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Consolidated unaudited interim results for the six months ended 31 December 2024
FORTRESS REAL ESTATE INVESTMENTS LIMITED
Incorporated in the Republic of South Africa
Registration number: 2009/016487/06
JSE share code: FFB
ISIN: ZAE000248506
LEI: 378900FE98E30F24D975
Bond company code: FORI
("Fortress" or "the group" or "the company")
Short-form announcement: Consolidated unaudited interim results for the six
months ended 31 December 2024
"Fortress is a real estate investment company with a portfolio of high-
quality logistics and retail assets. We own a portfolio of logistics
properties in South Africa and Central and Eastern Europe valued at
R20,3 billion and a portfolio of retail properties of R10,7 billion,
all located in South Africa. In addition, we hold approximately
R16 billion in NEPI Rockcastle shares, which provides exposure to
an outstanding retail portfolio in Central and Eastern Europe.
Combined, these holdings provide shareholders with exposure to an
approximately R50 billion real estate portfolio with a significant
development pipeline, providing growth opportunities for the future.
We delivered a solid set of results for the six-month interim period
ended 31 December 2024, with distributable earnings of 76,15 cents per
share, which is 29,8% higher than the normalised distributable earnings
per share for the previous corresponding six-month interim period ended
31 December 2023. The strategic shift into higher-growth and better-
quality assets is bearing fruit, resulting in lower vacancy rates and
improved like-for-like NOI growth across our core logistics and retail
portfolios. We have seen a particularly good performance from our
retail portfolio with 9,2% like-for-like NOI growth, stemming largely
from recent and ongoing refurbishments and extensions, as well as the
disposal of underperforming assets which were constraining growth.
Our logistics portfolio achieved like-for-like NOI growth of 4,7%. This
portfolio continues to benefit from very low vacancies, due to limited
new developments in the market, and increased demand for larger
warehouses in secure logistics parks. The historical negative reversions
in this portfolio, due to lease escalations being above the market rental
growth for several years, have started to improve. We ascribe this
partly to the rise in construction costs, which has necessitated an
increase in asking rentals for new, prime logistics developments and
which has buoyed much of the overall rental market.
The industrial portfolio, while remaining non-core, continued to
outperform our expectations, with another strong period of growth.
This portfolio includes the Inospace portfolio which has once again
performed exceptionally well. This makes the sale of assets within our
industrial portfolio more profitable and easier to achieve given the
relative strength of this market segment.
Our strategic exit from the office sector made progress with the
disposal of R259,2 million of office properties so far this financial
year.
These assets were sold marginally above our most recent book values,
with the proceeds recycled into our core asset portfolio. We
currently have R897 million of office properties remaining, which
represents only 1,6% of total assets.
We supported NEPI Rockcastle with their growth ambitions and
participated in the accelerated bookbuild in October 2024 for an
amount of EUR100 million. NEPI Rockcastle utilised the additional
capital to acquire top-quality, dominant retail assets which are
accretive, both from an earnings and a portfolio quality
perspective. We believe that NEPI Rockcastle's future growth
prospects are strong due to a superior-quality retail portfolio,
presence in growth markets and a conservatively geared balance
sheet.
In accordance with our commitment to drive total shareholder
returns, we have again offered a portion of our investment in
NEPI Rockcastle to our shareholders in lieu of a cash dividend
for 1H2025."
Steven Brown, CEO
Nature of the business
Fortress is a real estate investment company with a focus on
developing and letting premium-grade logistics real estate in
South Africa and Central and Eastern Europe ("CEE"), as well
as growing our convenience and commuter-oriented retail
portfolio. Fortress also holds, at the date of this
announcement, a 16,3% interest in NEPI Rockcastle N.V.
("NEPI Rockcastle"), the largest listed property company
on the JSE Limited ("JSE"), with a EUR8 billion portfolio
across nine CEE countries.
Distributions
Fortress has a policy of distributing 100% of the Fortress-
defined, post-tax distributable earnings on a semi-annual
basis. The Fortress distribution methodology is generally
more conservative than industry guidelines. Fortress remains
a member of and utilises the reporting metrics of the
SA REIT Association.
Distributable earnings
Distributable earnings amounted to R917,1 million for 1H2025,
compared to R952,9 million for 1H2024. In 1H2024, we held an
additional R7 billion of assets in the form of NEPI Rockcastle
shares, which were utilised to settle the buy-back of Fortress
shares, as approved in the scheme of arrangement implemented
in February 2024 ("SOA"). This material change in our asset
base renders the 1H2025 reporting period incomparable with
1H2024, due to the higher asset base in 1H2024. However,
adjusting for this transaction, distributable earnings for
1H2025 increased by 33,6% compared to the normalised
distributable earnings, adjusted for the effects of the SOA,
for 1H2024. In line with our policy, the board has declared
the full R917,1 million as a dividend for 1H2025, which
amounts to 76,15 cents per FFB share.
Shareholders may further elect to receive the 1H2025
distribution in cash, as the default option, or in the form
of NEPI Rockcastle shares held by Fortress in a ratio of
0,0069 NEPI Rockcastle shares for every FFB share held.
Full details of the dividend alternative will be communicated
to shareholders in due course.
Summary of financial performance
Dec 2024 Dec 2023 % change
Distributable earnings
(R'000) 917 095 952 868 (3,8)
Dividend declared per share
- FFA (cents) - #
- FFB (cents)$ 76,15 81,44 (6,5)
# Percentage change not meaningful to disclose or not applicable.
$ The FFB shares on which the dividend is declared were
converted from FFA shares post 31 December 2023.
International Financial Reporting Standards ("IFRS")
information
Dec 2024 Dec 2023 % change
Revenue from direct property
operations (R'000) 2 353 965 2 139 767 10,1
Total revenue (including
revenue from investments)
(R'000)@ 2 934 246 2 139 767 37,1
Net asset value ("NAV")
(R'000) 30 010 030 36 363 959 (17,5)
NAV per share^ (Rand) 24,92 17,18 45,1
Basic earnings per share
- FFA (cents) 140,12 #
Basic earnings per share
- FFB (cents) 116,54 140,12 (16,8)
Headline earnings per share
- FFA (cents) 29,42 #
Headline (loss)/earnings
per share - FFB (cents) (0,14) 29,42 (100,5)
# Percentage change not meaningful to disclose or not applicable.
^ The NAV per share is calculated as the total NAV divided by the
aggregate number of FFA and FFB shares in issue, less shares held
in treasury.
@ Included in total revenue at Dec 2024 is the dividend received
on the NEPI Rockcastle investment. This investment was previously
accounted for as an associate in terms of IAS 28 and therefore
not included in total revenue at Dec 2023.
SA REIT Best Practice disclosure
Dec 2024 Dec 2023 % change
NAV per share (Rand) 24,26 16,24 49,4
Loan-to-value ("LTV")
ratio (%) 39,9 34,2 #
Funds from operations (R'000) 878 117 949 041 (7,5)
# Percentage change not meaningful to disclose or not applicable.
Prospects
We previously communicated that our distributable earnings for
FY2025 would be approximately R1,780 billion. We revise this
previous guidance to approximately R1,925 billion for FY2025,
following better-than-expected operational results and a reduction
in interest rates not previously forecast. Our forecast
distributable earnings for FY2025 represent 159,84 cents per
share, which is 24,0% higher than the normalised distributable
earnings for FY2024. Further detail is presented in the table below.
1H2024 2H2024 FY2024 1H2025
(actual) (actual) (actual) (actual)
Total
distributable
earnings (R'000) 952 868 835 637 1 788 505 917 095
Shares in issue
(net of treasury
shares) 1 169 980 307 1 190 536 893 1 190 536 893 1 204 291 830
Distributable
earnings per
share (cents) 81,44 70,19 151,63# 76,15
FY2024
Normalisation 1H2024 2H2024 (normalised 1H2025
adjustments (normalised) (actual) actual) (actual)
Exclusion of
dividend on
53 134 372
NEPI Rockcastle
shares (R'000)
received in
September
2023* (266 365) - (266 365) -
Adjusted total
distributable
earnings (R'000)
(normalised for
the effects of
the SOA) 686 503 835 637 1 522 140 917 095
Adjusted
distributable
earnings per
share (cents)
(normalised for
the effects of
the SOA) 58,68 70,19 128,87 76,15
FY2025 Annual
2H2025 (revised change
(forecast) forecast) (%)
Total
distributable
earnings (R'000) 1 007 905 1 925 000 7,6
Shares in issue
(net of treasury
shares) 1 204 291 830 1 204 291 830
Distributable
earnings per
share (cents) 83,69 159,84 5,4
FY2025 Annual
Normalisation 2H2025 (revised change
adjustments (forecast) forecast) (%)
Exclusion of
dividend on
53 134 372
NEPI Rockcastle
shares (R'000)
received in
September
2023* - -
Adjusted total
distributable
earnings (R'000)
(normalised for
the effects of
the SOA) 1 007 905 1 925 000 26,5
Adjusted
distributable
earnings per share
(cents) (normalised
for the effects of
the SOA) 83,69 159,84 24,0
# Sum of the 1H2024 and 2H2024 actual distributable earnings
per share.
* The 53 134 372 NEPI Rockcastle shares were used to fund the
buy-back of all the Fortress B ordinary shares in issue at the
time of implementation of the SOA. The adjustment includes related
foreign currency hedges on this income.
This forecast is based on the following assumptions:
Fortress-specific assumptions
- Our distributable earnings methodology will remain consistent
with that of prior periods, as previously communicated;
- No material sales, or acquisitions, outside of our planned
pipeline occur which necessitate a revision to this forecast;
- There is no unforeseen failure of material tenants in our
portfolio;
- Contractual escalations and market-related renewals will be
achieved with no major change in vacancy rates; and
- Tenants will be able to absorb the recovery of rising utility
costs and municipal rates.
Macroeconomic and regulatory assumptions
- There is no unforeseen material macroeconomic deterioration
in the markets in which Fortress has exposure;
- There are no unforeseen adverse socio-political events in the
jurisdictions in which Fortress has exposure;
- There are no changes to current tax legislation in the
jurisdictions in which the company operates; and
- There are no changes to current interest rates by the European
Central Bank or the South African Reserve Bank.
The forecast and normalisation adjustments, including the
assumptions on which they are based and the financial information
from which they have been prepared, are the responsibility of the
directors of the company. The forecast and normalisation adjustments
have not been reviewed or reported on by the company's external
auditor.
Financial periods defined as follows:
- 1H2024 - Interim reporting period for the six months ended
31 December 2023;
- 2H2024 - Final reporting period for the six months ended
30 June 2024;
- 1H2025 - Interim reporting period for the six months ended
31 December 2024;
- 2H2025 - Final reporting period for the six months ended
30 June 2025;
- FY2024 - Financial year ended 30 June 2024; and
- FY2025 - Financial year ending 30 June 2025.
Short-form announcement
This short-form announcement is the responsibility of Fortress'
board of directors and is only a summary of the consolidated
unaudited interim results for the six months ended
31 December 2024 ("1H2025 Results") and does not contain
full or complete details. Any investment decision by investors
and/or shareholders should be based on the 1H2025 Results.
The 1H2025 Results, have been released on SENS and are available
on the JSE cloudlink at https://senspdf.jse.co.za/documents/2025/jse/isse/FFBE/HY2025.pdf,
and the company's website at
https://fortressfund.co.za/financials/view-pdf?id=Interim%20
results%20announcement%2031%20December%202024.
The short-form announcement itself is not audited or reviewed
by Fortress' external auditor.
By order of the board
Steven Brown Ian Vorster
Chief executive officer Chief financial officer
Johannesburg
27 February 2025
Block C, Cullinan Place, Cullinan Close, Morningside, 2196
PO Box 138, Rivonia, 2128
Lead sponsor
Java Capital
Joint equity and debt sponsor
Nedbank CIB
Date: 27-02-2025 03:40:00
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