FORTRESS Real Estate Investments continues to see strong demand for logistics space and has rolled out a number of developments in the year to end-June 2024.
The group, which focuses on logistics and retail properties with assets in South Africa and Europe, yesterday forecast distributable earnings of about R1.73 billion for its 2025 financial year, while the 2024 figure was expected to be R1.7bn.
“The buoyant demand for high-quality, well-located logistics space is evidenced by the development of 268 982m2 of lettable area that we commenced or completed, of which over 90% is let with a weighted average lease expiry of approximately 10 years,” CEO Steven Brown said in an operational and trading update.
The roll-out of the development pipeline was underpinned by strong fundamentals, healthy demand and the strategy to dispose of non-core assets and recycle this capital accordingly, he said.
The group currently had R3.9bn in cash and available facilities and loan-to-value ratio was approximately 39.4%.
Vacancies, based on rental, in the South African logistics portfolio increased from 1.1% at December 31, 2023 to 2% at May 31, 2024. This low rate reflected the healthy tenant demand, successful recycling of non-core assets and management initiatives in the standing portfolio.
Vacancies in the central and eastern European logistics portfolio would rise in June 2024, due to the completion of the Lodz development, which currently had 24 742m2 of the 53 251m2 total lettable area unlet.
The South African retail portfolio achieved like-for-like tenant turnover growth of 7.1% and maintained a low vacancy rate of 1.3%.
The refurbished and extended AbaQulusi Plaza in Vryheid was trading ahead of expectations. The newly opened Shoprite at Morone Shopping Centre was trading well and had catalysed increased foot traffic and reduced vacancies at the centre.
“Our focus on improving the performance of our core portfolio, while disposing of the underperforming assets, has delivered positive results and we will continue to drive this strategy while remaining prudent in the allocation of capital,” Brown said.
The office portfolio vacancy rate, by value, was expected to reduce from 2.6% to less than 2% of total assets once the current held for sale transactions were concluded.
For the 2024 year, non-core asset disposals were expected to amount to about R1.8bn, with the proceeds recycled into the logistics development pipeline and retail refurbishments, extensions and redevelopments.
“We expect to generate about R1.8bn in cash proceeds from asset sales with the remainder of the held for sale assets expected to be transferred shortly after the 2024 year-end, depending on the speed of the deeds office processes,” the group said.
New developments were expected to contribute to significant growth in net operating income from the direct standing portfolio for 2025 year.
Fortress raised R900 million through a public bond auction in April. The issuance consisted of two DMTN notes of R409m in a three-year note and R491m in a five-year note.
BUSINESS REPORT