Real estate company Fortress Real Estate Investments says it successfully simplified its capital structure through the implementation of a single class of share, as well as achieved other operational successes during the six months ended December 31, 2023.

CEO and MD Steven Brown on March 11 lauded shareholders’ approval of the introduction of a single class of share in January this year.

The result is that previous restrictions to paying distributions no longer apply. For the interim period, the board has declared a dividend of 81.44c apiece.

“This proactive approach by our shareholders provides increased flexibility to unlock shareholder value as we continue to enhance our core portfolios in South Africa and Central and Eastern Europe,” he said.

“The introduction of a scrip dividend alternative, made possible by the new capital structure, offers shareholders the flexibility of choosing between cash distribution or additional shares, marking a significant milestone in our company’s history,” he added.

During the interim period, Fortress witnessed a continued strong operational performance within its direct portfolio, as well as from its associate NEPI Rockcastle.

Despite the local challenging consumer market and economic climate, the direct South African retail portfolio achieved a 6.9% like-for-like retail turnover growth.

The expansion and refurbishment of core retail assets, as well as the continued rollout of logistic developments, alongside strategic divestments, are expected to position the company for enhanced portfolio quality and growth going forward.

Distributable earnings increased by 19% compared with the previous interim period.

The company had net asset value and tangible net asset value growth of R3-billion (9.1%) and R3.8-billion (11.9%), respectively, during the period.

The overall portfolio vacancy stands at 3.7% based on rental.

Like-for-like retail turnover increased by 6.9%.

Direct property disposals totalling R1.02-billion were achieved at a 25% premium to valuations.

Brown highlighted the company’s focus on sustainability, with the company aiming to double solar photovoltaic (PV) plants across the portfolio, and with installed capacity up by 58.8%.

He mentioned that Fortress takes a holistic view on sustainability in terms of its retail assets, with the company providing a full utility package to tenants. This is through internal control and supply of high-speed, reliable Internet, water and energy.

Fortress had 42 operational solar PV installations as at December 30, compared with 25 plants as at June 30, 2023.

More plants are planned for completion by June 30 this year, with 58 plants to be in operation by then.

Fortress aims to increase the installed capacity to 22.4 MW by then, and add a further 12 MW through 37 planned projects by June 30, 2025.

This will increase Fortress’ consumption of renewable energy to about 22% of total energy consumption.

Fortress is also reviewing the water storage facilities in its portfolio and adding back-up water tanks where possible.

PORTFOLIO PERFORMANCE

The logistics portfolio, with a R13.8-billion asset value, recorded marginal increases in vacancies (0.5%) to 1.2% at period end; however, it still maintained a strong performance with a 9.2% like-for-like net operating income growth.

The logistics developments portfolio, with a R2-billion asset value has a remaining development pipeline of 230 000 m² of gross lettable area and completion of this is estimated to take between two and four years.

Fortress has ongoing development projects including the successful Eastport Logistics Park and Clairwood Logistics Park. The option on the additional Eastport North land provides additional development opportunities in the medium term.

Given the success of the Eastport development, Fortress says it is optimistic that the demand for this site will be high and that the rollout should not extend beyond five years.

The Central and Eastern Europe direct property portfolio, with a R3.4-billion asset value, saw sustained growth momentum owing to a focus on sustainable building and tenant-driven demand.

The retail portfolio, with a R10.4-billion asset value, achieved a robust performance amid a higher interest rate environment, and was driven by increased demand from essential goods retailers, including groceries, supermarkets, pharmaceuticals, and liquor categories, despite challenging trading conditions and loadshedding.

“Fortress looks ahead to continue to power growth for our tenants and communities that we operate in, marked by enhanced operational agility, logistics and retail demand and the ongoing need for more sustainable real estate solutions,” Brown averred.

Fortress has revised its distributable earnings guidance for full-year 2024 from R1.93-billion to between R1.66-billion and R1.72-billion.