June 26 2024 21:45
Fortress Real Estate Investments has released a pre-close operational update for the period from January 1 to May 31 2024. The South African logistics portfolio vacancies, based on rentals rentals, increased from 1.1% as at December 31, 2023, to 2% as at May 31.
Lower vacancies have stemmed from healthy tenant demand for Fortress’ logistics developments, the recycling of noncore assets and “well-executed management initiatives in the standing portfolio”, according to Fortress. The low vacancy allowed Fortress to increase its asking rental rates, which it said may result in marginally higher vacancies in the short term.
Fortress owns logistics park and commuter retail assets in South Africa as well as a small portfolio in Poland. The group said its “Central and Eastern Europe (CEE) logistics vacancies reduced from 6.5% as at December 31, 2023, to 5.2% as at May 31 2024. This vacancy represented two buildings, being 3 849 m² in Hall A in Stargard, Poland, and 5 450 m² in Hall E in Bydgoszcz, also in Poland.
Fortress’ South African retail portfolio achieved like-for-like tenant turnover growth of 7.1% and maintained a very low vacancy rate, by of 1.3%.
The retail portfolio collection rate for the period January 1 to May 31 was 99%. Retail vacancies decreased from 1.6% as at December 31, 2023, to 1.3% as at May 31 2024.
Fortress disposed of assets for R1.51bn with a book value of R1.27bn.
For the full financial year to end-June 2024, Fortress expected to generate about R1.8bn in cash proceeds from noncore asset sales, with the remainder of the held-for-sale assets expected to be transferred shortly after the end of the 2024 financial year.
Fortress had R3.9bn in cash and available facilities at group level and was within all debt covenants. Its unencumbered asset ratio was 30.6% and its loan-to-value (LTV) ratio was about 39.4%. LTV serves as a measure of the health of a property company’s balance sheet. It measures the group’s debt relative to the value of its assets.
“The new developments will contribute to significant growth in net operating income from our direct standing portfolio for the 2025 financial year, for which we forecast growth of 20% off the 2024 financial year base, after adjusting for the impact of the scheme of arrangement implemented in February,” said CEO Steve Brown.
“We forecast total distributable earnings for financial year 2025 to be marginally ahead of financial year 2024. This is noteworthy given that we used one-third of our R21bn investment in NEPI Rockcastle shares at the time to facilitate the simplification of our capital structure to a single class of share by buying out one class entirely for R7bn,” said Brown.
Fortress said it received an offer from Crusader Logistics, an existing tenant, for a five-year lease on a new 19 970 m² warehouse at Eastport Logistics Park, with development to start in July 2025.
Liquor Runners signed a five-year lease for a new 31 481 m² warehouse at Eastport, with beneficial occupation scheduled for October 2025.
The company also received numerous enquiries for space at the Longlake Logistics Park and expected to start a pre-let development shortly.
The 24 537 m² warehouse for Dromex at the Cornubia Ridge Logistics Park was completed on schedule in February, with a ten-year lease commencing on March 1.
The new 38 169 m² warehouse at Clairwood Logistics Park for Sammar Logistics was completed and the 15-year lease started on April 1.
Fortress notes that construction of the 14 071 m² warehouse at Clairwood on Pocket 5B, for CHC, is progressing well and is on schedule for completion in September 2024. The ten-year lease with CHC would begin on November 1.
Demand for Pocket 6, the last available pocket at Clairwood, was strong and it was expected that the final portion, about 30 000 m² of GLA, will be let during the remainder of this year.
Once Pocket 6 is built and let, Fortress says Clairwood will comprise about 300 000 m² of fully-let, high-quality and well-located secure logistics space.
Fortress signed a 12-year lease with MediVet for 6 425 m² of Hall C in Bydgoszcz, with construction starting in April 2024 and the lease commencement is expected to occur in December.
Construction of a 50 200 m² warehouse at the site in Łódź, in Poland, began in July 2023, with 28 509 m² pre-let to Notino, which has already taken occupation, on a ten-year lease.
Construction of the 23 015 m² warehouse at the site in Zabrze, Poland, was pre-let to Lit Logistyka Polska, 11 675m², and INNPRO, 11 340 m², both on five-year leases. The 11 675 m² warehouse for Lit Logistyka was completed during May and the 11 340 m² facility for INNPRO was expected to be completed by September.
Fortress said the demand for new space in this location was encouraging and boded well for the remainder of this 77 500 m² development.
Fortress saw growth in its CBD retail portfolio turnover, owing to improved lettings at Park Central in the Johannesburg CBD and Central Park in Bloemfontein.
The recently redeveloped AbaQulusi Plaza is performing well and exceeding expectations. The newly opened Shoprite at Morone Shopping Centre is trading well, resulting in increased foot traffic and reduced vacancies.
Since December 31, 2023, Fortress has installed of 17 solar plants at its assets and is working on a further 16 plants. Fortress intends to have 60 operational plants with an installed capacity of 22.4 MW by June 30.
The company said it would generate about 22 000 MWh during the current financial year. The renewable energy penetration rate would increase from 5% to about 10% of total portfolio consumption.
For the period July 1 to December 31, Fortress is targeting the addition of 19 plants, taking the total number of installations to 79, with installed capacity increasing to 30 MW.
For the six months from January 1, 2025, to June 30, 2025, Fortress is planning a further 15 new plants, taking the total number of plants to 94, with installed capacity increasing to 35 MW.
The installation of backup generators at core retail sites was well under way and should be completed during the first half of 2025.
“Our continued 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 across the various opportunities,” Brown said.
247@propertyflash.co.za
