Fairvest CEO Darren Wilder. Picture: supplied
Fairvest REIT’s portfolio of South African retail, office, and industrial properties is strong and stable, CEO Darren Wilder said.
Writing in the annual report published Friday, he said the core of the business, consisting of 108 properties valued at R7.6 billion, is well-let with a weighted average vacancy of 2.7%.
Nine problematic properties comprise 43.6% of the group’s total vacancy and predominantly reside in the office and retail portfolio. These properties are specifically managed as special projects, he said.
The REIT aims to eventually divest its office and industrial portfolios to focus on retail. It has disposed of 17 assets comprising about 56 000 square metres of gross lettable area. These were viewed as either non-core to the portfolio, problematic in terms of filling vacant space, or at the end of their growth cycle.
In the past financial year, six disposals valued at R280.3 million were finalised, which included three office properties that had a vacancy of more than 25%.
“We will continue to divest our office and industrial portfolios. Promising transactional opportunities exist within these sectors, and we intend to sell both portfolios as a single unit,” Wilder said.
A feature of the office portfolio, which comprises 20.6% of gross lettable area, was the success of the company’s Fairspec strategy of offering tenants a ready-to-move-in space, which has helped reduce vacancy and attract a higher rental rate. This helped the group to reach its office vacancy rate target of below 10% last year.
The industrial portfolio, with 27 assets, maintained vacancies under 1%. About 60% of the portfolio consists of multi-let parks with strong demand, which has led to an “impressive increase” in positive rental reversions, rising from 5.8% in 2023 to 9.7%, said Wilder.
The retail portfolio holds 72 assets, which are the core of the business. For large national tenants, Fairvest provides a platform with properties available across all nine provinces and the ability to bring new market share to retailers such as Shoprite and Checkers, Pepkor, Boxer, Mr Price, Spar, Pick n Pay, TFG, Truworths, Lewis, and Clothing Junction, which are the top 10 tenant exposures.
Vacancies were at 4%, mainly in secondary space on the first floor office level of smaller retail centres. Fairvest’s retail portfolio focuses on lower-income and middle-income consumers and includes community shopping centres, convenience centres, and neighbourhood centres, typically in high-growth urban areas and townships.
“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,” Wilder predicted for the new financial year.
“The office and industrial portfolios are beginning to perform exceptionally well, and we will continue to prepare those assets for sale to maximise pricing and value for our shareholders. We will continue to make some acquisitions, but only at the right price. We will also continue to engage with Dipula to extract value for both sets of our shareholders,” he said. Fairvest has a 26.3% stake in Dipula Income Fund.
For the core portfolio, the focus is to reduce vacancies and concentrate on the letting of vacant space while retaining tenants and increasing rent per square metre with higher built-in escalation.
Wilder said in the past three years, Fairvest delivered consistent performance and strong shareholder returns. In the past year, it increased distributable income by 5%, while loan-to-value stood at a comfortable 33.3%. Vacancies fell to 4.3% from 4.5%.
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