FORTRESS REIT LIMITED - Preliminary audited summarised consolidated financial statements for the year ended 30 June 2018

Release Date: 21/08/2018 17:38
 
Wrap Text
Preliminary audited summarised consolidated financial statements for the year ended 30 June 2018

Fortress Reit Limited
Incorporated in the Republic of South Africa
Registration number 2009/016487/06
JSE share codes: FFA ISIN ZAE000248498 FFB ISIN ZAE000248506
Bond company code: FORI
("Fortress" or "the group" or "the company") 
(Approved as a REIT by the JSE)
(Previously Fortress Income Fund Limited)

Preliminary audited summarised consolidated financial statements 
for the year ended 30 June 2018

Directors' commentary

Nature of business
Fortress REIT Limited is an internally asset managed Real Estate Investment 
Trust ("REIT") and was established as a hybrid fund, investing in both direct 
property as well as other listed property stocks and REITs.

Fortress owned 308 properties at 30 June 2018 which, together with its 
development pipeline, had a carrying value of R30,2 billion@. The property 
portfolio consists predominantly of A-grade logistics warehouses, which 
Fortress has been developing on its strategically owned land and a portfolio of 
retail shopping centres, which primarily service the commuter-oriented market.

The listed property portfolio consists of three significant holdings: NEPI 
Rockcastle plc, Resilient REIT Limited and Greenbay Properties Limited. At
30 June 2018, these investments were valued at R22,1 billion@.

Capital structure
Fortress is listed on the Johannesburg Stock Exchange with two separately 
listed shares. The A share (share code: FFA) has a preferential right to 
distribution of income and to capital participation, which is calculated as the 
60-day volume weighted average price, in the event of winding up. The B share 
(share code: FFB) has entitlement to the residual distributable income and 
capital participation on winding up.

As a result of Resilient unbundling its investment in Fortress B shares in 
May 2018, Fortress received 16 423 997 Fortress B shares which were held in 
treasury shares at 30 June 2018.

Group results
The increase in the dividend for the six months to 30 June 2018 attributable 
to the A share was 4,29% compared to the six months to 30 June 2017. This
was calculated as being the lower of CPI or 5,0% using data supplied by 
Statistics South Africa. Accordingly, the dividend for the A share increased 
from 67,67 cents to 70,57 cents per share. The B share dividend decreased by
4,80% from 93,41 cents per share to 88,93 cents per share compared to the
previous comparable period. Shareholders are referred to the SENS
announcement published by Fortress on 7 March 2018 and 29 May 2018 in 
this regard.

For the 2018 financial year, the dividend for the A share amounts to 141,77 
cents per share, a 4,53% increase, and the dividend for the B share increased 
by 4,07% to 179,00 cents per share.

The B share dividend was negatively impacted by the decision to distribute 
interest accrued on the loans advanced to the Siyakha Education Trust and 
Siyakha 2 Education Trust ("Siyakha Trusts") only to the extent that this
interest is matched by dividends accrued to the Siyakha Trusts from Fortress
A and B shares in the same period which were funded by Fortress.

Direct retail and logistics properties performed satisfactorily, however, the 
office and industrial properties continued to trade in challenging markets. The 
increase in the direct property portfolio's net rental income was in line with 
expectations.

The dividend growth from the Euro denominated listed property securities, as 
well as the attractive forward hedged exchange rates, continued to
contribute positively to Fortress' distributions. The dividend growth from the 
investment in Resilient was in line with Resilient's revised guidance.

The net asset value of the Fortress B share decreased from R26,75 per share at 
30 June 2017 to R16,54 per share at 30 June 2018. This decrease was driven by 
the decline in the value of Fortress' listed securities, the impairment of the 
loans to the Siyakha Trusts as well as the impairment of the staff scheme 
loans.

Direct property portfolio
The entire direct property portfolio was valued externally. Fortress appointed 
four new external valuers to perform the valuations at 30 June 2018, being 
Cushman & Wakefield, Viking Valuations, Yield Property Valuers and 
Strata Properties (a black owned firm associated with Quadrant Properties). 
These new firms valued portfolios based on their expertise in certain markets, 
being Gauteng Logistics for Cushman & Wakefield, the Cape Town portfolio for 
Viking Valuations, the KwaZulu-Natal portfolio for Yield Property Valuers and 
the office portfolio for Strata Properties. Given the geographical spread of 
the retail properties, Quadrant Properties continued to value this portfolio.

The valuers predominantly used a discounted cashflow method with specific 
discount rates for each property. However, on a capitalisation rate equivalent 
(forecast net income divided by the value), the portfolio average 
capitalisation rate was 9,4% at 30 June 2018. Discount rates varied from
13,25% to 15,75%.

Logistics
The construction of phase two of Louwlardia Logistics Park has been completed 
and Worldwide Automotive Group has taken occupation of this 34 025m2 facility. 
The development was concluded at a yield of 9,5%. Construction of phase three 
of an additional logistics facility in this park measuring 17 715m2 is nearing 
finalisation and this warehouse has been let to Vodacom on a new five-year 
lease agreement. We Buy Cars has exercised their option to purchase a 50% 
undivided share in their facility.

Phase two of Westlake View Logistics Park opposite Bongani Rainmaker Logistics, 
is scheduled for completion in October 2018 at a projected yield of 9,0%. This 
speculative logistics facility measuring 23 569m2, is being constructed using 
tilt-up technology and has an eaves height of 15 metres with an FM2 floor. 
Negotiations are underway with a logistics user to lease this facility.

The second logistics warehouse at Union Park Logistics, south of Johannesburg, 
is due for occupation in February 2019. The construction of this 21 958m2 
facility, adjacent to the new Voltex warehouse, has commenced on a speculative 
basis. A projected yield of 10,0% is anticipated on the successful letting of 
this warehouse.

Eastport Logistics Park (65% owned) located on the R21 highway and 
strategically situated between OR Tambo International Airport and Pretoria,
will welcome Savino Del Bene to this new 24 280m2 logistics facility in 
December 2018. Construction of an adjacent 21 835m2 logistics warehouse has 
commenced with completion scheduled for April 2019. In addition, several 
tenant driven developments are currently being negotiated.

The first logistics facility at Clairwood Logistics Park is scheduled for 
completion in October 2018. This state-of-the-art 24 975m2 warehouse is 
anticipated to yield 7,5% on the conclusion of a successful lease. Negotiations 
are at an advanced stage with a user for this warehouse. The soil improvements 
and platform construction on platforms two and three have been completed. 
Fortress has been approached by a logistics user to purchase platform two and 
discussions are progressing well. A conditional offer has been signed with a 
large multi-national user for a 42 000m2 warehouse on platform three. Soil 
improvements on platform four and seven will be completed by the end of August 
2018 and September 2018 respectively. The gatehouse and central access road 
will be completed by September 2018 followed shortly by the on-ramp and 
off-ramp to the M4 highway. The creation of the seven-hectare wetland has been 
completed.

Construction of the new 18 925m2 Makro store at Cornubia Ridge Park (50,1% 
owned) opposite Umhlanga, is progressing well and is expected to open in March 
2019. Makro has signed a 20-year lease for this facility.

A new ten-year lease agreement has been concluded for the construction of a
24 896m2 warehouse and showroom facility for Decofurn in Montague Business
Park (25% owned).

Projected yields on all the speculative developments above assume market- 
related rentals.

Retail
Sales growth in this portfolio for the 12 months ended 30 June 2018 has 
shown a 4,1% increase over the preceding 12 months which is satisfactory 
given current economic headwinds. These trading numbers include a successful 
Black Friday trade in November 2017 and robust trade in December 2017. 
Sales growth for the current year compared to the prior year is detailed 
per province below:
Gauteng                                                                 4,3% 
Western Cape                                                            5,0%
KwaZulu-Natal                                                           5,0% 
North West                                                              9,1% 
Limpopo                                                                 4,0% 
Mpumalanga                                                             (2,9%) 
Free State                                                              8,3%
Eastern Cape                                                            6,1%

Turnover rental budgeted for the year ended 30 June 2018 amounted to
R11,6 million while turnover rental collected was R13,4 million.

Fortress commenced extensions and refurbishments at The Plaza Mbombela, Central 
Park Bloemfontein and a new access road at Palm Springs Mall during the year.

The earthworks required for construction of phase one at White River
Shopping Centre is nearing completion and the top structure for this
10 000m2 centre will commence thereafter. The opening of this neighbourhood 
centre is anticipated in August 2019 with two food anchors and a discount 
pharmacy chain amongst its offerings. Fortress has a 51% interest in this 
development.

Offices
The difficult conditions experienced in the office market are expected to 
persist as lower demand and a continuing new supply stream have caused a glut of 
office space. In line with its strategy, Fortress will continue to dispose of 
its remaining 39 office properties which had a combined value of R2,7 billion@ 
at 30 June 2018.

Transfer of the strategically located site with 42 000m2 of bulk opposite
the Gautrain station in Sandton was delayed and is now expected in September
2018. Offers have been received from a number of hotel operators for this site 
given its proximity to the Gautrain. The board is considering several options 
for this site.

Industrial
The portfolio of industrial properties continues to show limited growth and 
this trend is expected to persist. In line with its strategy, Fortress will 
continue to dispose of its industrial assets which had a combined value of 
R3,9 billion@ at 30 June 2018. The majority of the industrial properties are 
smaller and well suited to owner-occupiers and private investors.

Other
These investments consist primarily of residential flats in Mthatha (60% 
owned), Secunda and The Prism in Rivonia (50,1% owned). The Prism has been 
successfully let to Corporate Apartment Group ("CAG") on a four-year lease 
agreement at an initial yield of 9,2%. CAG has leased the entire complex to 
Huawei Technologies. Fortress considers all the assets classified in this 
category, valued at R504 million@, as non-core.

@ Information based on Fortress' management accounts. 

Property disposals
The following properties were sold at a premium of 3,1% to book value during 
the year:

                                         Net        Book                 Exit
                                    proceeds       value    Transfer    yield
Property name          Sector          R'000       R"000        date        %
The Crescent
Umhlanga &             Retail        550 000     486 000    Aug 2017      8,2
West Street
Sandton                Office        273 000     350 000    Dec 2017      n/a
Kingsburgh
Shopping Centre &      Retail        114 660      94 184    Jul 2017      8,6
45 Richard Carte
Road Mobeni            Logistics     110 000     101 100    Dec 2017      9,0
Constantia Park
Durban                 Industrial     78 000      73 200    Mar 2018      8,7
Van Riebeeck
Mall &                 Retail         74 000      77 497    Jul 2017      9,3
33 Angus Crescent
Longmeadow &           Logistics      62 000      58 000    Aug 2017      8,2
Shoprite Bela-
Bela &                 Retail         53 550      47 000    Sep 2017      9,1
87-91 Goodwood
Road Durban            Logistics      49 000      42 100    Nov 2017      7,7
Union Park (50% 
undivided share of 
the facility occupied 
by Bidvest)            Logistics      48 500      40 500          ##      9,0
Imperial Motors
Strijdom Park          Other          42 000      43 600    May 2018        @ 
Rutherfords
Germiston              Industrial     41 000      42 000    May 2018        @
Essex Street
Meadowdale             Industrial     39 500      37 700    Oct 2017      9,4
204 Rivonia Road
Morningside *          Office         28 842      24 000    Nov 2017        @ 
Broadwalk Motor
City &                 Retail         27 350      26 800    Aug 2017      9,1
21E Polo Crescent
Woodmead &             Office         23 000      27 000    Aug 2017      9,8
Brewery Road
Isando &               Industrial     16 950      14 700    Sep 2017        @ 
York Road Wynberg
Cape Town              Industrial     17 750      17 600    Nov 2017     10,2
19 Indianapolis
Street                 Industrial     15 100      14 410    May 2018      9,6
3 Capital Hill
Business Park          Industrial     12 000      10 700    Mar 2018      8,7
22 Skietlood Street 
Isando (portion of 
Isando Business
Park)                  Logistics      10 500      10 500    Dec 2017      9,3
Chelsea Office
Park Rivonia
(Block C) *            Office          6 790       4 716    Mar 2018        @
28 Linbro Village
Linbro Park            Industrial      5 265       4 750    Nov 2017      8,5
                                   1 698 757   1 648 057

@ vacant occupation.
## 1 March 2018 effective date transaction.
* a portion of the property was sold.
& property was held for sale at 30 June 2017. Book value shown is at 
30 June 2016.

The following properties were held for sale at 30 June 2018:

                                       Expected net        Book   Anticipated
                                       sales amount       value    exit yield
Property name              Sector             R'000       R'000             %
New Redruth Village &&     Retail           184 450     184 450           8,6
Louwlardia Logistics Park
- 50% undivided 
share of the facility 
occupied by WAG            Logistics        140 500*    140 500*         8,25
Louwlardia Logistics Park
- 50% undivided share 
of the facility occupied
by We Buy Cars             Logistics        107 200*    107 200*          8,5
22 on Sloane               Office            65 000      65 000           8,8
17 Kosi Place Umgeni       Office            36 000      36 000             @ 
Woolworths Newcastle       Retail            31 400      31 400           9,1
Westar Park Stormill &     Industrial        20 000      20 000           9,3
Tradeport (Erf 30
City Deep)                 Land              18 740      18 740             @
                                            603 290     603 290

& transferred on 27 July 2018.
&& transferred on 21 August 2018.
@ vacant occupation.
* price will be calculated on date of transfer at the pre-determined exit 
yield.


Vacancies
Total vacancies increased to 7,4% from 5,8% at 31 December 2017. The vacancy
as a percentage of total gross income, assuming the vacancy was let at market 
related rentals, amounts to 6,2%.

In particular, vacancies in the industrial portfolio increased due to 
continuing weakness in the local economy and the further de-industrialisation 
of the South African economy.

Johnson Controls vacated their logistics facility of 23 370m² in Uitenhage 
which contributed to the increase in the logistics vacancy. The retail vacancy 
includes 3 124m2 currently being refurbished.

                                                    Sector % of   Sector % of
                                                       property      property
                                                      portfolio     portfolio
                             Jun 2018     Dec 2017     by value      by value
Sectoral vacancy by GLA             %            %     Jun 2018      Dec 2017
Logistics                         5,2          3,3         41,1          40,8
Retail                            5,2          4,5         34,5          33,6
Industrial                        8,1          6,5         13,0          13,1
Offices                          23,4         19,6          9,7          10,4
Other                             6,3         14,8          1,7           2,1

Information based on Fortress' management accounts. 

Listed portfolio
                                   Jun 2018                 Jun 2017
                            Number of  Fair value      Number of   Fair value
Counter                        shares       R'000         shares        R'000
Nepi (NEP) $^                                   &     59 154 000    9 787 621
Resilient (RES) ^          41 060 000   2 309 625     39 456 000    4 803 373
                                        2 309 625                  14 590 994
Greenbay (GRP) *        1 987 507 364   2 623 510  1 480 410 000    2 857 191
Rockcastle
(ROC) *                                         &    358 432 000   12 788 854
NEPI Rockcastle
(NRP) &*                  139 990 000  17 143 175
Total                                  22 076 310                  30 237 039

$ The deferred tax liability relating to the fair value adjustment on the
NEPI investment at 30 June 2017 was reversed as a result of the merger.
& In July 2017 NEPI and Rockcastle merged into a new company, NEPI Rockcastle 
plc, which is listed on the JSE and Euronext in Amsterdam.
* Fortress' interests in Greenbay, NEPI Rockcastle and Rockcastle were treated 
as associates (equity accounted) and were not fair valued in the financial 
statements. In July 2017 Fortress' investment in Rockcastle was sold as a 
consequence of the merger, resulting in a profit on the sale of an interest in 
an associate of R3,7 billion being recorded.
^ Accounted for as an investment.

Fortress received cash dividends on its investments in NEPI Rockcastle and 
Greenbay during the six months ended 30 June 2018 and elected to receive scrip 
dividends on its investments in NEPI Rockcastle and Greenbay during the six 
months ended 31 December 2017.

The listed portfolio's exposure to Central and Eastern Europe through NEPI 
Rockcastle provides Fortress with offshore diversification of both its asset 
base and income streams.

The board has noted the announcement by Greenbay of its intention to buy back 
up to 30% of its shares for cash and awaits further announcements in this 
regard.

The board currently considers Fortress' investment in Resilient as offering 
value through its exposure to a well-managed and defensive retail portfolio.

Broad-based black economic empowerment
The Property Sector Charter, which was gazetted in June 2017, and which 
Fortress both subscribes to and is committed, forms the guidance for management.

Fortress is in the process of finalising the restructuring of the Siyakha 
Trusts in conjunction with the trustees of the Siyakha Trusts and Resilient and 
will update the market in due course. The intention remains that Siyakha 2 will 
become a dedicated empowerment vehicle for Fortress.

Fortress remains committed to its obligations to fund the on-going expenditure 
of the Siyakha Trusts.

Staff scheme loans
Staff scheme loans under the old share purchase scheme were granted to staff 
to align the interests of staff, management and executive directors to 
shareholders. As a result of the decline in the price of Fortress shares,
the staff scheme loans under this scheme have been impaired by R126,3 million. 
Fortress staff, including two executive directors who repaid the capital 
outstanding on their loans in full, repaid scheme loans by an amount of 
R367,7 million during the year. A new long-term incentive scheme was approved 
by shareholders at the annual general meeting held on 1 November 2017. No 
shares have been issued to staff under the new scheme.

During the second half of the year, Fortress relocated to its new offices in
Morningside and certain staff joined Fortress from Resilient. Given that
many of these staff members had negative equity in their old Resilient share 
schemes, Fortress advanced loans to them totalling R84,3 million, secured by 
Resilient shares. These loans were impaired by an amount of R25,6 million.

No debt to any staff member has been written off and the full loan amounts 
owing to Fortress still remain.

Funding and liquidity
At 30 June 2018, the loan-to-value ratio of Fortress increased to 31,8% mainly 
as a result of the decline in the prices of the listed securities portfolio.

Fortress remains well capitalised and continues to enjoy strong relationships 
with its institutional lenders.

During the year, Fortress accepted a new R500 million facility from Absa with a 
tenure of five years and a R300 million facility that was due to expire in 
August 2018 was refinanced and increased to R500 million with a tenure of five 
years.

Fortress accepted a new seven-year facility of R500 million from Sanlam and a 
new R400 million facility from LibFin with tenures of six years (R150 million) 
and seven years (R250 million) respectively.

Standard Bank facilities totalling R897 million that were due to expire in 
October 2017 and November 2017 were renewed and extended for five years. An 
existing Standard Bank facility (1 July 2021) of R750 million was extended by 
a further 17 months to 30 November 2022.

During the year Fortress raised a total of R700 million (five-year:
R500 million; six-month: R200 million) and repaid R462,5 million under its
Domestic Medium Term Note Programme.

Negotiations are underway with RMB to refinance the R2,2 billion of facilities 
expiring in November 2018 and a termsheet has been received in this regard.

Standard Bank has approved the refinancing of a R260 million facility expiring 
in October 2018 and negotiations are underway with Standard Bank to refinance 
R1 billion of facilities expiring in March 2019 and R430 million in June 2019 
respectively.

Fortress had facilities secured only by shares through Nedbank and Sanlam. The 
Nedbank facility was restructured and is now also secured with direct property. 
The Sanlam facility was also restructured and gearing levels significantly 
reduced. Fortress is committed to further reducing lenders' reliance on listed 
shares as security.
                                                                      Average 
                                                                       margin
                                                         Amount    over Jibar
Facility expiry                                       R'million             %
Jun 2019                                                  4 329          1,69
Jun 2020                                                  4 503          1,71
Jun 2021                                                  3 782          1,80
Jun 2022                                                  1 900          1,84
Jun 2023                                                  4 347          1,77
Jun 2024                                                    400          1,75
Jun 2025                                                    750          1,85
Jun 2026                                                      -             - 
Jun 2027                                                    250          1,99
                                                         20 261          1,76

The following interest rate derivatives are in place in mitigation of South
African interest rate risk:
                                                                      Average
                                                         Amount     swap rate
Interest rate swap expiry                             R'million             %
Jun 2020                                                  1 000          7,16
Jun 2021                                                    700          8,16
Jun 2022                                                    600          7,99
Jun 2023                                                    300          7,79
Jun 2024                                                    200          7,47
Jun 2025                                                    600          7,88
Jun 2026                                                    250          7,94
                                                          3 650          7,73

                                                                      Average
                                                         Amount      cap rate
Interest rate cap expiry                              R'million             %
Jun 2019                                                    200          7,39
Jun 2020                                                    200          7,52
Jun 2021                                                    400          7,80
Jun 2022                                                    400          7,76
Jun 2023                                                    300          7,71
Jun 2024                                                    400          7,98
Jun 2025                                                    250          8,03
Jun 2026                                                    500          7,90
Jun 2027                                                    250          8,18
                                                          2 900          7,83

The all-in weighted average cost of local funding of Fortress was 8,78% at
30 June 2018 and the average hedge term was 4,23 years.

The following interest rate derivatives are in place in mitigation of the 
group's exposure to foreign interest rate risk:
                                                                      Average
                                                         Amount      cap rate
Interest rate cap expiry                                EUR'000             %
Jun 2022                                                146 900          0,36
Jun 2023                                                146 900          0,49
Jun 2024                                                 79 900          0,33
Jun 2025                                                 53 900          0,38
                                                        427 600          0,40

In total 80,2% of the exposure to foreign base rates are hedged and the average 
hedge term was 4,5 years.
                                                                     Offshore 
                                                                    listed in
                                                   South Africa  South Africa
Variable interest rates                                    '000          '000
Interest-bearing borrowings                         R18 211 092
Currency derivatives                                (R7 969 651)   R7 969 651
Loans to co-owners                                    (R477 597) 
Cash and cash equivalents                             (R676 651) 
Capital commitments contracted for                   R1 264 175
Capital commitments approved                            R12 140
Properties held-for-sale                              (R603 290)
                                                     R9 760 218    R7 969 651
Spot rate                                                              R14,95
Exposure                                                           EUR533 087
Total interest rate derivatives
(swaps/caps)                                         R6 550 000    EUR427 600
Percentage hedged                                         67,1%         80,2%

Information based on Fortress' management accounts.

Fortress entered into additional local interest rate derivatives of
R700 million during the six months ended 30 June 2018.

Fortress advanced loans to the Siyakha Trusts linked to the prime interest 
rate, for which loans Fortress adjusted its prior hedging calculation. 
Following the decision to limit interest received on the loans to dividends 
on the Fortress A and B shares held by the Siyakha Trusts, Fortress no longer 
considers these loans as a hedge against movements in short-term Rand 
interest rates.

Currency derivatives
Balance sheet hedging
The board's policy is to use cross-currency swaps as a means of obtaining 
funding at rates in a currency similar to that of the foreign investments. At 
30 June 2018 cross-currency swaps totalled EUR533,1 million at an exchange rate 
of R14,95 against investments of EUR1 232 million (NEPI Rockcastle and 
Greenbay).

Income hedging
Income from foreign investments is hedged in line with the following policy:
- Hedge 100% of the income projected to be received in the following
12 months;
- Hedge 67% of the income projected to be received in months 13 to 24; and
- Hedge 33% of the projected income to be received in months 25 to 36.

In line with this policy the following forward exchange contracts are currently 
in place:
                                                                         NEPI
                                                       Greenbay    Rockcastle
                                                            EUR           EUR
Forward rate against ZAR: Dec 2018                        17,18         17,46
Forward rate against ZAR: Jun 2019                        18,27         18,35
Forward rate against ZAR: Dec 2019                        18,22         18,08
Forward rate against ZAR: Jun 2020                        19,39         18,98
Forward rate against ZAR: Dec 2020                        19,35         19,05
Forward rate against ZAR: Jun 2021                        20,84         20,05

Summary of financial performance
                     Jun 2018        Dec 2017        Jun 2017        Dec 2016
Dividend per
A share
(cents)                 70,57           71,20           67,67           67,96
Dividend per B
share (cents)           88,93           90,07           93,41           78,59
Shares in issue 
at period end
- A             1 184 496 438   1 184 496 438   1 175 214 835   1 172 508 991
- B             1 086 114 294   1 086 114 294   1 076 832 691   1 067 026 847
Shares used for 
dividend per share 
calculation
- A             1 184 496 438   1 184 496 438   1 175 214 835   1 165 408 991
- B             1 069 690 297   1 086 114 294   1 076 832 691   1 067 026 847
A shares held
in treasury                 -               -               -       7 100 000
B shares held
in treasury        16 423 997               -               -               -
Management accounts 
information
Net asset value per
A share *              R16,26          R17,39          R16,89          R16,32
Net asset value per
B share                R16,54          R35,08          R26,75          R24,73
Loan-to-value
ratio **                31,8%           22,9%           22,8%           25,2%
Net property
expense ratio           16,1%           18,3%           14,9%           19,5%
Gross property
expense ratio           33,6%           35,4%           34,9%           36,2%
Net total
expense ratio           13,1%           13,8%           12,4%           15,8%
Gross total
expense ratio           25,7%           26,1%           26,5%           28,0%
IFRS
accounting
Net asset value per
A share *              R16,26          R17,39          R16,89          R16,32
Net asset value per
B share                R16,54          R28,85          R23,43          R22,83

* 60-day volume-weighted average traded price at reporting date limited to 
combined net asset value.
** The loan-to-value ratio is calculated by dividing total interest-bearing
borrowings adjusted for cash on hand by the total of investments in property, 
listed securities and loans advanced.

Prospects
The slowing economic growth rate currently being experienced in South Africa is 
expected to continue with the likelihood of a near term recovery diminishing. 
However, the strategy of developing high quality logistics real estate 
continues to bear fruit. Fortress will continue to dispose of its
non-core industrial and office properties and reinvest the proceeds in
logistics and retail assets. The stable escalations and low credit risk of the 
tenants will positively impact income growth into the future.

Assuming distribution growth of 5% on the Fortress A shares, Fortress expects 
distributions on the Fortress B share of between 175 cents and 183 cents for 
the 2019 financial year, which is lower than previously guided principally 
because of revised forecast distributions from Fortress' investments in 
Greenbay and Resilient, as well as further weakening in the office and 
industrial portfolios.

This forecast is based on the assumption that the macro environment will not 
deteriorate further, the current political landscape does not change 
dramatically, no major corporate failures will occur and that tenants will 
be able to absorb the recovery of rising utility costs and municipal rates.
The forecast is further based on the assumption that the growth in 
NEPI Rockcastle, Greenbay and Resilient's distributions will be in
line with their guidance communicated to the market. Budgeted rental 
income was based on contractual escalations and assuming market-related 
renewals and no major change in vacancy rates. This forecast has not been 
audited, reviewed or reported on by Fortress' auditors.

By order of the board

Mark Stevens                      Steven Brown
Managing director                 Financial director

Johannesburg
21 August 2018


Summarised consolidated statement of financial position
                                                  Audited           Audited
                                                 Jun 2018          Jun 2017
                                                    R'000             R'000
Assets
Non-current assets                             54 611 851        60 144 415
Investment property                            24 822 540        24 848 981
Straight-lining of rental revenue
adjustment                                        469 458           364 862
Investment property under development           4 266 318         3 282 103
Property, plant and equipment                      28 039                 -
Investment in and loans to associates
and joint venture                              20 440 010        12 860 576
Investments                                     2 309 625        14 590 994
Staff scheme loans                                328 914           764 254
Loans to BEE vehicles                           1 946 947         3 432 645
Current assets                                  2 032 216         1 921 566
Investment property held for sale                 596 878           990 409
Straight-lining of rental revenue
adjustment                                          6 412            11 801
Staff scheme loans                                 18 359            22 344
Trade and other receivables                       733 716           881 242
Cash and cash equivalents                         676 851            15 770
Total assets                                   56 644 067        62 065 981
Equity and liabilities
Total equity attributable to equity
holders                                        36 951 001        45 074 462
Stated capital                                 45 571 944        45 072 151
Treasury shares                                  (259 171)                -
Currency translation reserve                       28 821          (134 149)
Reserves                                       (8 390 593)          136 460
Non-controlling interests                          99 017            38 101
Total equity                                   37 050 018        45 112 563
Total liabilities                              19 594 049        16 953 418
Non-current liabilities                        14 971 050        14 951 626
Interest-bearing borrowings                    14 924 587        13 804 864
Deferred tax                                       46 463         1 146 762
Current liabilities                             4 622 999         2 001 792
Trade and other payables                        1 281 218         1 001 482
Interest-bearing borrowings                     3 341 781         1 000 310
Total equity and liabilities                   56 644 067        62 065 981


Summarised consolidated statement of comprehensive income
                                                                   Restated*
                                                  Audited           audited
                                                  for the           for the
                                               year ended        year ended
                                                 Jun 2018          Jun 2017
                                                    R'000             R'000
Recoveries and contractual rental revenue       3 290 708         3 204 670
Straight-lining of rental revenue adjustment       99 207            92 245
Revenue from direct property operations         3 389 915         3 296 915
Revenue from investments                          243 489           596 950
Total revenue                                   3 633 404         3 893 865
Fair value (loss)/gain on investment 
property, investments and derivative
financial instruments                          (2 104 143)        1 929 057
Fair value gain on investment property            127 197           856 542
Adjustment resulting from straight-
lining of rental revenue                          (99 207)          (92 245)
Fair value loss on investments                 (1 746 035)         (223 138) 
Fair value (loss)/gain on derivative
financial instruments                            (386 098)        1 387 898
Property operating expenses                    (1 096 350)       (1 115 193) 
Administrative expenses                          (109 898)         (122 694) 
Impairment of staff scheme loans                 (151 932)                - 
Impairment of loans to BEE vehicles            (1 858 177)                - 
Impairment of goodwill on Lodestone
merger                                                  -            (1 707)
Impairment of investments in
associates                                     (9 128 395)                - 
Profit on sale of interest in
associate                                       3 706 415                 -
Income from associates and joint venture        1 913 476           640 113
- distributable                                 1 250 111           634 467
- non-distributable                               663 365             5 646 
(Loss)/profit before net finance costs         (5 195 600)        5 223 441
Net finance costs                                (655 337)         (733 095)
Finance income                                    531 694           438 312
Interest on staff scheme and other                 99 126           136 462
Interest on loans to BEE vehicles                 432 568           301 850
Finance costs                                  (1 187 031)       (1 171 407) 
Interest on borrowings                         (1 523 878)       (1 393 699)
Capitalised interest                              336 847           222 292
(Loss)/profit before income tax                (5 850 937)        4 490 346
Income tax                                        981 577           (64 063) 
(Loss)/profit for the year
attributable to equity holders                 (4 869 360)        4 426 283
Other comprehensive (loss)/income net 
of tax
Items that may subsequently be 
reclassified to profit or loss: 
Exchange gain realised on translation
of associates                                     134 200                 -
Exchange gain/(loss) on translation of
associates                                         28 770          (100 074) 
Total comprehensive (loss)/income for
the year                                       (4 706 390)        4 326 209
(Loss)/profit of the year attributable to:
Equity holders of the company                  (4 904 290)        4 420 054
Non-controlling interests                          34 930             6 229 
                                               (4 869 360)        4 426 283
Total comprehensive (loss)/income for 
the year attributable to:
Equity holders of the company                  (4 741 320)        4 319 980
Non-controlling interests                          34 930             6 229 
                                               (4 706 390)        4 326 209
Basic (loss)/earnings per A share (cents)         (216,76)           201,93
Basic (loss)/earnings per B share (cents)         (216,76)           201,93

* Refer to note 4 - restatement of financial statements.


Summarised consolidated statement of cash flows
                                                                   Restated*
                                                  Audited           audited
                                                  for the           for the
                                               year ended        year ended
                                                 Jun 2018          Jun 2017
                                                    R'000             R'000
Operating activities
Cash generated from operations                  2 420 975         2 375 529
Interest on staff scheme and other                103 110           140 996
Interest on borrowings                         (1 493 712)       (1 285 704)
Dividends paid                                 (3 626 296)       (3 105 190) 
Income tax                                       (118 721)                - 
Cash outflow from operating activities         (2 714 644)       (1 874 369) 
Investing activities
Development and improvement of
investment property                            (1 515 055)       (1 031 231) 
Acquisition of investment property               (238 899)         (907 201) 
Disposal of investment property                 1 698 757         1 471 189
Increase of interest in and loans 
advanced to associates and joint venture       (1 272 746)       (1 423 636) 
Loans advanced to staff                           (84 292)                - 
Staff scheme loans repaid                         367 701           670 387
Investment property and related assets
and liabilities acquired not included in 
additions to investment property or
financing activities                                    -             2 927
Cash flow on derivative financial instruments     627 055         1 792 984
Cash flow on Hammerson equity derivative                -           278 349
Acquisition of investments                       (197 706)         (759 234) 
Co-owner loans repaid                                   -           169 029
Loan repaid by BEE vehicles                       559 882                 -
Loans advanced to BEE vehicles                          -           (35 416) 
Cash (outflow)/inflow from investing 
activities                                        (55 303)          228 147
Financing activities
Increase in interest-bearing borrowings         3 431 028         1 652 091
Cash inflow from financing activities           3 431 028         1 652 091
Increase in cash and cash equivalents             661 081             5 869
Cash and cash equivalents at the
beginning of the year                              15 770             9 901
Cash and cash equivalents at the end of
the year                                          676 851            15 770
Cash and cash equivalents consist of:
Current accounts                                  533 400            15 770
Restricted cash                                   143 451                 -
                                                  676 851            15 770

Investing activities includes the following cash flow items available for 
distribution: Interest rate derivatives and cross-currency swaps of
R596 million and realised profits on forward exchange contracts of
R176 million. Scrip dividends received amounted to R607 million and 
capitalised interest on developments was R337 million.

* Refer to note 4 - restatement of financial statements.


Summarised consolidated statement of changes in equity 
                                                   Stated          Treasury
                                                  capital            shares
Audited                                             R'000             R'000
Balance at Jun 2016                            42 241 795          (104 827)
Issue of shares (equal number of 
A and B shares)                                 2 935 183
Non-controlling interests on Lodestone 
merger
Total comprehensive income for the year 
Exchange loss on translation of associates
Cancellation of treasury shares                  (104 827)          104 827
Dividends paid
Balance at Jun 2017                            45 072 151                 - 
Issue of 9 281 603 A and B shares each
on 19 October 2017                                499 793
Total comprehensive loss for the year
Non-controlling interest on Mantraweb 
consolidation
FFB treasury shares                                                (259 171)
Exchange gain realised on translation
of associates
Exchange gain on translation of associates
Dividends paid
Balance at Jun 2018                            45 571 944          (259 171)


                                                                     Equity
                                     Currency                  attributable
                                  translation                     to equity
                                      reserve       Reserves        holders
Audited                                 R'000          R'000          R'000
Balance at Jun 2016                   (34 075)    (1 178 404)    40 924 489
Issue of shares (equal number 
of A and B shares)                                                2 935 183
Non-controlling interests on 
Lodestone merger
Total comprehensive
income for the year                                4 420 054      4 420 054
Exchange loss on 
translation of associates            (100 074)                     (100 074)
Cancellation of
treasury shares                                                           - 
Dividends paid                                    (3 105 190)    (3 105 190)
Balance at Jun 2017                  (134 149)       136 460     45 074 462
Issue of 9 281 603 
A and B shares each on
19 October 2017                                                     499 793
Total comprehensive
loss for the year                                 (4 904 290)    (4 904 290) 
Non-controlling interest on 
Mantraweb consolidation
FFB treasury shares                                                (259 171) 
Exchange gain realised
on translation of associates          134 200                       134 200
Exchange gain on 
translation of associates              28 770                        28 770
Dividends paid                                    (3 622 763)    (3 622 763) 
Balance at Jun 2018                    28 821     (8 390 593)    36 951 001


                                                        Non-
                                                 controlling          Total
                                                   interests         equity
Audited                                                R'000          R'000
Balance at Jun 2016                                              40 924 489
Issue of shares (equal number of 
A and B shares)                                                   2 935 183
Non-controlling interests on 
Lodestone merger                                      31 872         31 872
Total comprehensive income for the year                6 229      4 426 283
Exchange loss on translation of
associates                                                         (100 074) 
Cancellation of treasury shares                                           - 
Dividends paid                                                   (3 105 190) 
Balance at Jun 2017                                   38 101     45 112 563
Issue of 9 281 603 A and B shares each
on 19 October 2017                                                  499 793
Total comprehensive loss for the year                 34 930     (4 869 360) 
Non-controlling interest on Mantraweb
consolidation                                         29 519         29 519
FFB treasury shares                                                (259 171) 
Exchange gain realised on
translation of associates                                           134 200
Exchange gain on translation of associates                           28 770
Dividends paid                                        (3 533)    (3 626 296) 
Balance at Jun 2018                                   99 017     37 050 018

Notes
1. Preparation and accounting policies
The preliminary audited summarised consolidated financial statements have been 
prepared in accordance with the requirements of the JSE Listings Requirements 
for preliminary reports and the requirements of the Companies Act of South 
Africa applicable to summary financial statements. The JSE Listings 
Requirements require preliminary reports to be prepared in accordance with 
the framework concepts and the measurement and recognition requirements of 
International Financial Reporting Standards ("IFRS"), the SAICA Financial 
Reporting Guides as issued by the Accounting Practices Committee and 
Financial Pronouncements as issued by the Financial Reporting Standards 
Council, and to also, as a minimum, contain the information required by 
IAS 34: Interim Financial Reporting. This report complies with the 
SA REIT Association Best Practice Recommendations. This report and the
full set of consolidated financial statements were compiled under the 
supervision of Steven Brown CA(SA), the financial director.

The accounting policies applied in the preparation of the consolidated 
financial statements, from which the summarised consolidated financial 
statements were derived, are in terms of IFRS and are consistent with the 
accounting policies applied in the preparation of the previous consolidated
financial statements, with the exception of the adoption of new and revised 
standards which became effective during the 30 June 2018 financial year.

The entire direct property portfolio was valued externally. Fortress 
appointed four new external valuers to perform the valuations at 
30 June 2018, being Cushman & Wakefield, Viking Valuations, Yield Property 
Valuers and Strata Properties (a black owned firm associated with Quadrant 
Properties). These new firms valued portfolios based on their expertise in 
certain markets, being Gauteng Logistics for Cushman & Wakefield, the Cape 
Town portfolio for Viking Valuations, the KwaZulu-Natal portfolio for Yield 
Property Valuers and the office portfolio for Strata Properties. Given the 
geographical spread of the retail properties, Quadrant Properties continued 
to value this portfolio. In terms of IAS 40: Investment Property and 
IFRS 7: Financial Instruments: Disclosure, investment properties are 
measured at fair value and are categorised as level 3 investments.

The revaluation of investment property requires judgement in the 
determination of future cash flows from leases and an appropriate 
capitalisation rate which varies between 7,50% and 12,00%, with the 
exception of Musina Shopping Centre, which has a capitalisation rate of
19,12% and which is a leasehold property with seven years remaining on 
the lease. Changes in the capitalisation rate attributable to changes 
in market conditions can have a significant impact on property valuations. 
A 25 basis points increase in the capitalisation rate will decrease the 
value of investment property by R676 million. A 25 basis points decrease 
in the capitalisation rate will increase the value of investment property 
by R715 million.

In terms of IAS 39: Financial Instruments: Recognition and measurement and 
IFRS 7, the group's currency and interest rate derivatives are measured at 
fair value through profit or loss and are categorised as level 2 investments. 
In terms of IAS 39, investments are measured at fair value being the quoted 
closing price at the reporting date and are categorised as level 1 
investments. There were no transfers between levels 1, 2 and 3 during the 
period. The valuation methods applied are consistent with those applied in 
preparing the previous consolidated financial statements.

The directors are not aware of any matters or circumstances arising 
subsequent to 30 June 2018 that require any additional disclosure or 
adjustment to the financial statements.

The auditors, Deloitte & Touche, have issued their opinion on the 
consolidated audited financial statements for the year ended 30 June 
2018. The audit was conducted in accordance with International Standards 
on Auditing. They have issued an unmodified audit opinion. These 
preliminary summarised consolidated audited financial statements have been 
derived from the consolidated audited financial statements and are 
consistent, in all material respects, with the consolidated audited 
financial statements. This preliminary report has been audited by Deloitte 
& Touche and an unmodified audit opinion has been issued. Copies of their 
audit reports and the consolidated audited financial statements are 
available for inspection at Fortress' registered address.

The auditor's report does not necessarily report on all of the information 
contained in this announcement. Shareholders are therefore advised that in 
order to obtain a full understanding of the nature of the auditor's 
engagement, they should obtain a copy of that report together with the 
accompanying financial information from Fortress' registered address.

2. Lease expiry profile
                                                                   Based on 
                                                 Based on       contractual
                                                 rentable            rental
                                                     area           revenue
                                                        %                 %
Vacant                                                7,4                  
Jun 2019                                             26,0              22,8
Jun 2020                                             17,7              17,6
Jun 2021                                             13,6              14,8
Jun 2022                                              7,0               9,1
Jun 2023                                             11,2              14,1
> Jun 2023                                           17,1              21,6
                                                    100,0             100,0

3. Segmental analysis
                                                  Audited           Audited
                                                  for the           for the
                                               year ended        year ended
                                                 Jun 2018          Jun 2017
                                                    R'000             R'000
Total revenue
Logistics                                       1 089 064           940 487
Industrial                                        588 942           603 015
Offices                                           384 370           491 743
Retail                                          1 232 300         1 203 854
Other                                              95 239            57 816
Corporate                                         243 489           596 950
Total                                           3 633 404         3 893 865 

(Loss)/profit after tax
Logistics                                         756 464         1 031 575
Industrial                                        420 998           440 193
Offices                                            30 419           229 998
Retail                                          1 148 617         1 275 658
Other                                              50 127            51 644
Corporate                                      (7 272 985)        1 397 215
Total                                          (4 869 360)        4 426 283

Total assets
Logistics                                      12 941 907        11 585 403
Industrial                                      4 009 302         3 957 574
Offices                                         3 005 757         3 547 279
Retail                                         10 528 551        10 852 993
Other                                             695 114           671 314
Corporate                                      25 463 436        31 451 418
Total                                          56 644 067        62 065 981


                                                  Audited           Audited
                                                  for the           for the
                                               year ended        year ended
Reconciliation of (loss)/profit for              Jun 2018          Jun 2017
the year to dividend declared                       R'000             R'000
(Loss)/profit for the year                     (4 869 360)        4 426 283
Fair value gain on investment property           (127 197)         (856 542) 
Fair value loss on investments                  1 746 035           223 138
Fair value loss/(gain) on
derivative financial instruments                  386 098        (1 387 898) 
Impairment of staff scheme loans                  151 932                 - 
Impairment of loans to BEE vehicles             1 858 177                 - 
Impairment of goodwill on Lodestone merger              -             1 707
Impairment of investments in associates         9 128 395                 - 
Profit on sale of interest in associate        (3 706 415)                -
Non-distributable income from
associates and joint venture                     (663 365)           (5 646) 
Income tax                                       (981 577)           64 063
Non-controlling interests                           1 298             3 348
Antecedent dividend *                               8 957           116 652
Loans to BEE vehicles interest
reversal January 2018 to June 2018               (183 612)                - 
BEE vehicles FFA distribution
January 2018 to June 2018                             669                 -
BEE vehicles FFB distribution
January 2018 to June 2018                         102 267                 - 
Dividends accrued                                   3 242           173 274
Interest on cross-currency swaps                  611 921           534 281
Foreign dividend hedging                          176 426           143 784
Interest rate derivatives                         (35 092)           (4 719) 
Amount available for distribution               3 608 799         3 431 725
Interim dividend declared
- A shares (2017 net of treasury shares)         (843 361)         (792 012)
- B shares                                       (978 263)         (838 576) 
Final dividend declared
- A shares                                       (835 899)         (795 268)
- B shares (2018 net of treasury shares)         (951 276)       (1 005 869)
                                                        -                 -

* The antecedent dividend includes eight months' performance of Lodestone 
prior to 1 December 2016.

The methodology applied in calculating the dividend is consistent with that 
of the prior year, except for the interest accrued on the Siyakha Trusts 
loans which has been limited to the dividends accrued on the Fortress shares 
held by the Siyakha Trusts in the same period. The methodology was changed 
with effect from the period 1 January 2018 to 30 June 2018.


                                                  Audited           Audited
                                                  for the           for the
                                               year ended        year ended
                                                 Jun 2018          Jun 2017
Headline (loss)/earnings                            R'000             R'000
Basic earnings - (loss)/profit for the 
year attributable to equity holders            (4 904 290)        4 420 054
Adjusted for:                                  (3 778 217)         (791 029)
- fair value gain on investment property          (27 990)         (764 297)
- profit on sale of interest in associate      (3 706 415)                -
- fair value gain on investment property 
of associate and joint venture                    (34 962)          (23 720)
- impairment of goodwill on Lodestone merger            -             1 707
- income tax effect                                (8 850)           (4 719) 
Headline (loss)/earnings                       (8 682 507)        3 629 025
Headline (loss)/earnings per A share (cents)      (383,75)           165,79
Headline (loss)/earnings per B share (cents)      (383,75)           165,79

Diluted earnings per share and diluted headline earnings per share are the 
same as basic earnings per share and headline earnings per share as there 
are no dilutionary instruments in issue.

Basic earnings per share and headline earnings per share are based on the 
following weighted average shares in issue during the year:

                                                 Jun 2018          Jun 2017
- A share                                   1 181 699 243     1 143 654 442
- B share                                   1 080 842 250     1 045 272 298


4. Restatement of financial statements
                                                                    Audited
                                                                    for the
                                                                 year ended
Impact on statement of profit or loss                              Jun 2017
(increase/(decrease) in profit)                                       R'000
Fair value (loss)/gain on derivative financial instruments          614 755
Revenue from investments                                           (143 784) 
Interest on cross-currency swaps                                   (534 281) 
Finance costs - interest on borrowings                                4 719
Fair value adjustment on interest rate derivatives                   58 591
Net impact on profit for the year                                         -

                                                                    Audited
                                                                    for the
                                                                 year ended
Impact on statement of cash flows                                  Jun 2017
(increase/(decrease) in cash flows                                    R'000
Interest on other                                                     4 534
Interest on loans to BEE vehicles                                  (301 850) 
Interest on cross-currency swaps                                   (534 281) 
Interest on borrowings                                              112 714
Cashflow from operating activities                                 (718 883)
Staff scheme loans advanced                                         335 199
Staff scheme loans repaid                                            (4 701) 
Cash flow on derivative financial instruments                       529 562
Loans advanced to BEE vehicles                                    1 301 435
Cashflow from investing activities                                2 161 495
Increase in interest-bearing borrowings                            (107 995)
Raising of share capital                                         (1 334 617) 
Cashflow from financing activities                               (1 442 612)
Movement in cash and cash equivalents                                     -

Presentation of the statement of comprehensive income
The line item "Income from investments", as previously reported, has been 
renamed "Revenue from investments".

The consolidated statement of comprehensive income has been re-ordered in 
order to reflect total revenue which includes revenue from direct property 
operations and revenue from investments.

Reclassification of derivatives in the statement of comprehensive income 
During the current year, the presentation of interest rate and currency 
derivatives in the statement of comprehensive income was reassessed in order 
to ensure compliance with IFRS. Fortress does not apply hedge accounting and 
as such the following reclassifications as a result of a prior period error 
were made.

Interest on interest rate derivatives, together with the fair value 
adjustment on interest rate derivatives was removed from net finance costs 
and is now disclosed in the income statement as a fair value (loss)/gain 
on derivative financial instruments.

Similarly, the interest on currency derivatives was removed from net 
finance costs and is now included in the fair value (loss)/gain on 
derivative financial instruments in the income statement.

The cash flow on the expiry of forward exchange contracts, previously 
included in revenue from investments, has also been reclassified to fair 
value (loss)/gain on derivative financial instruments.

Restatement of items disclosed in the statement of cash flows (prior 
period error)
The 2017 cash inflow from financing activities was restated as it
incorrectly included an amount of R1 334,6 million as cash inflow for 
the raising of share capital issued to BEE vehicles and to the staff 
share scheme, which was not a cash flow item. The corresponding cash 
outflow from investing activities incorrectly included loans advanced to 
BEE vehicles (R999,6 million) and loans advanced to the staff share scheme 
(R335,0 million) which was also not a cash flow item. This error has been 
corrected in the 2017 comparative figures presented.

The classification of derivative financial instruments in the statement 
of cash flows was revisited in the current year. As contracts are not 
held for dealing or trading purposes, the cash flows were reclassified as 
investing activities. The following reclassifications were made:
-  Interest on cross-currency swaps previously classified as cash flows 
from operating activities has been reclassified to cash flow on 
derivative financial instruments in cash flow from investing 
activities; and
-  Interest on interest rate derivatives previously classified as cash 
flows from operating activities has been reclassified to cash flow on 
derivative financial instruments in cash flows from investing 
activities.

5. Payment of final dividends
The board has approved and notice is hereby given of final dividends 
of 70,57000 cents per A share and 88,93000 cents per B share for 
the six months ended 30 June 2018. The dividends are payable to 
Fortress shareholders in accordance with the timetable set out below:

Last date to trade cum dividend        Tuesday, 18 September 2018
Shares trade ex dividend               Wednesday, 19 September 2018
Record date                            Friday, 21 September 2018
Payment date                           Tuesday, 25 September 2018

Share certificates may not be dematerialised or rematerialised 
between Wednesday, 19 September 2018 and Friday, 21 September 2018, 
both days inclusive. In respect of dematerialised shareholders, the 
dividend will be transferred to the CSDP accounts/broker accounts on 
Tuesday, 25 September 2018. Certificated shareholders' dividend payments
will be deposited on or about Tuesday, 25 September 2018. An announcement 
informing shareholders of the tax treatment of the dividend will be 
released separately on SENS.

Management accounts
Basis of preparation
In order to provide information of relevance to investors, these 
management accounts, which comprise financial information extracted 
from the audited consolidated financial statements for the year ended 
30 June 2018, have been prepared and are presented below to provide 
users with the position:
-  Had the group's interest in Arbour Town, an associate, accounted for
using the equity method under IFRS, been proportionately consolidated.
-  Had the group's listed investments in Greenbay and NEPI Rockcastle, 
that were accounted under using the equity method for IFRS, been fair 
valued.
-  Had the group accounted for its share of the assets, liabilities 
and results of partially-owned subsidiaries (Araxia, Bridge, Cornubia 
and Mantraweb) on a proportionately consolidated basis, instead of 
consolidating it.

The pro forma financial information (management accounts) has been 
prepared in terms of the JSE Listings Requirements and the SAICA 
Guide on pro forma financial information.

Directors' responsibility statement
The preparation of the management accounts is the sole responsibility 
of the directors and have been prepared on the basis stated, for 
illustrative purposes only, to show the impact on the summarised 
consolidated statement of financial position and the summarised 
consolidated statement of comprehensive income. Due to their 
nature, the management accounts may not fairly present the financial 
position and results of the group in terms of IFRS.


Pro forma summarised consolidated statement of financial position

                                                                      Adj 2
                                                      Adj 1      Fair value
                                                 Fair value  accounting for
                                             accounting for  investments in
                                             investments in    associates -
                                                associate -          listed
                                       IFRS     Arbour Town     investments
                                   Jun 2018        Jun 2018        Jun 2018
                                      R'000           R'000           R'000
Assets
Non-current assets               54 611 851            (600)              - 
Investment property              24 822 540         660 608
Straight-lining of rental 
revenue adjustment                  469 458          12 117
Investment property under
development                       4 266 318
Property, plant and equipment        28 039
Investment in and loans
to associates                    20 440 010        (673 325)    (19 766 685)
Investments                       2 309 625                      19 766 685
Staff scheme loans                  328 914
Loans to BEE vehicles             1 946 947
Loans to co-owners                        -
Current assets                    2 032 216           5 749               -
Investment property held 
for sale                            596 878
Straight-lining of rental 
revenue adjustment                    6 412
Staff scheme loans                   18 359
Trade and other receivables         733 716           4 146
Cash and cash equivalents           676 851           1 603
Total assets                     56 644 067           5 149               - 
Equity and liabilities
Total equity attributable to 
equity holders                   36 951 001               -               -
Stated capital                   45 571 944
Treasury shares                    (259 171)
Currency translation reserve         28 821
Reserves                         (8 390 593) 
Non-controlling interests            99 017
Total equity                     37 050 018               -               - 
Total liabilities                19 594 049           5 149               -
Non-current liabilities          14 971 050               -               -
Interest-bearing borrowings      14 924 587
Deferred tax                         46 463
Current liabilities               4 622 999           5 149               - 
Trade and other payables          1 281 218           5 149
Interest-bearing borrowings       3 341 781
Total equity and liabilities     56 644 067           5 149               -


                                                      Adj 3
                                              Proportionate 
                                           consolidation of
                                            partially-owned      Management
                                               subsidiaries        accounts
                                                   Jun 2018        Jun 2018
                                                      R'000           R'000
Assets
Non-current assets                                 (153 531)     54 457 720
Investment property                                (364 250)     25 118 898
Straight-lining of rental revenue adjustment        (14 039)        467 536
Investment property under development              (252 839)      4 013 479
Property, plant and equipment                                        28 039
Investment in and loans to associates                                     - 
Investments                                                      22 076 310
Staff scheme loans                                                  328 914
Loans to BEE vehicles                                             1 946 947
Loans to co-owners                                  477 597         477 597
Current assets                                      (10 692)      2 027 273
Investment property held for sale                                   596 878
Straight-lining of rental revenue adjustment                          6 412
Staff scheme loans                                                   18 359
Trade and other receivables                          (8 889)        728 973
Cash and cash equivalents                            (1 803)        676 651
Total assets                                       (164 223)     56 484 993
Equity and liabilities
Total equity attributable to equity holders               -      36 951 001
Stated capital                                                   45 571 944
Treasury shares                                                    (259 171) 
Currency translation reserve                                         28 821
Reserves                                                         (8 390 593) 
Non-controlling interests                           (99 017)              - 
Total equity                                        (99 017)     36 951 001
Total liabilities                                   (65 206)     19 533 992
Non-current liabilities                             (55 276)     14 915 774
Interest-bearing borrowings                         (55 276)     14 869 311
Deferred tax                                                         46 463
Current liabilities                                  (9 930)      4 618 218
Trade and other payables                             (9 930)      1 276 437
Interest-bearing borrowings                                       3 341 781
Total equity and liabilities                       (164 223)     56 484 993


Pro forma summarised consolidated statement of comprehensive income
                                                                      Adj 2
                                                      Adj 1      Fair value
                                                 Fair value  accounting for
                                             accounting for  investments in
                                             investments in    associates -
                                                associate -          listed
                                       IFRS     Arbour Town     investments
                                    for the         for the         for the
                                 year ended      year ended      year ended
                                   Jun 2018        Jun 2018        Jun 2018
                                      R'000           R'000           R'000
Recoveries and contractual
rental revenue                    3 290 708          80 977
Straight-lining of rental
revenue adjustment                   99 207             640
Revenue from direct
property operations               3 389 915          81 617               - 
Revenue from investments            243 489               -       1 200 003
Total revenue                     3 633 404          81 617       1 200 003
Fair value (loss)/gain on 
investment property, 
investments and
derivative financial
instruments                      (2 104 143)         34 322      (4 793 577) 
Fair value gain on
investment property                 127 197          34 962
Adjustment resulting from 
straight-lining of rental
revenue                             (99 207)           (640)
Fair value loss on investments   (1 746 035)                     (4 793 577)
Fair value loss on derivative 
financial instruments              (386 098) 
Property operating expenses      (1 096 350)        (30 884)
Administrative expenses            (109 898)            (94)
Impairment of staff scheme
loans                              (151 932)
Impairment of loans to BEE
vehicles                         (1 858 177)
Impairment of investments
in associates                    (9 128 395)                      9 128 395
Profit on sale of interest
in associate                      3 706 415                      (3 706 415) 
Income from associates            1 913 476         (85 070)     (1 828 406)
- distributable                   1 250 111         (50 108)     (1 200 003)
- non-distributable                 663 365         (34 962)       (628 403) 
Loss before net finance costs    (5 195 600)           (109)              -
Net finance costs                  (655 337)            109               - 
Finance income                      531 694             109               - 
Interest on staff scheme
and other                            99 126             109
Interest on loans to BEE
vehicles                            432 568
Finance costs                    (1 187 031)              -               - 
Interest on borrowings           (1 523 878)
Capitalised interest                336 847
Loss before income tax           (5 850 937)              -               - 
Income tax                          981 577
Loss for the year attributable 
to equity holders                (4 869 360)              -               -
Loss for the year 
attributable to:
Equity holders of the company    (4 904 290)              -               - 
Non-controlling interests            34 930
Total comprehensive loss
for the year                     (4 869 360)              -               -


                                                      Adj 3
                                              Proportionate 
                                           consolidation of
                                            partially-owned      Management
                                               subsidiaries        accounts
                                                    for the         for the
                                                 year ended      year ended
                                                   Jun 2018        Jun 2018
                                                      R'000           R'000
Recoveries and contractual rental revenue           (30 756)      3 340 929
Straight-lining of rental revenue adjustment        (10 461)         89 386
Revenue from direct property operations             (41 217)      3 430 315
Revenue from investments                                  -       1 443 492
Total revenue                                       (41 217)      4 873 807
Fair value (loss)/gain on investment 
property, investments and
derivative financial instruments                    (25 767)    (6 889 165)
Fair value gain on investment property              (36 228)       125 931
Adjustment resulting from straight-lining of
rental revenue                                       10 461        (89 386) 
Fair value loss on investments                                  (6 539 612) 
Fair value loss on derivative financial
instruments                                                       (386 098)
Property operating expenses                           5 953     (1 121 281) 
Administrative expenses                                 168       (109 824) 
Impairment of staff scheme loans                                  (151 932) 
Impairment of loans to BEE vehicles                             (1 858 177) 
Impairment of investments in associates                                  - 
Profit on sale of interest in associate                                  - 
Income from associates                                    -              -
- distributable                                                          -
- non-distributable                                                      - 
Loss before net finance costs                       (60 863)    (5 256 572) 
Net finance costs                                    25 933       (629 295) 
Finance income                                         (202)       531 601
Interest on staff scheme and other                     (202)        99 033
Interest on loans to BEE vehicles                                  432 568
Finance costs                                        26 135     (1 160 896) 
Interest on borrowings                               50 934     (1 472 944) 
Capitalised interest                                (24 799)       312 048
Loss before income tax                              (34 930)    (5 885 867) 
Income tax                                                -        981 577
Loss for the year attributable to 
equity holders                                      (34 930)    (4 904 290) 
Loss for the year attributable to:
Equity holders of the company                             -     (4 904 290) 
Non-controlling interests                           (34 930)             -
Total comprehensive loss for the year               (34 930)    (4 904 290)

Adj 1: This adjustment proportionately consolidates the indirect investments 
in The Galleria and Arbour Crossing that are held through Arbour Town 
(Fortress has a 25% interest), previously accounted for on the equity
method. It effectively discloses the group's interest in the assets,
liabilities and results of operations from these investments using the 
audited financial statements for the year ended 30 June 2018 on a 
line-by-line basis.

Adj 2: The investments in Greenbay and NEPI Rockcastle are reflected at 
their respective fair values by multiplying the 1 987 507 364 and
139 990 000 shares held respectively by their quoted closing prices at
29 June 2018. All entries relating to accounting for these investments on 
the equity method are reversed. This more accurately reflects the group's 
assets and liabilities. In addition to this, the profit on the sale of the 
interest in associate Rockcastle has been included in fair value gain 
on investments.

Adj 3: This adjustment proportionately consolidates the indirect investments 
in partially-owned subsidiaries (the indirect investments in Araxia, Bridge, 
Cornubia and Mantraweb) previously consolidated. It uses the audited financial 
statements for the year ended 30 June 2018 of Araxia, Bridge, Cornubia and 
Mantraweb to reverse the non-controlling interests to reflect the group's 
interest in the assets, liabilities and results of operations from these 
investments.

Directors: Iraj Abedian (chairman); Mark Stevens*; Steven Brown*; 
Robin Lockhart-Ross; Vuso Majija*; Tshiamo Matlapeng-Vilakazi; Bongiwe Njobe; 
Jan Potgieter; Banus van der Walt; Djurk Venter; Fareed Wania* 
(*executive director)

Changes to the board of directors: Effective 1 November 2017, Andrew Teixeira 
retired as an executive director at the annual general meeting in accordance 
with the provisions of clause 25.12 of the company's memorandum of 
incorporation.

On 29 May 2018, Jeff Zidel retired as an independent non-executive director 
and deputy chairman.

On 2 July 2018, Rual Bornman resigned due to ill health as financial and 
executive director. Steven Brown was appointed as interim financial and 
an executive director.

On 2 July 2018, Robin Lockhart-Ross was appointed as an independent 
non-executive director.

On 25 July 2018, Kura Chihota resigned as an independent non-executive 
director.

Company secretary: Tamlyn Stevens

Registered offices: Block C, Cullinan Place, Cullinan Close, Morningside,
2196. PO Box 138, Rivonia, 2128

Transfer secretaries: Link Market Services South Africa Proprietary 
Limited, 13th Floor, 19 Ameshoff Street, Braamfontein, 2001. 
PO Box 4844, Johannesburg, 2000

Lead sponsor: Java Capital

Joint sponsor: Nedbank Limited, acting through its Corporate 
and Investment Banking division 

www.fortressfund.co.za

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