Fortress logistic assets continue to outperform
With increasing demand and limited supply of logistics assets in SA as well as Central and Eastern Europe, Fortress Reit says its portfolio continues to outperform.
In a trading and preclose operational update, the company said on Monday the reporting period was characterised by continued strong operational performance in the direct portfolio and better-than-expected results from Nepi Rockcastle.
“The performance is testament to our simpler and more focused strategy, which involves continual recycling of capital out of the noncore assets and into high-quality assets which will provide a stronger platform from which to grow earnings in the future,” CEO Steven Brown said.
Fortress is a JSE-listed real estate investment trust (Reit) specialising in the logistics and retail property sectors. Its strategy is to build a two-thirds logistics and one-third defensive rural retail portfolio.
Following the 2022 financial year, Fortress has achieved R435m in asset disposals with a combined profit-to-book value of R7m. These comprise industrial, logistics, retail and office properties. Group vacancies fell from 5.4% in June to 3.9% at the end of October. SA logistics vacancies decreased from 1.2% in June to 0.1% at the end of October. The central and eastern Europe portfolio reduced vacancies from 8.3% to 5.5%.
“Demand for secure, welllocated prime logistics space remains robust as evidenced by the continued positive interest in our development pipeline and low vacancies in our logistics portfolio,” Brown said.
There is high demand for all unit sizes within the industrial portfolio with vacancies falling as space is let.
Inofort, the joint-venture partnership with Inospace, has been successful with portfolio optimisation and leasing.
“We have been successful at Island Works in Paarden Island [Cape Town], with a 5,000m² vacant pocket subdivided into smaller units now fully let with a significant increase in rentals achieved,” Brown said.
Developments in progress come to about 393,230m² in gross lettable area (GLA) with expected total cost on completion of about R5.3bn including 100% of the cost of coowned projects.
SA projects include the construction of a nearly 40,000m² warehouse on a 15-year lease and a new 20,514m² speculative warehouse at Clairwood Logistics Park in Durban.
In Cornubia Ridge Logistics, Fortress is developing a warehouse for Retailability.
At its Gauteng flagship asset, Eastport Logistics Park, the construction of the 164,470m² state-of-the-art Pick n Pay distribution centre is on track for completion in 2023 with occupation planned for June 1.
In Europe, the first phase of Hall E in Bydgoszcz is nearly completed and is fully let. The second phase of just more than 10,500m² under construction is preleased to two tenants on fiveyear leases.
Brown said the retail portfolio saw 7.5% like-for-like tenant turnover growth with vacancies at 3.6% at the end of October.
Township malls, followed by suburban and city centres, showed the highest growth during this period, with the portfolio rental collection rate reaching 99%.
“Our retail assets offering essential goods and services in convenient locations and commuter nodes are well placed in the current macroeconomic environment,” Brown said.
Fortress has R2.7bn in cash with a 38.8% gearing.