Fortress withdraws dividend guidance
Property owner is the latest real estate investment trust to be unable to project dividends because of the Covid-19 outbreak
Property group Fortress Reit on Friday withdrew its dividend guidance for the year to June because of the Covid 19 pandemic.
Fortress has assets in logistics, commuter-orientated retail centres, and industrial and office properties. Fortress also owns a 23.3% equity stake in East European mall owner Nepi Rockcastle.
Covid-19 has ravaged SA with more than 3,000 confirmed cases by Sunday. The country’s economy has been in lockdown for three weeks, and President Cyril Ramaphosa a week ago extended the lockdown until the end of April.
“Given the uncertainty around the impact of the Covid-19 pandemic and related nationwide lockdown and ongoing negotiations with tenants regarding rentals, Fortress is withdrawing previous guidance of distributable earnings and dividends,” the company said in an operational update on Friday.
Fortress said it had implemented various measures to ease pressures on its business during the lockdown.
“Prior to the Covid-19 pandemic, management and the board of directors had taken significant steps across critical aspects of the business in anticipation of macroeconomic headwinds,” it said.
“These measures place Fortress in a position to better withstand the challenges SA faces in dealing with the Covid-19 pandemic. Management and the board will remain focused on preserving liquidity and maintaining balance sheet strength in these uncertain times,” it said.
Before the Covid-19 pandemic and nationwide lockdown, Fortress implemented a number of risk-mitigating measures, including refinancing R4.5bn of secured banking facilities; the disposal of R420m of properties; and the settlement of the interim dividend for the 2020 financial year on the Fortress A and Fortress B shares by way of an in specie distribution of Resilient Reit shares.
This allowed the company to retain cash and improve liquidity. It also reduced exposure to cross-currency interest rate swaps from €464.7m (R9.5bn) at June 30 2019 to €302.7m post December 31 2019.
No changes were made to interest rate derivatives as per Fortress’s published December 2019 interim results.
Fortress said it continued to engage with its tenants directly and through collective sector initiatives. This was regarding “the immediate and continuing effect that the Covid-19-related lockdown has and will likely have on their businesses, which will inform discussions around rentals”.
Collections to date of total rental and rates and utilities invoiced for April 2020 amounted to about 62%. This was before deferral and other agreements being negotiated with tenants, where no or partial payments have been received.
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