovery being quicker than anticipated.

“Consequently, although trading challenges around the low growth environment are likely to persist, Fairvest’s experienced team with its proven track record remains confident that it can achieve growth in distributions and continue to unlock value through scale for our stakeholders,” Wilder said.