Our opinion on the current state of FFB

Fortress REIT Limited, trading on the Johannesburg Stock Exchange (JSE) under the tickers FFA and FFB, represents a significant entity within the real estate investment trust sector. The trust manages a diverse portfolio that not only encompasses direct property holdings valued at around R30 billion, focusing on logistics, offices, and commuter retail sectors but also includes substantial investments in other REITs, notably Nepi Rockcastle and Lighthouse (formerly known as Greenbay).

Fortress operates a dual share structure, comprising lower-risk "A" shares (FFA) and higher-risk "B" shares (FFB). The "A" shares offer dividends that increase by the lesser of CPI or 5% per period, providing a level of income stability. In contrast, the "B" shares are entitled to any residual income after the "A" shares have been compensated, alongside a preferential payout in the event of winding up. This structure allows investors to choose their preferred risk and return profile within the same entity. Notably, Fortress still holds a 23.3% stake in Nepi-Rockcastle, underlining its strategic investment footprint.

The impact of the flooding in Natal in April 2022, which affected 4 properties or approximately 2% of its gross lettable area (GLA), was reported to be minor and non-structural. This incident underscores the resilience of Fortress's property portfolio and its capacity to withstand environmental challenges with minimal disruption.

For the six-month period ending 31st December 2023, Fortress reported a total revenue increase of 14.3%, despite a decrease in headline earnings per share (HEPS) for both "A" and "B" shares by 24.3%. However, the trust's net asset value per share (NAVB) saw a significant increase of 18.5% to 1624c, and its loan to value (LTV) ratio was maintained at a healthy 34.2% by the period's end. These financial metrics reflect a complex interplay between revenue growth and earnings performance, coupled with a robust increase in asset valuation.

The "B" shares (FFB) of Fortress are currently exhibiting a strong upward trend in the market, indicating their perceived value by investors. Despite the recent downturn in earnings, the overall financial health of the trust, marked by revenue growth, increased asset valuation, and a reasonable LTV ratio, suggests that Fortress remains an attractive investment option. The upward trend in the "B" shares, in particular, may reflect market optimism about the trust's future prospects and its strategic positioning within the South African real estate sector.