Property group Fortress has lost its status as a real estate investment trust (Reit) after losing an appeal against the JSE’s decision as it battled for months to win the approval of shareholders to collapse its dual-share structure.
The change will take effect in February, but Fortress will remain a listed company with its existing share structure.
Fortress, which specialises in the logistics and retail property sectors in SA and owns premium logistics assets in Central and Eastern Europe, has struggled to pay the minimum of 75% of its taxable earnings available for distribution as a dividend annually within four months after its year-end as required by the listing requirements of the local bourse for property companies to remain a Reit.
Fortress announced on December 7 it had lodged an objection to the JSE’s decision. The JSE said it would await the outcome of the company’s general meeting with shareholders last week, where shareholders again voted against getting rid of the current share structure, and informed Fortress about its decision on Thursday.
Fortress listed in October 2009 with two classes of shares offering investors different risk and reward profiles. Its A ordinary shares and B ordinary shares have equal voting rights.
Reits do not incur tax when paying a dividend, thus allowing earnings to flow through to investors without the company attracting income tax. They provide investors with dividend-based income, but Fortress shareholders are not enjoying these benefits.
In 2022 Fortress proposed a share exchange that would result in A shareholders receiving 80% of Fortress’s distributions with the remaining 20% going to Fortress B shareholders, but most investors were not having it.
The property group will now become liable for tax, as opposed to the dividend being taxed in the hands of shareholders, and for capital gains tax on the sale of immovable property and certain shares.
With Denise Mhlanga
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.