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Resilient REIT, Fortress REIT announce restructuring of education trusts

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Resilient REIT, Fortress REIT announce restructuring of education trusts

Resilient REIT and Fortress REIT Ltd. announced a restructuring of the Siyakha education trusts to eliminate cross-shareholding between the two companies.

The Siyakha Education Trust will transfer all of its Fortress shares to The Siyakha 2 Education Trust and the latter will transfer all its Resilient shares to The Siyakha Education Trust.

The Siyakha Education Trust will subsequently be renamed Resilient Education Trust, and The Siyakha 2 Education Trust will be renamed Fortress Education Trust.

The Siyakha Education Trust is a broad-based black economic empowerment partner, or B-BBEE, as such initiatives are known in South Africa, that was established by Resilient, Fortress and Lodestone REIT Ltd.

Resilient's and Fortress' financial arrangements with the trust were among the main concerns raised by hedge fund 36ONE Asset Management and investment bank Arqaam Capital in recent notes, causing a decline in their share values. 36ONE Asset Management said the structure of the trust allowed the companies' share prices and volumes to be manipulated.

The hedge fund also raised concerns over cross-holdings among the stable of companies that Resilient helped establish. Resilient and Fortress said they are continuing to explore alternatives to eliminate the cross-shareholding among them.

The two companies also updated their distribution guidance in light of the restructuring.

Resilient expects its distribution for the 2018 financial year to be roughly 601 South African cents per share. The distribution for the first half was 306 cents per share.

Fortress expects its distribution for the 2018 financial year to be roughly 179 cents per B share. The distribution for the first half was 90 cents per B share.

Both companies' guidance assumes that the Siyakha restructuring proposal is implemented from Jan. 1.

As of March 7, US$1 was equivalent to 11.89 South African rand.