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Fortress reports positive operational performance amid logistics demand, disposals and capital recycling

20th June 2024

By: Sabrina Jardim

Creamer Media Online Writer


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Real estate company Fortress Real Estate Investments says healthy logistics demand, disposals of noncore assets and effective capital recycling continue to drive its positive operational performance.

In a pre-close operational update for the period from January 1 to May 31,  Fortress notes that South African logistics portfolio vacancies, based on rental, increased from 1.1% as at December 31, 2023, to 2% as at May 31.

The company explains that the low vacancy rate reflects the healthy tenant demand for Fortress’ quality logistics developments, the successful recycling of noncore assets and well-executed management initiatives in the standing portfolio.

The low vacancy allows Fortress to increase asking rental rates, which it says may result in marginally higher vacancies in the short term.

Central and Eastern Europe (CEE) logistics vacancies, by rental, reduced from 6.5% as at December 31, 2023, to 5.2% as at May 31. This vacancy represents two buildings, being 3 849 m² in Hall A in Stargard, Poland, and 5 450 m² in Hall E in Bydgoszcz, also in Poland.

Additionally, the company notes that the South African retail portfolio has achieved like-for-like tenant turnover growth of 7.1% and maintained a low vacancy rate, by rental, of 1.3%.

The retail portfolio collection rate for the period January 1 to May 31 was 99%. Retail vacancies, by rental, decreased from 1.6% as at December 31, 2023, to 1.3% as at May 31.

Fortress notes that it continues to sell noncore properties, with total disposals for the financial year-to-date amounting to R1.51-billion with a book value of R1.27-billion.

For the full financial year ending June 30, Fortress expects to generate about R1.8-billion in cash proceeds from noncore asset sales, with the remainder of the held-for-sale assets expected to be transferred shortly after the end of the 2024 financial year, depending on the speed of the deeds office processes.

Fortress has R3.9-billion in cash and available facilities at group level and remains comfortably within all debt covenants.

Its unencumbered asset ratio is 30.6% and its loan-to-value ratio about 39.4%.

“The buoyant demand for high-quality, well-located logistics space is evidenced by the development of 268 982 m² of lettable area that we commenced or completed during the current financial year, of which over 90% is let with a weighted average lease expiry of approximately ten years,” says Fortress CEO Steven Brown.

The company notes that proceeds from the noncore asset disposals have been recycled into the logistics development pipeline and strategic retail refurbishments, extensions, and redevelopments.

Despite the continued challenges faced by the real estate market, disposals were concluded at a premium to their book values, which highlights the stark contrast between the direct market and the Fortress share price, which trades at a material discount to net asset value per share.

“The new developments will contribute to significant growth in net operating income from our direct standing portfolio for the 2025 financial year, for which we forecast growth of 20% off the 2024 financial year base, after adjusting for the impact of the scheme of arrangement implemented in February.

“We forecast total distributable earnings for financial year 2025 to be marginally ahead of financial year 2024. This is noteworthy given that we used one-third of our R21-billion investment in NEPI Rockcastle shares at the time to facilitate the simplification of our capital structure to a single class of share by buying out one class entirely for R7-billion,” comments Brown.

Brown says the successful roll-out of the development pipeline is underpinned by strong fundamentals, healthy demand and the company’s strategy to dispose of noncore assets and recycle this capital accordingly.


Fortress says it has received an offer from Crusader Logistics, an existing tenant, for a five-year lease on a new 19 970 m² warehouse at Eastport Logistics Park, with development to start in July 2025.

Additionally, Liquor Runners has signed a five-year lease for a new 31 481 m² warehouse at Eastport, with beneficial occupation scheduled for October 2025.

The company notes that it has also received numerous enquiries for space at the Longlake Logistics Park and expects to start a pre-let development shortly.

The construction of a 24 537 m² warehouse for Dromex at the Cornubia Ridge Logistics Park was completed on schedule in February, with a ten-year lease commencing on March 1.

The new 38 169 m² warehouse at Clairwood Logistics Park for Sammar Logistics was completed and the 15-year lease started on April 1.

Fortress notes that construction of the 14 071 m² warehouse at Clairwood on Pocket 5B, for CHC, is progressing well and is on schedule for completion in September 2024.

The ten-year lease with CHC is expected to commence on November 1.

Additionally, the company says the 20 682 m² warehouse on Pocket 3C for ASL achieved practical completion on April 24, with ASL, an existing tenant, signing a five-year lease.

Demand for Pocket 6 – the last available pocket at Clairwood – is strong and it is expected that the final portion, about 30 000 m² of GLA, will be let during the remainder of this year.

Once Pocket 6 is built and let, Fortress says Clairwood will comprise about 300 000 m² of fully-let, high-quality and well-located secure logistics space.


Fortress also notes that it has signed a 12-year lease with MediVet for 6 425 m² of Hall C in Bydgoszcz, with construction starting in April 2024 and the lease commencement is expected to occur in December.

Construction of a 50 200 m² warehouse at the site in Łódź, in Poland, began in July 2023, with 28 509 m² pre-let to Notino, which has already taken occupation, on a ten-year lease.

The balance of the space currently under construction remains unlet at present, which will cause a temporary increase in the vacancy.

The project provides further development potential of about 30 000 m² of GLA in the second building. The company says development will begin once the available space in the first building has been fully let and based on adequate pre-lease commitments.

Construction of the 23 015 m² warehouse at the site in Zabrze, Poland, has been pre-let to Lit Logistyka Polska, 11 675m², and INNPRO, 11 340 m², both on five-year leases. The 11 675 m² warehouse for Lit Logistyka was completed during May and the 11 340 m² facility for INNPRO is expected to be completed by September.

Fortress says the demand for new space in this location is encouraging and bodes well for the remainder of this 77 500 m² development.


Fortress notes that it has also seen growth in its central business district (CBD) portfolio turnover, owing to improved lettings at Park Central in the Johannesburg CBD and Central Park in Bloemfontein.

However, high street CBDs face challenges from crime and surrounding area degradation, leading Fortress to plan a reduction in exposure to these retail assets. In the township category, improved leasing at Evaton Mall was the main driver of turnover growth.

Meanwhile, the company says the rural portfolio has benefited from reduced vacancies and improved trading at Mussina Shopping Centre, Lebowakgomo Centre, Sterkspruit Plaz, and Venda Plaza.

It reports that the recently redeveloped AbaQulusi Plaza is performing well and exceeding expectations. The newly opened Shoprite at Morone Shopping Centre is trading well, resulting in increased foot traffic and reduced vacancies.

Fortress adds that the suburban category continues to report steady growth, led by Shoprite Mayville, which now features a newly revamped Checkers Hyper, and Weskus Mall, which has seen an increase in foot traffic and consumer spending.

Additionally, the redevelopment at 204 Oxford is progressing well, with the parking reconfiguration completed.

The remaining construction, including a 1 061 m² Woolworths Food, is expected to be finalised in the second half of the year.


Since December 31, 2023, Fortress has completed installation of 17 solar plants at its assets and is working on a further 16 plants.

Fortress intends to have 60 operational plants with an installed capacity of 22.4 MW by June 30.

The company says it will generate about 22 000 MWh during the current financial year. The renewable energy penetration rate will increase from 5% to about 10% of total portfolio consumption.

For the period July 1 to December 31, Fortress is targeting the addition of 19 plants, taking the total number of installations to 79, with installed capacity increasing to 30 MW.

For the six months from January 1, 2025, to June 30, 2025, Fortress is planning a further 15 new plants, taking the total number of plants to 94, with installed capacity increasing to 35 MW.

The company says the installation of backup generators at core retail sites is also well under way and should be completed during the first half of 2025.

It notes that this energy security initiative is proving successful and popular with tenants, at a relatively low cost. The systems are working efficiently when combined with the solar installations.

The design caters for the installation of batteries but these are currently economically suboptimal, the company says.

“Our continued focus on improving the performance of our core portfolio, while disposing of the underperforming assets, has delivered positive results and we will continue to drive this strategy while remaining prudent in the allocation of capital across the various opportunities,” Brown concludes.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online



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