Despite slightly higher vacancies and a sharp reduction in the rent from Edgars and Jet stores, Fortress, the largest owner and developer of logistics real estate in South Africa, saw an increase in the revenue earned from its properties.
For the year to end June, revenue from direct property operations grew by less than a percent to R3.4 billion. Investors in Fortress A ordinary share saw their dividend increase by 4.32%.
The company owns 100 logistics property – including N1 Business Park, Isando Business Park, City Deep Industrial Park - and 61 shopping centres, including Thrupps Illovo Centre and the Fourways Value Mart.
Along with other landlords, Fortress agreed to reduce the rental charged on all Edgars, Jet and JetMart stores by 41%, in exchange for shares in the Edcon business. “We ascribe no value to these shares and will continue to distribute only the cash component of rental received. During the last six months, we have reduced our exposure to the Edcon group by approximately 8 000m2.”
Total vacancies, measured as a percentage of gross lettable area, increased marginally from 7.0% at 31 December 2018 to 7.2% at 30 June 2019.
Fortress says is office portfolio was hit by an oversupply in the market, and “aggressive offers from competing landlords”. It is now selling its offices, and will use the money to develop logistics properties.
In addition to its South African property portfolio, Fortress has a 23.9% interest in NEPI Rockcastle, valued at R18.1 billion, and an effective 11.1% interest in Resilient REIT, valued at R2.5 billion.
Fortress’s net asset value increased marginally by 1.4% to R35.7 billion at end-June, primarily due to a combination of positive revaluations on its investments in NEPI Rockcastle and Resilient.
Earlier this week, the Financial Sector Conduct Authority (FSCA) cleared Fortress of any wrongdoing after allegations that it manipulated its share price and company performance. It has been investigating the company since last year, when Fortress, along with NEPI and Resilient, saw massive slumps in their share prices amid reports of suspect inter-company transactions.
Compiled by Helena Wasserman