The outlook for the company is positive. The strategic decisions taken by management are powering growth for all stakeholders as the company benefits from the uplift provided by the strong rally the listed real estate sector is currently enjoying. Despite double-digit total returns of 37% achieved for the past 12 months, Fortress still trades at a discount of 25% to its intrinsic net asset value.
Shifting focus
Fortress finds itself in a strong market position after its move away from a particularly complex capital structure in February 2024.
Shifting to a real estate investment company (REIC) has unlocked benefits. The company now enjoys specific tax deductions around development allowances that are otherwise not claimable as a REIT, which creates tax efficiencies for Fortress and its shareholders.
While these high-quality logistics developments have resonated with investors, the company’s well-defined strategy of rotating out of its tail of non-core assets and focusing on the development of state-of-the-art logistics assets in prime locations has underpinned excellent operational performance.
Five years ago, after taking the strategic decision to exit office, industrial, and underperforming properties, Fortress generated approximately R 8,5 billion from disposals, which it recycled into developing its own logistics parks to unlock shareholder value. “We have developed close to 1 million m²in the last five years,” says Steven Brown, CEO of Fortress.
Fortress continues to invest in upgrading its current portfolio of assets, mainly by adding backup power and water, enhanced fibre connectivity, and solar PV systems. This makes the assets more functional and attractive to tenants.
The long-term consistent focus and implementation of its strategy to specialise in its core logistics and retail sectors continue to deliver high real like-for-like net operating income (“NOI”) growth of 5,9% in the overall portfolio.
Since FY2019, Fortress has completed and delivered approximately R10 billion of new warehousing facilities in South Africa, all of which are currently let. This has supported the strong performance of the logistics portfolio.
“Our strategic shift into higher-growth and better-quality assets is bearing fruit, resulting in record-low vacancy rates and improved like-for-like NOI growth across our core logistics and retail portfolios,” explains Brown.
Portfolio performance
The R10.7-billion Fortress retail portfolio emerged as the biggest contributor to the growth story, with 9,2% like-for-like NOI growth.
“This performance stems largely from recent and ongoing refurbishments and extensions, as well as the disposal of underperforming assets that were constraining growth,” explains Brown.
The R20.3-billion Fortress logistics portfolio also delivered positive results, achieving like-for-like NOI growth of 4,7%.
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Global expansion
Fortress has also responded to the challenges related to the domestic operating environment by diversifying and finding strong growth opportunities offshore.
The CEE logistics assets continue to perform well, with total assets of EUR240 million and a low vacancy rate of 1,6%.
“In February 2025, we acquired a partially completed logistics park in Gdańsk, Poland, and the development for MEDiVet in Bydgoszcz has been completed with extensions to Hall C adding a further 14,277m², which would complete the Bydgoszcz Logistics Park,” said Brown.
Fortress identified early in its foray into the CEE region that it could develop at a better yield than it could acquire existing assets.
“We have a development pipeline in Central Eastern Europe born out of acquisitions where we bought semi-completed parks, which has provided a strong yield uplift for us.”
In addition to its direct CEE logistics portfolio, Fortress has a material shareholding in NEPI Rockcastle (16,3%). The largest listed real estate company on the JSE, with a EUR7,9 billion retail portfolio across eight CEE countries achieved exceptional results for its year ended 31 December 2024.
“We supported NEPI Rockcastle with their growth ambitions and participated in the accelerated bookbuild in October 2024 for an amount of EUR100 million,” states Brown.
“NEPI Rockcastle utilised the additional capital to acquire top-quality, dominant retail assets which are accretive, both from an earnings and a portfolio quality perspective.”
NEPI Rockcastle remains the standout success story among South African property investment companies.
Its dominant position in A-grade shopping malls in Romania, Poland and neighbouring countries during a period of economic growth in those countries has generated the highest total shareholder returns in the sector over almost any time horizon during the last 10 years.
Leading the surge in listed real estate
Strong macro factors, like the turn in the interest rate cycle, the reduction in load-shedding, and improved market sentiment following the outcome of the national government elections, have helped amplify the impact of the company’s strategy, with Fortress emerging as the standout performer in the sector.
The listed property sector offers investors an opportunity to benefit from capital appreciation and consistent yield, which is proving particularly attractive due to falling bond yields.
Enhancing shareholder returns
With distributable income for 1H2025 of R917 million, which is approximately 34% higher than the normalised 1H2024 distribution of R687 million, Fortress elected to further enhance shareholder returns with an option to receive NRP shares in lieu of a cash dividend.
The 76,15cps post-tax dividend paid to investors for 1H2025 was 30% higher than the normalised 1H2024 dividend of 58,68cps.
“Alternatively, shareholders can elect to receive 0,0069 NRP shares for every Fortress share held, which represents additional value of roughly 18% compared to the default cash dividend,” explains Brown.
Strong outlook
In this regard, Brown believes that Fortress will continue to deliver strong results thanks to its diversified portfolio and future growth plans.
“There is still a lot of value to unlock in the Fortress business,” states Brown. “We are still sitting at about a 25% discount to our net asset value (NAV), and we are determined to close that gap.”
In terms of growth, the company plans to continue rolling out its robust development pipeline on existing land, with 92,000m2 of new logistics developments currently under construction.
“Ultimately, the secret to our success has been sticking to our strategy very closely, which is the approach we intend to continue with,” he concludes. DM