Fortress warns of lower distribution

The real estate investment trust is tweaking its model so it can pay out less to A shareholders due to Covid-19.

Fortress REIT has warned holders of its A shares that they will get a lower distribution this year, while its B shareholders will get nothing.

In a trading statement, the real estate investment trust said due to the impact of Covid-19 on its operations and the lower distribution it will receive from its investment in European property group NEPI Rockcastle, its expects the distribution per share payable to A shareholders for the six months to end-June to be at least 15% less than the 73.62c paid out last year. On Monday, NEPI said it expected a decline of 32% in distributable earnings per share for the six-month period and its dividend per share would be down by at least the same amount – if it pays one at all. It postponed a decision on its dividend until a board meeting tomorrow.

Under Fortress’s structure, holders of its A shares have a preferential right to distributions and are guaranteed growth of the lesser of CPI consumer inflation or 5%. However, due to current circumstances, Fortress said it was amending its Memorandum of Incorporation so it could pay out less. As it won’t be in the position to meet the A distribution entitlement, it said no distribution would be declared or paid in respect of its B shares.

Notwithstanding the above, Fortress expects that it will satisfy the minimum distribution requirements for REITs set out in the JSE Listings Requirements in respect of the year ended 30 June,” the company said.

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