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FORTRESS REIT LIMITED - Fortress short-form announcement for the year ended 30 June 2019

Release Date: 03/09/2019 07:05
 
Wrap Text
Fortress short-form announcement for the year ended 30 June 2019

Fortress REIT Limited
Incorporated in the Republic of South Africa
Registration number: 2009/016487/06
JSE share code: FFA ISIN: ZAE000248498
JSE share code: FFB ISIN: ZAE000248506
Bond company code: FORI
("Fortress" or "the group" or "the company") 
(Approved as a REIT by the JSE)

Fortress short-form announcement for the year ended 30 June 2019

2019 highlights

- Total shareholder returns of +48,7% per Fortress A share and -8,7% per 
Fortress B share.
- Increase in net asset value of +1,4% from December 2018.
- Maintained LTV ratio at 32%.
- Exited non-core investments totalling R3,4 billion.
- Completed developments amounting to R1,4 billion.
- Repurchased R543 million of Fortress B shares.
- Conclusion of PwC report on historical property transactions and share 
  dealings.
- The unwinding of the Siyakha Trusts structure and concluding a new black 
  economic empowerment transaction.
- Successfully refinancing debt facilities and accessing the debt capital 
  markets at favourable rates.

Capital structure and nature of business
Fortress is a Real Estate Investment Trust ("REIT") with internal asset 
management and two classes of listed shares offering investors different 
risk and reward profiles. The Fortress A ordinary share (share code:
FFA, "FFA") has a preferential right to distribution of income and to 
capital participation upon winding up, which is calculated as the 60-day 
volume weighted average traded price on the JSE. The Fortress B ordinary 
share (share code: FFB, "FFB") has entitlement to the residual distributable
income and capital participation upon winding up. Both share classes have 
equal voting rights per share.

We are the largest owner and developer of core, premium-grade logistics real 
estate in South Africa. We also own a retail portfolio of 61 commuter-oriented
shopping centres (including co-owned properties).

In addition to our property portfolio, we also have a 23,9% interest in NEPI 
Rockcastle plc ("NEPI Rockcastle"), valued at R18,1 billion, and an effective 
11,1% interest (excluding treasury shares) in Resilient REIT Limited ("Resilient"), 
valued at R2,5 billion at 30 June 2019.

Summary of financial performance
                                          Jun 2019       Jun 2018      % change
Dividend per share
- FFA (cents)                               148,35         141,77           4,6
- FFB (cents)                               155,50         179,00         (13,1)


International financial reporting standards ("IFRS") information

                                          Jun 2019       Jun 2018      % change
Revenue from direct property
operations (R'000)                       3 413 832      3 389 915           0,7
Total revenue (including revenue 
from investments) (R'000)                3 628 427      3 633 404          (0,1)
Net asset value (R'million)                 34 897         36 951          (5,6) 
Net asset value per FFA share (Rand)         19,77          16,26          21,6
Net asset value per FFB share (Rand)         11,78          16,54         (28,8)
Basic earnings/(loss) per share 
- FFA (cents)                               116,83        (216,76)        153,9
Basic earnings/(loss) per share
- FFB (cents)                               116,83        (216,76)        153,9
Headline earnings per share 
- FFA (cents)                               104,12           19,7         428,3
Headline earnings per share 
- FFB (cents)                               104,12           19,7         428,3

Management accounts information
                                          Jun 2019       Jun 2018      % change
Loan-to-value ratio                           32,2%          31,8%            * 
Net asset value (R'million)                 35 673         36 951          (3,5)
Net asset value per FFA share (Rand)         19,77          16,26          21,6
Net asset value per FFB share (Rand)         11,80          16,54         (28,7)
Direct property portfolio
(completed buildings) (R'million)           26 341         26 190           0,6
Property under development (R'million)       3 827          4 013          (4,6)
Non-core direct property 
disposals (R'million)                          803          1 699         (52,7)
Listed equity portfolio                     20 621         22 076          (6,6) 
Vacancy based on GLA                           7,2%           7,4%            *

*  % change not meaningful to disclose.

2019 final dividends declared
The board has approved, and notice is hereby given of final dividends of 
73,62000 cents per FFA share and 78,01000 cents per FFB share for the six months 
ended 30 June 2019. The dividends are payable to Fortress shareholders in 
accordance with the timetable set out below:

Last date to trade cum dividend             Monday, 23 September 2019
Shares trade ex dividend                    Wednesday, 25 September 2019
Record date                                 Friday, 27 September 2019
Payment date                                Monday, 30 September 2019

Share certificates may not be dematerialised or rematerialised between Wednesday, 
25 September 2019 and Friday, 27 September 2019, both days inclusive. In respect 
of dematerialised shareholders, the dividend will be transferred to the CSDP 
accounts/broker accounts on Monday, 30 September 2019. Certificated shareholders' 
dividend payments will be deposited on or about Monday, 30 September 2019. An 
announcement informing shareholders of the tax treatment of the dividends will 
be released separately on SENS.

Prospects
The low-growth South African economy is set to continue on its current trajectory 
in the medium term. The focus will continue to be on proactively managing the 
vacancies in the portfolio and disposing of the non-core portfolio of assets. We 
are actively seeking new opportunities for growth in order to provide shareholders 
with superior returns on equity.

For the coming financial year we forecast the following:
- Total distributable income to increase by approximately 1%;
- Distribution on the FFA share to increase by the lower of CPI or 5% to 
approximately 155,8 cents per share; and
- Distribution per FFB share of between 148 and 153 cents per share which is below 
previous forecasts due to impairments of a total of R590 million taken on 
development land at 30 June 2019 and the dividend methodology of capitalising 
interest on developments at the lower of cost or fair value for distribution purposes.

The forecast for the year ending 30 June 2020 is based on the application of a 
consistent distribution methodology and on the following assumptions:

Macroeconomic
- The macroeconomic environment will not deteriorate further;
- The current political landscape will not change dramatically; and
- South Africa's sovereign rating will remain investment grade (as rated
by Moody's) and the outlook will not deteriorate.

Fortress-specific
The aforementioned macroeconomic factors will also have an impact on the 
assumptions below given the diversity of our portfolio:
- Contractual escalations and market-related renewals will be achieved with no 
major change in vacancy rates;
- No major corporate failures will occur;
- Tenants will be able to absorb the recovery of rising utility costs
and municipal rates;
- Distributions from NEPI Rockcastle and Resilient will be in line with their 
guidance communicated to the market; and
- There is no material adverse change in the value of our investment property 
under development which includes our strategic land holdings.

This short-form announcement is only a summary of the information in the full 
announcement and does not contain full or complete details of the financial results 
that were published on SENS on 2 September 2019, and is the responsibility of 
Fortress' board of directors. The information in this short-form announcement has 
been extracted from the 2019 provisional audited summarised consolidated audited 
financial statements, but has not itself been audited. Any investment decisions 
should be based on consideration of the full announcement published on Fortress' 
website: 
https://cmsignition.co.za/download/files_1184/Fortressyearendresults30June2019.pdf 
and available on the JSE's website at:
https://senspdf.jse.co.za/documents/2019/jse/isse/FFAE/ye2019.pdf

A copy of the full announcement is available for inspection during business hours 
at the registered offices of Fortress or its sponsors, Java Capital and Nedbank 
Limited, acting through its Corporate and Investment Banking Division. Such 
inspection will be at no charge and investors may request a copy of Fortress' 
2019 provisional audited summarised consolidated audited financial statements 
from tamlyn@fortressfund.co.za.

By order of the board
Steven Brown                     Ian Vorster
Chief executive officer          Chief financial officer

Johannesburg
2 September 2019

Fortress REIT Limited
Block C, Cullinan Place,
Cullinan Close, Morningside, 2196 
(PO Box 138, Rivonia, 2128)

Date: 03/09/2019 07:05:00
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