Tower Property Fund, which listed on the JSE a year ago, is involved in negotiations to acquire new property assets worth more than R1 billion.
Marc Edwards, the fund’s chief executive, said yesterday that due diligence investigations were being undertaken on these properties and he was hopeful all the planned acquisitions from various private vendors would be finalised.
Edwards expected the transactions to be concluded in the next three months and a large portion of them to be part of Tower’s portfolio by the first quarter of next year.
The real estate investment trust owns a portfolio of 31 commercial and retail properties valued at R2.06bn after acquisitions worth R329 million in the six months to May.
It bought the De Ville Shopping Centre in Durbanville for R226m, the Clifton Place office building in Durban for R81m and the industrial property at 19 Section Street in Paarden Eiland, Cape Town, for R22m.
Edwards said the properties it was negotiating to acquire were a mixture of retail and office buildings, stressing the fund was “not scared of offices” because the market was bottoming out and from a price perspective it was a good time to buy. This is a reference to the recent poor performance of the office property market.
Edwards said Tower had reduced its exposure to the office sector to 64 percent of the portfolio but expected it to stay at this level with the acquisitions under negotiation. “I’d like to have 50 percent of the assets in retail, particularly convenience retail, but they are hard to come by,” he said.
By value, 35.1 percent of Tower’s assets are in retail, 63.7 percent in offices and 1.2 percent in other categories, while 42.1 percent are in Gauteng, 51.4 percent in the Western Cape and 6.5 percent in KwaZulu-Natal.
Edwards said the fund was not restricting itself to these three provinces. It was keen to get into areas such as Bloemfontein, Plettenberg Bay and Port Elizabeth and wanted to increase its exposure to Durban.
Tower’s maiden distribution of 74.6c a share for the year to May exceeded its prelisting forecast of 71.7c, the fund reported yesterday.
Edwards attributed the higher-than-forecast distribution to a reduction in vacancies from 11.5 percent to 8 percent, a considerable reduction in operating costs because of its greening initiative and positive rental reversions of about 6 percent.
Tower’s market capitalisation has grown by 18 percent since listing to R1.2bn at the end of May, but its shares have been trading at a discount to its net asset value, which stood at R9.07 a share at year-end.
The shares leapt 2.6 percent to R9.08 on the JSE yesterday.