Fairvest seeks growth away from metros

The company invests in commercial properties, interim distribution is 5,2c per linked unit for the six months to December unchanged from 2010

JSE-listed property company Fairvest said yesterday it was in the process of implementing a significant growth strategy focusing on retail assets in non-metropolitan areas and the lower living standards measure sector.

The company, which invests in commercial properties, yesterday declared an interim distribution of 5,2c per linked unit for the six months to December, unchanged from the same period in 2010.

CEO Jacques Kriel said yesterday the company’s newly appointed asset manager was investigating opportunities.

"There is scope to grow the portfolio in order to improve the quality of our portfolio. Liquidity remains a challenge because the company is tightly held by its shareholders," he said.

Revenue rose 5,3% to R9,5m during the period.

But the company warned that two of its largest tenants were likely to terminate their leases, which could have a "significant" effect on net asset value and future distributions. Mr Kriel said negotiations about renewing the leases were continuing.

The company said although distributions for the full year to June were likely to remain in line with the previous period, the inability to conclude renewals of the leases would "significantly" affect future distributions.

The company, with a market capitalisation of just under R100m, has every reason to hold onto its tenants because it has a high vacancy rate in its portfolio.

Vacancies fell from 21,5% in the previous year to 19,7% as a result of the sale of a vacant property, reducing the number of its properties to 10.

During the period, the company spent R4,1m on a new development, with a further R41,4m of capital committed.

The project is due for completion by November, with occupation by the tenant in December. Mr Kriel said the project was fully let and it would enhance the quality of the assets and the yield of the portfolio.

During the period Fairvest sold shares held in the Australian-listed property sector to the value of R6,1m, resulting in a realised gain of R1,159m.

The company said the surplus funds would be utilised in the development under way.

Fairvest’s portfolio consists of 10 commercial properties valued at R102,75m. The company’s receivable income is split as follows: 42,3% KwaZulu-Natal, 5,7% Gauteng, 5,9% Free State and 46,1% Eastern Cape.