JSE-listed Fairvest has made excellent progress in derisking its balance sheet, reducing vacancies and disposing of noncore assets in the financial year ended September 30.

The property company posted a distribution of 132.53c per A share and 41.29c per B share, which was within guidance for the year.

This compares with an A share distribution of 126.22c and B share distribution of 43.29c declared in the prior financial year.

CFO Jacques Kriel says the B share distribution was lower on the back of a lower dividend received from property investment fund Dipula, which was R23-million in the reporting year, compared with R33-million in the prior year.

Fairvest currently holds a 5% interest in Dipula.

Profit from continuing operations amounted to R667-million, which, following a R539-million loss from discontinued operations, amounted to R127-million of profit for the year.

Revenue of R1.92-billion for the reporting year compares with revenue of R1.88-billion in the prior year.

Despite exceptional headwinds in the form of a weak economy, high interest rates and sustained loadshedding, Fairvest achieved like-for-like net property income growth of 4.4% and reduced vacancies from 5.9% to 4.5% compared with the prior year.

The group’s tenant retention was 86.5% as at the end of the financial year, while its loan-to-value (LTV) ratio improved from 38.1% to 33.3%, particularly owing to just under R1-billion of disposals made.

Fairvest has R1.05-billion of debt due in the next 48 months, as well as R1.02-billion of available cash and undrawn facilities.

The disposals undertaken in the year under review included seven properties valued at R338-million at an average yield of 10.5% and a 3.2% premium to book value and Indluplace shares for R651-million.

Another six properties valued at R307-million are currently held for sale.

Rental reversions were positive at 2.8% overall, comprising retail with 3.3%, office with -0.4% and industrial with 5.8%.

The weighted average lease escalation across the portfolio was 6.6%, with retail at 6.5%, office at 6.9% and industrial at 7%. The weighted average lease expiry was 29 months.

Fairvest spent R190-million in capital expenditure in the reporting year, of which R26-million involved solar investments.

The company has 38 solar plants with 16.4 MW of installed capacity, which produced 10.1% of the combined portfolio’s electricity requirement for the year. Another 12 plants are in various stages of approval and implementation, which will add 7.5 MW of capacity.

Coupled with 58 generators, 45% of Fairvest’s portfolio has access to partial or full backup power. Fairvest spent R15.5-million on diesel in the year under review, of which 86% has been recovered from tenants.

The group’s R12-billion portfolio comprises 134 properties, of which 74 are retail, 34 are office and 26 are industrial. These properties are predominantly based in Gauteng, followed by the Western Cape and KwaZulu-Natal.

The retail sector contributes 68.2% of the group’s revenue, followed by office space with 20.7% and industrial properties comprising 11.1% of revenue.

Fairvest’s average gross rental is R158.41/m², compared with R147.17/m² in the prior year.

The group is mostly exposed to Shoprite and Checkers at the moment with these stores comprising 9.3% of retail space, followed by Pick n Pay and Boxer comprising 7.9% of all retail space.

COO Riaz Kader explains that Fairvest has successfully been “retailing” some of its office space by implementing flexible office solutions and storage solutions. The company has also been introducing specific retail into traditional office environments to create a mixed-use environment.

Looking ahead, Fairvest CEO Darren Wilder anticipates the challenging operating environment to persist, with interest rates expected to remain high.

The group will continue to reshape its portfolio to a retail-focused fund, with disposals continuing in 2024, as well as the exploration of acquisition opportunities in the non-metropolitan rural retail sector.

Fairvest expects to report net property income growth from all sectors on a like-for-like basis in the 2024 financial year, which should result in distribution growth to between 41.50c and 42.50c per B share.

“We will continue to differentiate ourselves by performance and not size while we simplify the business,” Wilder states, adding that Fairvest aims to keep its balance sheet conservative and its LTV at below 35%.