Fortress Reit says the market for well-located, quality logistics assets remains strong, both from an investment and tenant perspective, indicating scope for growth.
Newly developed logistics assets in secure parks and within proximity to road infrastructure were snapped up as soon as they came on to the market, with gradual rental growth expected, the company said in its interim results.
“Occupancy levels within our logistics portfolio are at an all-time high, and the quality of this portfolio is enhanced with new developments,” CEO Steven Brown said.
The JSE-listed real estate investment trust (Reit) specialises in the logistics and retail property sectors. It has exposure to high-growth economies in Central and Eastern Europe through its investment in listed counter, Nepi Rockcastle (owns a 23.6% stake) and acquisitions of logistic parks in Poland and Romania.
As at December, its logistics assets were valued at R14.1bn including existing properties, land and new developments. SA’s portfolio was worth R12.6bn and the Central and Eastern Europe segment R1.5bn.
In July 2021 Fortress acquired land for the development of a third logistics park in Romania, adding to the two previously acquired in Poland.
Last month Fortress completed the development of a warehouse facility for an existing tenant Eco Ready Bath which expanded in Stargard, Poland, and began construction of the first phase of a pre-let warehouse in Bydgoszcz, also in Poland.
Brown said developing on strategically located sites in Poland stems from the high developer profit margins and a lack of well-priced, income-producing assets for sale.
“Retaining operational and development capability in-country enables better market access and limits the high fees that more passive investors are required to pay to access this asset class,” he said, adding that Romania continued to attract a risk premium but due to limited operating assets for sale, investment yields had compressed.
“We are monitoring the ongoing crisis in Ukraine, but obtain comfort that more than 99% of our exposure in Central and Eastern Europe, both direct and indirect, is limited to countries which are both members of the EU and Nato.”
During the reporting period, retail turnovers had growth of 8.2%, while leasing enquiries specifically for new logistic developments increased.
The company sold 11 properties for R287m and a further 11 properties are expected to net R367m.
Fortress’s loan-to-value ratio increased from 36.7% in June to 38.8% in December, mainly due to the repurchase of about 26m of its A-shares and 25m B-shares, and the conclusion of the acquisition of EliPark 1 in Romania.
Vacancies are the lowest in four years, down to 6.5% in December from 7.4% in June, and the company says signs of improving rental reversions across the core portfolio are evident.
“While we navigate the macroeconomic headwinds in SA, we remain optimistic about the prospects for our business and the sectors within which we operate and focus,” Brown said.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.