The proposed Scheme of Arrangement between Fortress Real Estate Investments Limited and its shareholders has received the requisite level of support.
The company’s shareholders approved the scheme which will see Fortress’ dual capital structure being simplified into a single class of ordinary shares through the repurchasing and cancelling of all FFB shares in issue in exchange for shares of NEPI Rockcastle N.V. at a share-swap ratio of 0.060207 NEPI Rockcastle shares per FFB share. Once implemented, there will be a single class of ordinary share with no impediments to the declaration of distributions.
“We are grateful to our shareholders for their overwhelming support of the proposed transaction to simplify our capital structure,” commented CEO of Fortress, Steven Brown.
“We have consistently emphasised the importance of simplification and specialisation. This vote represents a major step forward for Fortress in this regard. This single-share structure has a host of benefits, most notably the ability to unlock value as well as to attract investors with a vanilla single-equity share which will be liquid and currently trades at a significant discount to its net asset value of approximately 40%. While our shareholding in NEPI Rockcastle will reduce, we will remain their largest shareholder with an investment of circa R13 billion in a high-quality, offshore business which remains a powerhouse in Central and Eastern Europe. The scheme of arrangement has truly been a collaborative effort between shareholders and Fortress in collectively finding a suitable solution to a complex structure.”
There are numerous benefits of having a single share, namely that a single share allows for distribution of income at the discretion of the Board without the restrictions of the MOI and in turn, dividend reinvestment programmes can be implemented. A single-share structure offers greater flexibility regarding corporate actions and allows Fortress management to focus on the business rather than on issues resulting from the dual share structure. In addition, shareholders will benefit from greater liquidity in a single share rather than having share liquidity spread across the two different classes, making it appealing to a broader range of potential investors.
“Our strategy of capital recycling through the disposal of older, under-performing properties to fund new developments which are in demand and have lower structural vacancies will continue in 2024. Our focus remains on completing new developments and letting of premium-grade logistics real estate in South Africa and Central & Eastern Europe as well as expanding our convenience and commuter-oriented retail portfolio. At Fortress, our focus on total returns over the long term will continue to drive our investment and capital allocation decisions.”
