Real estate investment trust Fortress has reported an increase of 4.53% to 141.8c apiece for its A-share distribution for the year ended June 30, while its B-share distribution increased by 4.07% to 179c apiece.
Fortress is active in high-growth nodes that have prime logistic warehousing, retail centres and offshore properties, and now manages 308 direct property investments worth R30-billion.
The company expects its listed investments, where it is predominantly exposed to the euro, to show sustained distribution growth. These holdings include Nepi Rockcastle, Resilient REIT and Greenbay Properties, together valued at R22-billion in the reporting period.
“The continued strength of our logistics portfolio, together with exposure to the commuter-oriented retail centres, is expected to provide a solid foundation for future upside despite the current difficult economic environment,” said Fortress CEO Mark Stevens.
In particular, construction of Phase 3 of an additional logistics facility in the Louwlardia logistics park, in Centurion, measuring 17 725 m2, is nearing completion and this warehouse has been let to Vodacom on a five-year lease agreement.
The construction of Phase 2 has been completed and Worldwide Automotive Group has taken occupation of the 34 025 m2 facility. The development was concluded at a yield of 9.5%.
Meanwhile, several tenant-driven developments are being negotiated, with the first logistics facility at Clairwood Logistics Park scheduled for completion in October.
Construction of the new 18 925 m2 Makro store (50.1% owned by Fortress) at Cornubia Ridge Park is progressing well and beneficial occupation is planned for March 2019. Makro signed a 20-year lease for this facility.
Fortress also started extenstions and refurbishments at The Plaza Mbombela, Central Park Bloemfontein and a new access road at Palm Springs Mall during the reporting period.
The earthworks required for construction of Phase 1 at White River Shopping Centre has started and the top structure for this 10 000 m2 centre will start shortly. Fortress has a 51% interest in this development.
Fortress will continue to dispose of its remaining office investments, which have a combined value of R2.9-billion and comprise 39 properties, in line with expected low growth in the office and industrial market.
During the reporting period, the dividend for the B-share – these shares provide a right to the residual distributable income after settlement of any A-share dividend and to the capital participation on winding up after calculating the A-share settlement – was negatively impacted on by a loan impairment on the company’s broad-based black economic empowerment (BBBEE) trust Siyakha Trust owing to the lower Fortress share price.
The distribution contribution from Siyakha for the second half of the period was matched to the Fortress dividends earned by Siyakha.
A restructure of the trusts was announced during the period to provide greater clarity and certainty for stakeholders, with the Siyakha 2 Trust (to be renamed the Fortress Empowerment Trust) repositioned as a black economic empowerment ownership vehicle with a relationship only with Fortress and which owns only Fortress shares and is funded only by Fortress.
In a guidance note, and assuming that the A-share dividend will increase by 5%, Fortress anticipates the B-share dividend to grow between 175c apiece and 183c apiece for the 2019 financial year.
Stevens said the increase in dividends has been calculated on the assumption that the macro environment will not deteriorate further and that the current political landscape does not change dramatically.
“We are charting a course which entrenches our position and brand in the market, plays to our existing strengths, further diversifies our portfolio and drives home advantages – notably in logistics – that we believe have the best potential.
We are gearing up for an agile future in which we can quickly take full advantage of property opportunities as they arise,” noted Stevens.