Fortress warehouse in Romania
JSE-listed property company Fortress has been approved for a secondary listing on A2X Markets, joining fellow property companies Growthpoint Properties, Equites Property Fund, Fairvest, Hyprop and Balwin Properties on the exchange.
Fortress’s A and B shares will be available for trade on A2X from March 16.
Notably, there have been issues around the company’s dual shareholding structure, which remain unresolved, it notes in a report to shareholders published on March 9.
Fortress also recently lost its real estate investment trust (Reit) status, owing to it not paying the minimum 75% of its taxable earnings as a dividend within a period of four months after its financial year-end.
At its annual general meeting in January, the majority of the company’s B shareholders voted against the company’s proposed share scheme, while the requisite majority of A shareholders voted in favour thereof.
Considering the failure of a resolution, Fortress did not pay a distribution for the financial year ended June 30, 2022.
Fortress believes the collapse of its A and B share structure into one class of shares is the only way to preserve its Reit status. There is, however, disagreement between the two shareholder groups on what exchange ratio they would consider to be fair.
The company affirms in its results announcement for the six months ended December 31, that its core business remains operationally strong with a conservatively managed balance sheet.
CEO Steven Brown comments that Fortress is looking to the future with a renewed focus on the operational performance of the business and ensuring tenants are able to operate efficiently and profitably.
Fortress says it experienced difficult trading conditions in the first half of the 2023 financial year, including loadshedding, high inflation and a low-growth operating environment.
To this end, the company continues its diversification efforts in logistics and retail assets in high-growth economies in Europe, including Poland, as evidenced by a 12% growth in net asset value in the six months under review, compared with the six months ended December 31, 2021.
Fortress completed just under 87 000 m2 of new logistics developments in the period, of which 7 738 m2 of new developments were in Poland.
Another 306 252 m2 of development is underway, including a 164 470 m2 pre-let super distribution centre for retailer Pick n Pay and a further 110 979 m2 of pre-let space to logistics businesses Crusader Logistics, Dromex, ZacPak, Retailability and Sammer Logistics.
The Mahikeng Station Boulevard centre redevelopment and refurbishment will be completed soon, while the completion of the 8 370 m2 extension of Vryheid Plaza will be completed by October.
The company has managed to reduce its total vacancy rate, by gross lease area (GLA), to 4.9% in the reporting period, with the South African logistics portfolio having a particularly low vacancy rate of 3.3%.
Fortress also achieved like-for-like retail turnover growth of 7.6% in the six months under review.
About 15 properties worth R590-million were disposed of in the period, with 12 more noncore properties, with a book value of R1.65-billion, being held for sale. This speaks to the company’s asset recycling strategy for noncore assets.
Further, the company is continuing strongly with its solar photovoltaic rollout, having commissioned 22 operational plants in total and having eight more under development. Brown confirms the company is finalising feasibility studies and tenders on another 11 projects.
At the end of the reporting period, Fortress had 8.98 MW installed, compared with 6.48 MW installed as at December 31, 2021.
In the six months under review, Fortress generated 6 137 MWh of renewable energy, compared with the 5 338 MWh generated in the prior comparable period.
As of December 31, 2022, Fortress had a R10.9-billion logistics portfolio in South Africa, with R3.8-billion in asset value currently under development, including the R2.1-billion Eastport logistics park, which will contain the Pick n Pay distribution centre that is due to be completed in May.
Additional key logistics park developments include Cornubia, Longlake and Clairwood, which has secured two 15-year lease agreements.
Fortress’s South African retail portfolio is valued at R10.1-billion, and delivered retail tenant turnover growth of 7.64% compared with the year ended December 31, 2021, which represents a notable performance considering the increasing challenges – subdued consumer spending, higher inflation, rising interest rates, loadshedding and poor local government service delivery – faced by the retail sector.
Abroad, Fortress has 133 000 m2 of GLA, worth R1.7-billion, in Poland and Romania, through a 23% shareholder in central and eastern Europe retail property group Nepi Rockcastle.
New developments are under way in the city of Bydgoszcz, in Poland, where Fortress owns logistics parks. The company will also start building two new developments in Zabrze and Łódź this year, and may launch a third development in Stargard, all in Poland.
Brown says the company will continue using the proceeds from disposals to fund its development pipeline and the enhancements of existing assets.