Real estate company Fortress Real Estate Investments achieved a solid performance for the six months ended December 31, with distributable earnings a share of 76.15c - a 29.8% increase on the normalised distributable earnings per share for the corresponding six-month interim period ended December 31, 2023.

Fortress owns a portfolio of logistics properties in South Africa and Central and Eastern Europe, and a portfolio of retail properties in South Africa. It also holds about R16-billion in NEPI Rockcastle shares, which provides exposure to a retail portfolio in Central and Eastern Europe.

The strategic shift into higher-growth and better-quality assets resulted in lower vacancy rates and improved like-for-like net operating income (NOI) growth across the group’s core logistics and retail portfolios, CEO Steven Brown said in a February 28 presentation.

He highlighted the particularly good performance of the retail portfolio, with 9.2% like-for-like NOI growth, largely owing to recent and ongoing refurbishments and extensions and the disposal of underperforming assets, which were constraining growth.

Fortress’ logistics portfolio achieved like-for-like NOI growth of 4.7%.

This portfolio continues to benefit from very low vacancies, owing to limited new developments in the market, and increased demand for larger warehouses in secure logistics parks, Brown averred.

The industrial portfolio, while remaining noncore, continued to outperform expectations, marking another strong period of growth.

Brown highlighted progress on the group’s strategic exit from the underperforming office sector, with the disposal of R259.2-million of office properties so far this financial year, sold marginally above Fortress’ most recent book values, with the proceeds recycled into its core asset portfolio.

The group currently has R897-million of office properties remaining, representing 1.6% of total assets, with Brown noting the aim to fully exit this sector within about three years.

The group is also expanding in Europe, with the successful acquisition of Gdańsk logistics park, in Poland, in February providing 55 073 m² of development potential on the already developed 50 916 m².

Fortress supported NEPI Rockcastle with its growth ambitions and participated in the accelerated bookbuild in October 2024 for €100-million.

NEPI Rockcastle used the additional capital to acquire dominant retail assets which are accretive, from both an earnings and a portfolio quality perspective, Brown highlighted.

NEPI Rockcastle’s future growth prospects are predicated to be strong owing to the quality of the retail portfolio, presence in growth markets and a conservatively geared balance sheet.

The final dividend for the period is 76.15c apiece, a 30% increase on the normalised dividend of 58.68c for the prior comparable period.

Alternatively, Fortress has again offered a portion of its investment in NEPI Rockcastle to shareholders in lieu of a cash dividend for the period. 

OUTLOOK

Distribution growth is being driven by an increase in NOI from both new developments and the existing portfolio.

The ongoing sales of lower-growth, underperforming assets is expected to strengthen the overall quality and earnings of the portfolio.

Fortress highlighted a positive outlook, having revised its full-year 2025 distributable earnings to at least 159.84c apiece.