Retail property owner Fairvest has sold its Tokai Junction, in Cape Town, for R180m to reduce debt, it said on Tuesday. The final fee is R10m short of the target price announced in April.

CEO Darren Wilder said the deal is still profitable for Fairvest.

“The disposal value represents good value for Fairvest. The disposal price represents a 2.1% premium to book value,” he said.

The asset’s value at end-December was R176m. Wilder said that in a market in which valuations were predicted to fall by as much as a fifth, this confirmed that Fairvest’s property valuations were not overvalued.

“The proceeds would be used to pay down debt, in line with Fairvest’s strategic objective of ensuring that its balance sheet remains robust in a tough economic environment,” Wilder said.

Fairvest has one debt facility, of R128m, due for refinance by December.

The JSE’s listed real-estate sector has been hit by the Covid-19 epidemic that has wreaked havoc worldwide, resulting in closure of businesses.

The lockdown has affected Fairvest’s tenants who were unable to pay their full rent due to the lack of business activities. Fairvest, which owns retail centres in rural and small towns, has since agreed to give some tenants rental discounts and deferments.

Fairvest said on Tuesday it had finalised an agreement to sell Tokai Junction to FPG Holdings.

“To complete a transaction of this nature in the current environment demonstrates the attractiveness of Fairvest’s assets, as well as its ability to recycle capital when equity becomes expensive,” he said.

The deal is pending approval from the Competition Commission.

Two months ago, Fairvest withdrew its guidance of distribution per share growth of 4%-6% for its year to end-June, saying that the effects of the Covid-19 pandemic and resultant lockdown made it impossible to forecast a dividend.

On Tuesday, Fairvest’s share price jumped 6% to close at R1.59, giving it a market capitalisation of R1.6bn.


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