Fortress REIT / Resilient REIT | Taking bitter pills
Fortress reported HY'18 results which were in line with the latest trading statement and prior market guidance. A decline in FFB's share price overshadowed the company's positive earnings update, as was the case with Fortress' sister company, Resilient. After the recent update on the restructuring of Siyakha trusts, we analyse the impact on distributable income and the balance sheet of both companies. We estimate that post the restructuring of Siyakha (at market value), Fortress will have an LTV of 32% and Resilient an LTV of 30%, in line with the sector average. In the latest announcements, reference is made to the cross-holding structure between the entities and that both will remain under cautionary status as the boards assess options to unwind the structure. We thus analyse various avenues available to the companies, including an unbundling, share swap, buy-back and a merger.
Fortress REIT Limited, formerly Fortress Income Fund Limited, is a real estate investment trust (REIT), which invests in both physical property and listed property securities. The Company's segments include Logistics, Industrial, Office, Retail, Other, Corporate South Africa and Corporate Europe. The Company owns and develops logistics warehouses, which are let to corporate tenants on long leases. The Company also invests in retail properties focused on transport nodes. The Company's equity portfolio consists of both local listed REITs and international listed property securities. The Company focuses on development of prime logistic warehousing, retail centers and strategic offshore investments. The Company's portfolio includes development properties, industrial properties, logistics properties, office properties, residential properties, retail properties and other properties.
Resilient Property Income Fund is engaged in property investment in South Africa. Co. operates through the following business segments: Corporate, Retail, Industrial and Commercial.
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