Wrap Text
Trading and pre-close operational update
FORTRESS REAL ESTATE INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2009/016487/06)
JSE share code: FFB ISIN: ZAE000248506
Bond company code: FORI
LEI: 378900FE98E30F24D975
("Fortress" or "the Company")
Trading and pre-close operational update
Shareholders and noteholders are referred to the results announcement for the
interim period ended 31 December 2024 ("1H2025"), released on SENS on
27 February 2025. Fortress hereby provides an update on its operations for
the period subsequent to 31 December 2024.
Fortress is a real estate investment company with a diversified portfolio of
high-quality logistics and retail assets located in South Africa and Central
and Eastern Europe. The Company directly owns logistics assets valued at
R20 billion and a South African retail portfolio of R11 billion. In addition,
Fortress holds an investment of approximately R15 billion in NEPI Rockcastle
shares, offering indirect exposure to one of the most prominent retail
portfolios in Central and Eastern Europe. Collectively these holdings provide
shareholders with access to a real estate portfolio valued at over R50 billion,
supported by a robust development pipeline that underpins future growth potential.
The logistics sector continues to demonstrate strong performance, with
high-quality, secure space in sustained demand. Vacancy rates remain
low across the portfolio, highlighting the attractiveness of our assets.
Currently, 117 915m2 of new logistics developments are underway, with 72,7%
pre-let. This strong letting activity reflects the superior quality of our
facilities, which feature best-in-class flooring, expansive yards and
15-metre eaves heights - allowing for increased racking and warehouse volume.
These properties also benefit from excellent connectivity to key transport
networks, supported by well-established infrastructure.
Despite a challenging consumer environment, our retail portfolio has delivered
like-for-like tenant turnover growth of 4,0% and maintained a low vacancy
rate of 0,9%. This healthy performance is driven by the continued success of
asset management initiatives and recently refurbished and expanded centres.
We remain committed to ensuring our retail portfolio remains relevant,
attractive and competitive for both consumers and tenants.
Our strategy of enhancing the performance of core assets while disposing of
underperforming properties has continued to yield positive results. So far
this financial year, we have disposed of non-core properties with a combined
book value of R1,39 billion, generating proceeds of R1,44 billion,
representing a premium to book value of 3,0%. These proceeds have been
reinvested into new logistics developments and strategic retail upgrades
and extensions. As of the reporting date, properties with a combined book
value of R147 million are classified as held for sale.
We reaffirm our current forecast for distributable earnings of R1,930 billion
for the financial year ending 30 June 2025 ("FY2025") and provide distributable
earnings guidance for FY2026 of between R2,046 billion and R2,075 billion,
representing growth in distributable earnings of between 6,0% and 7,5%.
SA logistics and logistics developments
Vacancies, based on rental, in our South African ("SA") logistics portfolio
decreased from 1,5% at 31 December 2024 to 0,9% at 31 May 2025. The vacancy
remains low by historical standards, driven by strong demand for newly
completed developments, effective asset management initiatives across the
standing portfolio and the improved quality of the overall logistics
offering, due to the continued successful recycling of non-core assets.
At Eastport Logistics Park ("Eastport"), construction of the 19 970m2
warehouse for Crusader Logistics is progressing well and is on schedule for
completion in September 2025. Crusader Logistics, an existing tenant at
Eastport, has signed a five-year lease, with an option, in favour of Fortress,
to extend for a further five years. Construction of the 31 481m2 warehouse
for Liquor Runners, who has signed a five-year lease, is on track with
beneficial occupation planned for October 2025. Demand for space at Eastport
is encouraging and the construction of a 13 063m2 speculative warehouse is on
schedule for completion in February 2026. Post completion of these three
warehouses, we will be left with only 30 000m2 of GLA to be developed
at Eastport.
We have signed an 8-year lease with Suzuki for a 24 507m2 warehouse
at Longlake Logistics Park ("Longlake"). Construction of the 24 507m2
warehouse is expected to commence in July 2025, with beneficial occupation
planned for July 2026. Demand for space at Longlake is promising and the
construction of a 19 099m2 speculative warehouse is on schedule for
completion in October 2026. Once these developments have been completed,
Longlake will be fully developed.
Discussions are ongoing with a potential tenant for the final site
("Pocket 6") within our Clairwood Logistics Park ("Clairwood"). We expect
to finalise a lease for a 30 000m2 warehouse before our FY2025 financial
year end. Post the construction and letting of Pocket 6, Clairwood will
comprise approximately 300 000m2 of premium logistics space within a
secure and well-located park environment.
Central and Eastern European ("CEE") logistics and logistics developments
CEE logistics vacancies, based on rental, increased from 1,4% as at
31 December 2024 to 2,5% at 31 May 2025. The remaining vacancy relates
to 3 849m2 in Hall A at our Stargard park (Poland) and 6 005m² of
recently completed space at our site in Zabrze (Poland).
Phase 1 of Hall C in Bydgoszcz (Poland) was completed in December 2024.
MEDiVET has signed a 12-year lease for the entire 6 425m2 space, which
commenced upon completion. Construction of Phase 2 of Hall C is progressing
well and is expected to be completed in July 2025. Volcano, another existing
tenant in the park, has pre-leased this 4 095m2 space for 7 years, with
occupation starting in July 2025. Bydgoszcz currently comprises
73 000 m2 of GLA and is fully-let.
Tenant demand at our Stargard park has picked up. Construction of a new
5 700m2 warehouse for a new tenant, Hine, has commenced and will be completed
by December 2025. Vestas has taken over its various lease areas in the park,
including 15 000m2 of storage yard space.
At our Zabrze park, construction of a 11 340m2 warehouse for INNPRO commenced
in July 2024 and was completed in April 2025. The lease, secured for five
years, reflects strong ongoing demand at this location. Additionally, we
completed a speculative 11 675m2 warehouse in April 2025, of which 50% has
been let to Lit Logistyka, an existing tenant. Discussions with other
potential tenants to lease the remaining 6 005m2 are underway.
The table below provides a summary of our logistics park developments in
SA and CEE:
Fortress' GLA m2
Logistics Description/ ownership (100%)
park tenant %
Developments
completed
during FY2025
Clairwood Pocket 5B - CHC 100 14 071
Eastport John Deere 65 4 619
Bydgoszcz (Poland) Hall C (phase 1) - MediVet 100 6 425
Zabrze (Poland) Phase 2 - INNPRO 100 11 340
Zabrze (Poland) Phase 2 - Lit
Logistyka/speculative 100 11 675
Total 48 130
Esti-
Let Lease mated Comple-
Logistics Description/ GLA term yield tion
park tenant (100%) (years) (%)$ date
Developments
completed
during FY2025
Clairwood Pocket 5B - CHC 14 071 10 8,3 Sep 2024
Eastport John Deere 4 619 10 8,5 Sep 2024
Bydgoszcz (Poland) Hall C (phase 1)
- MediVet 6 425 12 7,3* Dec 2024
Zabrze (Poland) Phase 2 - INNPRO 11 340 5 7,0* Apr 2025
Zabrze (Poland) Phase 2 - Lit
Logistyka/speculative 5 670 5 7,0* Apr 2025
Total 42 125
Fortress' GLA m2
Logistics Description/ ownership (100%)
park tenant %
Developments
currently under
development
Bydgoszcz (Poland) Hall C (phase 2) - Volcano 100 4 095
Stargard (Poland) Hall E (phase 1) - Hine 100 5 700
Eastport Crusader Logistics 2 65 19 970
Eastport Liquor Runners 65 31 481
Eastport Speculative 65 13 063
Longlake Suzuki 100 24 507
Longlake Speculative 100 19 099
Total 117 915
Total: 100% of developments 166 045
Esti-
Esti- mated
Let Lease mated comple-
Logistics Description/ GLA term yield tion
park tenant (100%) (years) (%)$ date
Developments
currently under
development
Bydgoszcz (Poland) Hall C (phase 2)
- Volcano 4 095 7 8,3* Jul 2025
Stargard (Poland) Hall E (phase 1)
- Hine 5 700 10 7,5* Dec 2025
Eastport Crusader Logistics 2 19 970 10^ 8,5 Sep 2025
Eastport Liquor Runners 31 481 5 8,1& Sep 2025
Eastport Speculative - - 8,5 Feb 2026
Longlake Suzuki 24 507 8 8,6 Jul 2026
Longlake Speculative - - 8,5 Oct 2026
Total 85 753
Total: 100% of developments 127 878
* Yield shown in Euro.
$ Development cost in this calculation includes cost of finance,
internal project management fees and all other costs.
^ Initial lease period is five years, with an option in favour of the landlord
to extend for five years, which we intend to exercise.
& 8,5% effective yield achieved through a stepped lease agreement.
Retail
Our retail portfolio, which is commuter-focused and centred on convenience
retail, remains well-positioned in the face of current macroeconomic headwinds
and a constrained consumer environment. For the 12 months ended 30 April 2025,
like-for-like turnover increased by 4,0% compared to the same period in the
previous year. Our tenant turnovers continue to grow at a higher level than
the country's recorded inflation rate. The growth in turnover is underpinned
by the grocer, value fashion and pharmaceutical categories.
Retail vacancies improved to 0,9% at 31 May 2025, reflecting ongoing demand
and portfolio stability.
The 4,500m2 extension of Sterkspruit Plaza, anchored by a new Boxer supermarket,
has been completed and is trading ahead of expectations. Similarly, the
extension at Bloem Value Mart for Shoprite is progressing well and Shoprite
is in the beneficial occupation period.
Industrial and Inofort
Vacancies, based on rental, in the industrial portfolio increased marginally
from 9,8% at 31 December 2024 to 10,0% at 31 May 2025. Of the 29 822m2 of
industrial vacancies, 10 200m2 comprises the office component of these
properties, with the majority of this in Isando. Well-located, smaller
industrial units remain in demand and interest from potential purchasers
for the multi-user industrial parks is encouraging.
Office
Office vacancies, based on rental, decreased from 25,5% at 31 December 2024 to
24,7% at 31 May 2025. The office portfolio currently comprises 16 assets with a
book value of R734 million, which represents less than 1,5% of our total assets.
The office portfolio remains non-core.
Vacancies
Total vacancies, based on rental, decreased from 3,1% at 31 December 2024 to
2,5% at 31 May 2025.
Based on rental Based on GLA
May 2025 Dec 2024 May 2025 Dec 2024
Sectoral vacancy % % % %
Total 2,5 3,1 2,8 3,7
Logistics - SA 0,9 1,5 0,9 1,5
Logistics - CEE 2,5 1,4 3,0 1,6
Retail 0,9 1,1 1,0 1,1
Industrial 10,0 9,8 8,6 10,3
Office 24,7 25,5 24,4 26,6
Other^ 5,8 - 6,2 -
Information based on Fortress' economic interest in wholly-owned and
co-owned properties
^ Includes residential units and serviced apartment properties
Direct property disposals
We continue to sell non-core properties, with total disposals for the financial
year-to-date amounting to R1,44 billion with a corresponding book value of
R1,39 billion. The following properties have transferred since 30 June 2024:
Book
value
Net Jun
Property proceeds 2024 Transfer
name Sector (R'000) (R'000) date
City Deep Industrial Park Industrial 251 500 250 061 May 25
Eastport Logistics Park
- Teraco Land* Land 133 250 133 250 Jul 24
Fourways Office Park* Office 103 700 103 700 Jul 24
Kimberley Junction* Retail 97 000 97 000 Jul 24
1 Setchel Road Roodekop* Industrial 96 250 96 250 Jul 24
City Deep Mini Units Logistics 78 000 76 904 May 25
Rutherford Estate
Scott Street Office 72 500 70 000 Jan 25
49 Ayrshire Road Longmeadow Logistics 62 500 52 233 Oct 24
Chemserve Spartan Industrial 54 000 44 733 Oct 24
Paradise and Corner House Retail 48 000 50 000 Dec 24
Tradeport Merino
(previously Torre City Deep) Industrial 44 000 39 828 Apr 25
Hobart Square* Office 43 000 43 000 Jan 25
Centurion Office Park* Office 40 000 40 000 Jan 25
Midtown Mall Retail 33 000 32 000 Apr 25
1105 Anvil Road Robertville Industrial 28 050 28 123 Sep 24
68 Galaxy Avenue Linbro Park Logistics 27 000 23 930 Feb 25
35 Reedbuck Crescent* Logistics 25 450 25 450 Jul 24
Milkyway Road Crown Mines* Logistics 25 000 25 000 Aug 24
11 Reedbuck Crescent
Corporate Park Logistics 23 000 19 611 Nov 24
146 Serenade Road Rustivia* Logistics 21 000 21 000 Aug 24
City Deep Rittel Logistics 20 500 20 097 May 25
8 Field Street Wilbart Industrial 17 500 14 645 Oct 24
1338 Staal Road Stormill Industrial 16 000 15 397 Sep 24
9 Reedbuck Crescent* Logistics 13 800 13 800 Aug 24
71 Tsessebe Crescent* Logistics 13 000 13 000 Aug 24
45 Director Road
(previously 741 Megawatt Road) Logistics 13 000 11 820 Oct 24
Turnberry Fourways Golf Park Office 11 580 10 000 Feb 25
32 Mandy Road Industrial 9 335 9 600 Dec 24
66 Booysen Street Industrial 5 781 6 311 Dec 24
Lakeview Business Park 7 Industrial 5 600 4 232 Mar 25
Lakeview Business Park 1 Industrial 3 850 2 917 Sep 24
1 436 146 1 393 892
* Held for sale at 30 June 2024
The following properties are held for sale at 31 May 2025
Book
value
Net Jun
Property proceeds 2024
name Sector (R'000) (R'000)
Otto Volek Road Pinetown Industrial 112 000 97 600
11 Covora Road Jet Park Industrial 17 500 17 209
Greenbushes
(only six portions) Land 12 803 7 431
Wynberg Workshops Block B
(only erf 139)# Industrial 4 374 5 011
146 677 127 251
# Our share 51,46%
Energy and water solutions
We remain firmly committed to expanding our solar photovoltaic ("solar PV")
footprint across our property portfolio. Currently, we have 87 operational
solar PV installations with a combined capacity of 32.91MWac, up from 59
installations totalling 22,17MWac as at 30 June 2024. By 30 June 2025, we
aim to commission an additional 9 plants, bringing the total number of
solar PV systems to 96 and increasing installed capacity to 35,54MWac.
The continued rollout of solar PV infrastructure has significantly boosted
our renewable energy output. From July 2024 to May 2025, we generated
approximately 39,765MWh of solar energy, almost double the 20,389MWh
generated during the corresponding period in the prior year. For the
first five months of the calendar year alone, generation reached
18,838MWh (January to May 2024: 11,184MWh), underscoring the meaningful
impact of our sustainability initiatives.
NEPI Rockcastle
NEPI Rockcastle released its final results for the year to 31 December 2024
on 25 February 2025 and subsequently released a comprehensive business update
on 16 May 2025, both available on its website at www.nepirockcastle.com.
The current value of our investment in NEPI Rockcastle is approximately
R15 billion.
Funding, liquidity and treasury
In May 2025, we successfully raised an additional R820 million under our
Domestic Medium-Term Note ("DMTN") programme. The issuance comprised two
tranches: a three-year note of R390 million and a five-year note of
R430 million. We have seen significant tightening of margins in this market
since 1Q2024, achieving a reduction in the three-year note of 21bps and
24bps in the five-year note.
We further strengthened our funding position by early refinancing R4,2 billion
of facilities with Nedbank. These facilities were early refinanced to take
advantage of favourable pricing, resulting in an average effective margin
decrease of c.12bps along with extended tenors of R600 million for two years,
R1,09 billion for three years, R1,25 billion for four years and R1,25 billion
for five years.
Fortress' hedging strategy remains consistent with that of previous periods
and currently comprises 64% caps and 36% swaps. This structure positions us
to benefit from potential reductions in interest rates, given the higher
proportion of caps, while still maintaining protection in the event of
further rate increases.
We remain fully compliant with the key performance indicators (KPIs) associated
with our sustainability-linked notes, consistent with previous reporting
periods and we are on track to meet our June 2025 targets.
At the group level we maintain strong liquidity, with R5 billion in cash and
available facilities. Our financial position remains solid, with a loan-to-value
(LTV) ratio of approximately 39,8% as at the date of this announcement,
comfortably within all covenants.
Currently we have a collar over 18,75 million NEPI Rockcastle shares. The put
and call strikes are R110 and R145 respectively, with maturities between
January 2026 and August 2026. We retain the dividends on these shares as well
as the risks and rewards of ownership.
Outlook and guidance
Distributable earnings for FY2025 is forecast to be in line with previous
guidance at approximately R1,93 billion. Furthermore, management provides
guidance for FY2026 distributable earnings as presented in the table below:
FY2024 FY2025 Change FY2026 Change
(actual) (forecast) (%) (forecast) (%)
Total
distributable 2 045 800 - 6,0 -
earnings (R'000) 1 788 505 1 930 000 7,9 2 074 650 7,5
Shares in issue
(at the end of
the period) 1 190 536 893^ 1 204 291 830 1 204 291 830
Distributable
earnings per 169,88 - 6,0 -
share (cents) 151,63# 160,26 5,7 172,27 7,5
# Sum of the 1H2024 and 2H2024 actual dividends per share.
^ Net of treasury shares.
This forecast is based on the following assumptions:
Fortress-specific assumptions
- Our distributable earnings methodology will remain consistent with
that of prior periods, as previously communicated;
- NEPI Rockcastle maintains a 90% payout ratio and meets its published
distributable earnings per share guidance for their financial year ending
31 December 2025;
- No material sales, or acquisitions, outside of our planned pipeline occur
which necessitate a revision to this forecast;
- There is no unforeseen failure of material tenants in our portfolio;
- Contractual escalations and market-related renewals will be achieved
with no major change in vacancy rates;
- Tenants will be able to absorb the recovery of rising utility costs
and municipal rates; and
- The current funding structure provided by the collar over 18,75 million
NEPI Rockcastle shares remains intact for the full period.
Macroeconomic and regulatory assumptions
- There is no unforeseen material macroeconomic deterioration in the
markets in which Fortress has exposure;
- There are no unforeseen adverse socio-political and geo-political events
in the jurisdictions in which Fortress has exposure;
- There are no changes to current tax legislation in the jurisdictions in
which the Company operates; and
- There are no changes to current interest rates by the European
Central Bank or the South African Reserve Bank.
The forecast, including the assumptions on which it is based and the
financial information from which it has been prepared, is the
responsibility of the directors of the Company. The forecast has not
been reviewed or reported on by the Company's external auditor.
6 June 2025
Lead equity sponsor
JavaCapital
Debt sponsor and joint equity sponsor
Nedbank CIB
Date: 06-06-2025 04:30:00
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