JSE revokes Fortress’s Reit status, property group says

Listed property group Fortress has lost its bid to avoid the removal of its real estate investment trust (Reit) status, over the non-submission of the required Reit declaration due to the company’s dual share structure.

Read the full sens announcement here.

Fortress’s dual-class share structure means that it has A shares and B shares, and the A shares get preference for dividends.

Read:

Fortress more than doubles FY dividend to A-shares as Reit sector recovers

Pick n Pay and Fortress co-invest in a super-distribution-centre development

Fortress pumps R700m into Poland, plans over R1bn for SA

The company has attempted to collapse the structure, but to no avail, with shareholders rejecting a proposal that would have folded the shares into one share.

The property group was required to submit 75% of its distributable earnings to shareholders, with the JSE giving the company a month to comply with the requirement at the start of November last year. According to JSE listing requirements, companies are expected to make these dividend payments to shareholders in order to retain the Reit title.

In attempts to keep its Reit status, Fortress lodged an objection against the bourse’s decision in early December, which was this week dismissed by the JSE based on the outcomes of an annual general meeting that was held yesterday (Thursday 19 January).

The decision was informed by the fact that the company has not paid a dividend for the 2022 financial that ended in June 2022, Fortress said in an update to shareholders.

The company’s board is not authorised to declare a dividend, due to the distributable earnings being below its Fortress A shares benchmark for FY22, it said.

Thus, Fortress will cease to exist as a Reit from 1 February and will retain its current dual structure, the commercial property group said on Friday.

As a result of no longer being classified as a Reit, Fortress and its subsidiaries are no longer entitled to deduct dividends paid to shareholders in determining its taxable income, the company said.

“Its subsidiaries will be liable for capital gains tax on the disposal of immovable property and certain shares; and … [they] will be entitled to claim allowances which previously were not available to a company with Reit status,” it said.

Trading in Fortress A and Fortress B shares will now also attract securities transfer tax – a type of tax applied to the purchase and transfers of listed and unlisted securities.