Fortress increases B-share dividends
Fortress Income Fund’s careful management of local and offshore assets has helped it to release some of the strongest results so far this season.
Fortress Income Fund’s careful management of local and offshore assets has helped it to release some of the strongest results so far this season.
The company outdid expectations by growing its B-share dividend 25.09% in the year to June, while it also successfully began to sell part of its struggling office portfolio.
Fortress, a hybrid real estate investment trust that invests in physical property and listed property securities, offers different risks and rewards with its Aand B-share structure. A-share investors are paid the lower of the rise in the consumer price index and 5%, but have a preferential claim to earnings.
The group grew its B-share dividend to 93.41c per share in the financial year ended-June, from 74.69c a year earlier.
The B-share dividend was expected to grow 15% in the year to June 2018 and at least 15% in the following year.
At the end of June, Fortress owned 327 properties valued at R29.9bn and its listed securities portfolio was worth R30.2bn.
Local and offshore assets were almost equally split.
“We are quite happy with the split, but will invest more abroad if we can find the right opportunity,” said CEO Mark Stevens.
“Our board has mandated us to go as much as 60% offshore.”
Fortress’s direct property portfolio consists mostly of Agrade logistics warehouses let primarily to corporate tenants on long leases. The development pipeline of logistics warehouses is worth about R8bn and will be rolled out over three years.
The board chose to exit the office portfolio and several transactions were concluded. Six office buildings with a gross lettable area of 41,816m² were sold for a combined R584m.
Fayyaz Mottiar of Absa Asset Management said Fortress could “surprise on the upside of forecasts for a number of years”.
Peter Clark at Investec Asset Management said Fortress had done well in reducing its office exposure, as the results highlighted how offices remained under pressure in SA.
“The core segments of logistics and retail continue to show strong growth, which has been aided by development activity.
“Distribution growth remains well above the sector, in part thanks to the leveraged effect of the A and B unit structure.”