Fortress, with R44.9 billion of property assets and which tried unsuccessfully to collapse its dual share structure at a shareholder meeting on Wednesday, said yesterday that it was unable to comply with minimum distribution requirements of a Reit, and it was engaging with the JSE to manage the process.
“Fortress’s MOI (memorandum of incorporation) prevents payment of a distribution where distributable earnings is less than the Fortress A distribution benchmark, in respect of that period, which is the case for both the interim and final six-month periods of FY2022,” the company, which is also South Africa’s biggest logistics real estate developer and land owner, said yesterday.
Although the scheme to collapse the dual share structure was “supported by more than 60 percent of each of the ‘A’ and ‘B’ shareholders, the scheme did not achieve the necessary approval threshold of 75 percent,” Fortress said yesterday.
The plan, had it gone ahead, would have resulted in the collapse of Fortress’s dual share structure and the removal of the restrictions on paying distributions.
It would also have allowed Fortress to pay a distribution and meet its Reit obligations in respect of its year ended June 30, 2022, and it would have allowed the Reit, at its board;s discretion, to maintain a six-monthly distribution cycle paying out 100 percent of distributable income.
Fortress’s board also believed it would have resulted in a positive re-rating of the ‘B’ Fortress share, which would have been the only share in issue.
“In the scheme circular, Fortress noted that shareholders indicated an understanding of the need to collapse the dual share structure. However, there was a wide gap between ‘A’ and ‘B’ shareholders as to what exchange ratio they considered to be fair,“ the company said.
Fortress said the proposed scheme had been at an exchange ratio that was informed by detailed analysis and assessment of information and valuation metrics and found to be fair and reasonable by an independent expert.
Individual shareholder activist Albie Cilliers said there were many conflicting interests among the shareholders that voted on Fortress' plan to collapse the dual share structure, and given the large number of shares that voted against, it was likely to have included the Public Investment Corporation.
He said he anticipated the JSE would likely adopt an accommodative stance so that Fortress could resolve its Reit listing dilemma.
Fortress’s share price increased by 2.2 percent to R4.05 yesterday morning. A few years back, the group’s logistics property development pipeline was about one million square metres and by the end of December there was only 360 000 square metres of the pipeline that wasn’t under construction or had already been developed.
Its vacancies at that date were at the lowest level not seen in four years.
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