Fortress eyes even bigger logistics property portfolio

JSE-Listed Real Estate Investment Trust (REIT), Fortress, is aiming for more than 66% of its portfolio to be logistics-focused properties by 2020. Logistics properties already makes up some 42% of its total portfolio, accounting for 100 such properties across the country.

Commenting on the move, Mark Stevens, CEO of Fortress said: “With the new-found optimism in the country, we have seen a noticeable increase in interest from prospective tenants across our entire portfolio. However, we believe the logistics and rural retail space offers the best opportunity to capitalise on this growth.”

Mark Stevens, CEO of SA Real Estate Investment Trust (SAREIT), Fortress.

While logistics properties already makes up the bulk of the property portfolio of Fortress currently, the balance is made up of retail at 35%, industrial at 13% and office properties at 10%. Fortress plans to rebalance this overall portfolio mix to two-thirds logistics and one-third commuter-focused, rural retail properties over the next two years.

Despite South Africa’s annual economic growth not exceeded 2% since 2013, the election of President Cyril Ramaphosa has resulted in renewed optimism in the country, with business confidence rallying to a three-year high in March. New Finance Minister Nhlanhla Nene said last month that the 1.5% economic expansion forecast in the February budget speech would likely be lifted in October as the economic recovery gains momentum.

Clairwood Logistics Park

Fortress is currently developing six new logistics properties and one retail facility, with a combined total gross lettable area (GLA) in excess of 154,000m2 and a cost of R1.5bn. The initial building at Durban’s Clairwood Logistics Park with a GLA of 24,977m2 will be ready to welcome the first tenant in September 2018. Fortress has also concluded a lease for the development of Makro’s 22nd store in the country at Cornubia Ridge Logistics Park, also in Durban.

In Gauteng, Fortress has started developing the second speculative building at Union Park with a GLA of 22,414m2 and is in discussions with various logistics users. To complement its existing buildings at Louwlardia Logistics Park, Fortress is developing a new 17,715m2 building on the corner of Nelmapius Drive and Old Pretoria Road. It said negotiations were at an advanced stage with a blue-chip user to occupy this property.

Fortress is also developing a 23,569m2building at Westlake View to complement its existing asset that was recently let to Bongani Rainmaker Logistics. In conjunction with M&T Developments, Fortress is developing the new 24,700m2 Gauteng distribution centre for Savino Del Bene and a further 21,300m2 building at its flagship development property on the R21 Highway known as Westlake View.

Fortress has also completed three additional developments with a total GLA of 71,000m2. The two flagship developments among these are the 34,025m2 Worldwide Automotive Group building and the 23,642m2 We Buy Cars facility at Louwlardia Logistics Park in Centurion. In addition, Fortress developed a 13,340m2 logistics facility at Union Park that was fully let on completion to Voltex, a subsidiary of Bidvest Limited.

Stevens said: “All of these developments, the recently completed ones as well as the new developments, are located within logistics parks, which our research has shown provides the best return on investment over time. To achieve our goal of rebalancing our portfolio, we will continue selling our existing office and industrial properties and repositioning our investments towards the logistics and rural retail space.”