Fortress Reit CEO Steve Brown. Picture: SUPPLIED
Fortress Reit CEO Steve Brown. Picture: SUPPLIED

Fortress, the owner of commuter retail  and logistics properties, which, on Monday, was cleared of charges of share price manipulation, says its asset portfolio has positioned the group to excel as it prepares for life without Resilient.

Fortress CEO Steven Brown said after the release of financial results for the year to end-June that the company had nearly dealt with challenges that were out of its normal course of business, including having to sever its relationship with Resilient and an impairment on a newly built logistics asset.

Fortress, Resilient, Nepi Rockcastle and Lighthouse Capital, which are considered as making up the Resilient stable of companies, saw their share prices plummet in January 2018 after a sudden sell-off, which cost pensioners and other investors more than R120bn in value.

The shares struggled to recover as some asset and hedge fund managers released reports saying that they were overvalued and that their double-digit dividend growth was unsustainable, having been propped up by related party deals. Fortress B shares slumped 65.64% in 2018.

The Financial Sector Conduct Authority (FSCA) stepped in in early 2018 and spent about 18 months investigating the allegations about the stable.

On Monday it said it had found no evidence of Fortress shares having been manipulated by people who worked for Fortress or the other stable members.

Fortress is the largest listed owner and developer of logistics real estate in SA followed by Equites Property Fund. It also owns 61 commuter-orientated shopping centres, as well as offices and some factories.

Fortress uses an A-B share structure that serves investors of varying risk profiles. A-class shareholders are paid their dividends from available profits first. These dividends increase at the lower of inflation or 5%. B-class shareholders are entitled to residual distributable income after distributions to A shares.

The dividends to Fortress A shareholders increased 4.6% to 148.35c a share for the year to end-June, in line with inflation, while B-shareholders received 155.5c a share.

Fortress A shares have climbed about 13.7% year to date while its B shares are down 30%, having closed 6.37% lower at R10.14 on Tuesday.

Fortress trimmed its 2020 financial year forecast for its B-share dividend by about 5% after a hefty R560m impairment to its newly built Clairwood Logistics Park in Durban.

Forecast distribution for Fortress B shares in its 2020 financial year are expected to range from 148c to 155.8c per share.

“Clairwood ended up costing in excess of fair value. The soil conditions were more difficult to work with than expected when we bought the land some years ago,” Brown said. 

He said the group’s earnings will take a hit as a result but in the next financial year, 2021, “our SA portfolio should soar again. Our 24% stake in Nepi Rockcastle, the largest owner of malls in eastern Europe will also support dividend growth.”

andersona@businesslive.co.za