Fairvest Property Holdings recorded solid results for the six months to December 31, with above-market distribution growth of 5.1%, net property income growth of 2.2%, five-year lows in vacancy rates and consistently low arrears.
“Fairvest’s focus on a differentiated sector of the market and its persistent drive to get the property basics right have again demonstrated the defensiveness of its portfolio amid market conditions that have proven extremely challenging,” CEO Darren Wilder said on Monday.
He said the company was in an operationally strong position, going into what it anticipates will be another difficult period.
Fairvest maintains a focus on retail assets weighted predominantly toward nonmetropolitan and rural shopping centres, as well as convenience and community shopping centres servicing the lower-income market in high-growth nodes, close to commuter networks.
For the six months under review, its total property revenue increased by 11.9% year-on-year to R267.7-million, owing to income growth in the historic portfolio, as well as an acquisition and a completed development during the period.
A strong focus on arrears management reduced arrears to 1.7%, on par with the lowest level achieved in the past seven years.
Cost containment and efficient recoveries of municipal charges remains a strategic focus, with the gross cost to income ratio having increased from 36.7% to 37.1% in the interim period.
The value of the property portfolio increased by 10.4% from R3.16-billion as at June 30, 2019, to R3.49-billion as at December 31.
The weighted average contractual escalation for the portfolio decreased from 7.4% to 7.2% in the period.
Gross rentals across the portfolio trended upwards, with the weighted average retail rental having increased to R126.10/m².
Vacancies were maintained at the lowest level achieved in the past five years.
There is a strong focus on tenant retention and Fairvest successfully renewed 11 774 m² of leases, with an average escalation of 0.8%.
The weighted average lease term increased from 35 to 38 months, which further negates the risk to its income stream.
Letting of vacant space remained a focus area and during the period vacancies were reduced from 4% to 3.2%.
The company completed the installation of photovoltaic rooftop solar systems on ten of its properties at a cost of R36.6-million during the period under review. Solar installation on seven more properties has started, with a further R24.7-million committed.
Fairvest’s loan to value remains conservative at 34%, in line with the board approved strategy.
Despite the challenging conditions persisting, Fairvest highlighted its confidence in the nature of its portfolio, its low-risk tenant base and letting expertise.
The company continues to target growth in distributions per share at the top end of the market, approximating or exceeding current inflation.
Management maintains that growth in distribution per share of between 4% and 6% for the full 2020 financial year is achievable, against the market expectation for the listed property sector which is to deliver negative to flat distribution growth.Creamer Media Senior Deputy Editor Online