South Africa: The Finance Ghost - Not All Reits Are Created Equal

26 June 2022
Daily Maverick (Johannesburg)
analysis By The Finance Ghost

While specialist real estate investment trust Stor-Age is busy getting on with its core business, Fortress is in a fight for survival.

Stor-Age is a specialist real estate investment trust (REIT) focusing on, well, storage. This is one of the most dependable funds on the JSE, having achieved a total accounting return for the year ended March 2022 of 16.5%.

The group is geographically diversified, with R4.9-billion in local assets and R5.3-billion in UK assets. The fund enjoys a significant development pipeline and strong support from investors, having raised R575-million in an oversubscribed accelerated bookbuild in January. The share price is trading at a slight premium to the net asset value per share.

In stark contrast, Fortress REIT is staring down the barrel of potentially being the first REIT on the JSE to lose that status through not meeting the rules for paying dividends.

The fund's complicated dual-share class structure is causing major headaches, as the rules aren't allowing a dividend because the fund isn't achieving the benchmark required to trigger a dividend payment.

To avoid losing REIT status in the next few months, Fortress is proposing that the classes be collapsed into a single share class. The trouble is...

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