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Fortress falls after cutting payout


The REIT has changed the way it distributes interest on the loans it's made to the Siyakha Education Trusts after coming under scrutiny

Fortress REIT fell sharply yesterday after it trimmed its final dividend to holders of its B shares following a change in the way it distributes interest in loans made to the Siyakha Educations Trusts.

The real estate investment trust released results for the year to end-June after the market closed on Tuesday so yesterday's share-price decline reflects the market's reaction. It and Resilient REIT came under fire earlier this year due to their cross-shareholdings and the way accounted for interest paid by the Trusts.

Fortress said a decision had also been taken to distribute interest accrued on the loans to Siyakha only to the extent that the interest was matched by dividends accrued to the trusts from Fortress in the same period they were funded by the REIT.

Dividends to its A shareholders will be increased by 4.29% for the six months to end-June, which matches inflation for the period. The B share dividend had been cut by 4.8% to 88.93c, resulting in a total dividend for the year of 179c.

Fortress owns 308 properties and a development pipeline which had a carrying value of R30.2 billion at the end of June. Its properties include A-grade logistics warehouses and a portfolio of retail shopping centres. It also owns stakes in NEPI Rockcastle, Resilient REIT and Greenbay Properties, which were valued at R22.1 billion at the end of its financial year.

Over the period, Fortress said its direct retail and logistics properties performed "satisfactorily" but its office and industrial properties continued to come under strain. It said dividend growth from its Euro-denominated listed property securities, as well as attractive forward hedged exchange rates, continued to contribute positively to its distributions.

The net asset value of its B shares declined by 38% to R16.54 due to a decline in the value of its listed securities, the impairment of loans to the Siyakha Trusts as well as the impairment of staff scheme loans.

It's in the process of restructuring the Trusts, along with its trustees and Resilient. The intention remains that Siyakha 2 will become its dedicated empowerment vehicle. While Resilient has unbundled its Fortress B shares, Fortress said it was holding onto its stake in Resilient.

The board currently considers Fortress' investment in Resilient as offering value through its exposure to a well-managed and defensive retail portfolio," Fortress said.

Its shares ended 4% lower at R16.55 yesterday. They're down 61% this year.



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