Fortress interim results reflect value of logistics-focused strategy

Posted On Thursday, 11 March 2021 09:24 Published by
Rate this item
(0 votes)

Fortress Real Estate Investments, South Africa’s third largest REIT, announced today that its long-term strategy is paying off.  

 Steve_Brown_CEO_Fortress_REIT_Limited

Fortress’s strategic focus, pivoting the direct portfolio to a one-third convenience retail and two-thirds logistics real estate business - focussed on developing and letting premium-grade logistics real estate in South Africa and Central and Eastern Europe - has helped the country’s largest logistics real estate owner find growth and buck the trend in an otherwise lacklustre real estate sector. 

Fortress REIT took the hard decision to pivot the asset weighting of its business. Even when Covid-19 hit, “we continued to shore up our balance sheet, ensure we had enough liquidity and invest in both acquiring and developing our best-in-class, well-located premium logistics boxes both locally and in Europe,” says Steven Brown, CEO of Fortress REIT.  

While shoring up the balance sheet was to some extent aided by an extremely favourable interest rate environment, Brown was particularly pleased by “significant progress in key areas of our long-term strategy despite extensive market disruption.” 

  1. Achieving and deepening liquidity. Fortress successfully sold ZAR 1.1 billion of largely non-core office and industrial assets at above book value over the last six months. Fortress will continue to dispose of assets in line with “our strategy to invest in, develop and manage South Africa’s largest holding of quality, state-of-the-art logistics assets located at leading urban logistics growth nodes as well as key convenience retail hubs in townships and rural areas,” says Brown. 
  2. Letting and receiving offers on 340 000 square metres of Fortress’s one million square metre gross lettable area (GLA) logistics development pipeline in South Africa. A strong and growing balance sheet enabled Fortress to continue to realise its commitment to delivering one million square metres of GLA. This is “an achievement that we are proud of in these especially challenging times,” adds Brown.  
  3. Growing demand for Fortress’s Logistics and Retail assets. Fortress Logistics’ technically advanced, purpose-built logistics developments boast globally compliant fire safety features in well serviced and secure parks in prime locations enabling efficient supply chains. With state-of-the-art logistics infrastructure supporting higher volumes and greater efficiencies, “our parks were in high demand during Covid-19 as retail and logistic clients looked to consolidate distribution and hold more stock in support of their own ecommerce and omnichannel evolutions,” says Brown. Fortress Retail also managed its convenience and commuter-oriented retail portfolio very well in a challenging climate, maintaining trading densities across its 56 shopping centres at 2019 levels despite the impact of Covid-19. “We continue to invest in and recycle our retail assets through refurbishments, especially the installation of solar photovoltaic capacity currently running at 3 585 Mega Watt peak across all our assets. This is up from 2 808 Mega Watt peak in 30 June 2020,” says Brown.  
  4. Deepening investment in high-growth Central and Eastern Europe. As the largest shareholder in retail shopping centre investor NEPI Rockcastle Plc, Fortress increased its presence in Central and Eastern Europe with its first logistics acquisition. “We are excited to announce that in 2021 we entered the Polish logistics market, concluding the acquisition of Waimea Group’s two logistics parks in Bydgoszcz and Stargard,” reports Brown. Both are ideally situated in regional industrial zones benefitting from strong infrastructure. Major roads nearby allow for fast transportation of goods to businesses in Poland. Both developments are close to Germany presenting a powerful supply proposition for clients targeting Europe’s largest economy. We also welcome Maciej Tuszynski as our regional Managing Director who brings a wealth of experience and local knowledge,” says Brown.  

Key to Fortress’s success over the last year has been “our ability to partner with clients, powering their growth by understanding their challenges and supporting their own evolutions in response to change,” says Brown. Flexible leases and part-ownership arrangements are examples of adapting and innovating with our clients. By offering various options to scale up, Fortress kept logistics vacancies in the region of 4% despite pandemic disruption. More generally, overall vacancies across Fortress’s portfolios were reduced from 8.9% to 6.8%. This was all achieved while “shoring up the balance sheet with additional liquidity and reducing the loan-to-value ratio to 38.1%,” adds Brown.  

Current results show that Fortress’s long-term strategic pivot to convenience retail and logistics real estate supported by deepening liquidity sustaining a strong balance sheet enabled South Africa’s largest provider of quality logistics assets to buck the trend in a challenging year for the real estate sector.  

Going forward, signature client developments in key South African and European logistics developments “present a powerful long-term investment proposition as Fortress continues to roll out its pipeline of one million square metres of logistics GLA,” concludes Brown. 

Last modified on Monday, 05 April 2021 17:52

Most Popular

SA property visionary John Rabie announces new global property joint venture

Mar 15, 2021
LX_LIVING_Lisbon_Portugal
Capital, the Geneva based property investment, development and asset management-business,…

Repo rate unchanged at 3.5%

Mar 25, 2021
Lesetja_Kganyago_SARB_Governor
The Monetary Policy Committee has decided against altering the repo rate, deciding to…

Court finds against EAAB in battle for FFCs

Mar 16, 2021
Tony C
In a scathing judgement handed down from the High Court on 15 March, the failure of the…

KZN residential property market poised for upswing

Mar 15, 2021
Sershin_Moodley_TUHF
Over the past three years, the KwaZulu Natal (KZN) property market has enjoyed…

SARB to hold but is a rate hike around the corner?

Mar 16, 2021
SARB_to hold_rate_hike
The South African Reserve Bank (SARB) is set to hold the repo rate at the 23-25 March…

Please publish modules in offcanvas position.