Fairvest buying in Yeoville

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Fairvest is gaining a reputation as one of the more adventurous property shoppers.

Fairvest, the small JSE-listed real estate counter that focuses mainly on emerging retail precincts, is gaining a reputation as one of the more adventurous property shoppers.

Last month the Cape Townheadquartered company made a substantial investment in Yeoville, the rundown suburb east of central Johannesburg.

The move has surprised market watchers, especially the size of the proposed transaction in an area where residential property valuations have dwindled over the past 20 years.

Once a vibrant bohemian hub, the suburb has fallen into disrepair and in parts resembles an inner-city slum.

Last month Fairvest disclosed it had paid R56m for four properties in Raleigh Street, the main road through Yeoville.

In a Sens statement the company stressed the acquisition was consistent with its growth strategy, which focuses on acquiring retail assets with a weighting in favour of nonmetropolitan areas and lowerincome sectors.

Fairvest already has substantial investments in other lowerincome areas, including retaillinked investments in Nyanga Junction outside Cape Town, Sharpeville, Ulundi and Giyani.

The properties are being sold voetstoots and are still subject to a due diligence, but the fundamentals — on paper — look rather attractive.

Leases still run for between two and almost nine years, with no vacancies on three properties and the fourth showing a 4,34% vacancy rate. The rental escalation clauses on the properties range between 7,2% and 9,5%.

The forecasts on the Yeoville properties also look compelling, with revenue of R9m and net income of R5,6m pencilled in for the nine months to end June 2016. The forecast for the financial year to June 2017 predicts revenues of R11,5m with net income of R7,5m.

Fairvest intends settling up with the vendors of the Yeoville properties in cash. The payment will be funded through debt or equity funding.

Fairvest recently raised R137m by placing 71,8m linked units at 191c each with investors.

How much Fairvest will need to invest in the Yeoville properties to upgrade the retail offering is not clear at this point. The company has enjoyed some success in revamping its shopping centre properties, most notably Nyanga Junction, where directors reported rentals on renewal trending upwards at about 12% as the national tenant component was increased.

Redevelopment projects at Nyanga have continued with the creation of a food court and all the new premises have been let.


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