Fortress lowers distribution guidance


Fortress lowers distribution guidance

Published Date: 2019-09-04 | Source: Stephen Gunnion | Author: Stephen Gunnion

Fortress lowers distribution guidance

Holders of the B shares will get less than previously forecast next year due to impairments on development land.

Fortress REIT says it's taken steps to strengthen its leadership and governance after coming under scrutiny early last year. It's appointed three new independent non-executive directors to its board, has a new CEO and chief financial officer, and has also added a new chief operating office post to the mix. It said a report by PwC into historical property transactions and share deals should also provide comfort to its shareholders that these matters have been dealt with.

Also gone are the Siyakha Education Trust and the Siyakha 2 Education Trust, which were criticised as well. It's unwound the structure, replacing it with a new black economic empowerment deal.

Reporting back for the year to end-June, the real estate investment trust said it exited non-core investments totalling R3.4 billion over the year and completed developments worth R1.4 billion.

Fortress is the biggest owner and developer of core, premium-grade logistics real estate in the country. It also has a portfolio of 61 commuter-oriented shopping centres, including co-owned properties, and owns a 23.9% stake in Central and Eastern European shopping centre owner NEPI Rockcastle and an 11.1% interest in Resilient REIT.

Revenue from the group's direct property operations rose 0.7% to R3.41 billion in the year to end-June, with total revenue including investments declining by 0.1% to R3.63 billion. It's raised its total dividend for holders of its A shares by 4.6% to 148.35c, while holders of its B shares will get a 13.1% reduction to 155.5c. Under its structure, the A shares have a preferential right to distributions.

Total vacancies increased to 7.2% from 7%, due to a big rise in industrial vacancies as manufacturing tenants came under pressure. Office vacancies reduced slightly but remained high, while logistics and retail vacancies improved.

The REIT's net asset value rose 1.4% to R35.7 billion as positive revaluations of its investments in NEPI Rockcastle and Resilient were offset by a loss on the disposal of its interest in Lighthouse Capital, a R560 million impairment to the value of its Clairwood Logistics Park, a 2.3% reduction in the valuation of its direct property portfolio, and an effective decrease in the economic carrying value of the unwound Siyakha Trusts and the new BEE structure.

It has forecast total distribution growth of about 1% for the year ahead, with holders of its A shares guaranteed the lower of CPI consumer inflation or 5%. Holders of the FFB shares will receive less than previous forecast due to impairments taken on development land.

Its A units declined by 1.2% to R20.71 yesterday while its B shares fell 6.7% to R10.10.

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