PROFILE: Getting to know Fortress Reit CEO Steve Brown
The embattled property company’s new head has his work cut out to place the stock back on investors’ radars
Taking over the reins of Fortress Reit, one of the JSE’s largest property stocks, was never going to be a cakewalk even in the good times. But stepping into the CEO’s position at a time when investor sentiment had hit rock bottom, after allegations of dodgy share deals and a 65% share price slump, was a challenge most would have shied away from.
But Steve Brown, in taking over the reins from Mark Stevens, who is retiring after 10 years, has a pragmatic approach to his appointment.
"From a timing point of view, my task may seem daunting," says Brown, a CA and certified financial analyst. "But the exciting part is we have an entirely new management team in place so we have the chance to rebuild the business from the base."
He refers to five other new board appointments in recent months, who, he believes, will help him navigate what is bound to be a difficult road ahead. They include CFO Ian Vorster (former Grant Thornton head of corporate finance) and ex-investment banker Donnovan Pydigadu as COO. "Fortress also has an exceptional team at the coalface that has a deep understanding of the property market," he says.
At 38, Brown is one of the youngest CEOs in the listed property sector. Industry players describe him as bright and ambitious but unassuming — a refreshing change from the big personalities that tend to dominate the sector. His appointment as Fortress CEO-designate in December may have come as a surprise to the market, and some may question whether he has the experience to manage a portfolio such as Fortress’s, which is the largest logistics developer in SA with assets exceeding R54bn.
But Brown is no newcomer to the sector. The University of Cape Town accounting graduate joined Corovest as a property analyst 11 years ago after completing his articles at KPMG. He moved to Standard Bank’s real estate division where he was mentored by industry veteran Stewart Shaw-Taylor, and worked on structured lending and equity deals for various property clients, including the Resilient group.
Brown joined the group in 2015. He initially worked on its African investments and later for Capital Property Fund (now part of Fortress), where he honed his asset management skills.
"Given my finance background, then CEO Barry Stuhler gave me an East Rand portfolio of industrial buildings to manage. He knew that would be the best way for me to gain hands-on property experience."’ Brown was appointed as an executive director of Fortress in 2016 and in mid-2018 assumed the role of interim CFO.
He dismisses the suggestion that his appointment as CEO-designate was unexpected. "Fortress has always had a succession plan in place and I was part of that from the outset, when I joined the group in 2015."
Brown has a tough task ahead of him: he has to regain investors’ confidence and return the company to positive dividend growth. Dividends to Fortress B shareholders dipped by 14% for the six months to December (payouts to A shareholders grew by the usual 5%) on the back of restated financials — a far cry from the double-digit growth B shareholders were accustomed to. He is confident that dividend growth will resume in 2020, bar unforeseen shocks.
The Financial Sector Conduct Authority (FSCA) finding earlier this month — that there is no evidence to support insider trading allegations against Fortress — will no doubt help to repair damaged sentiment.
"The key takeaway is that the FSCA is no longer investigating the company’s affairs; it is now only looking at the trading of Fortress shares on the JSE," Brown says.
He says there has been significant progress in addressing other market concerns as well.
"We have appointed six new directors, restructured the Siyakha Trusts, unwound the cross-holding between Fortress and Resilient, disposed of R1.7bn worth of noncore assets and, if approved, will swap our entire R2.34bn stake in Resilient for seven shopping centres."
Even so, Brown accepts it will take time to restore investor sentiment. "Change is a process, not an event," he says.