Johannesburg - Cape-based Tower Property Fund increased
revenue by 22 percent to R223 million and operating profit by 47 percent to
R195 million in difficult trading conditions in the six months to November.
In a statement issued on Tuesday, it said the acquisition
of a R1 billion retail property portfolio in Croatia during the
period increased the fund’s total portfolio value to more than R5 billion.
Currently 28 percent of Tower’s properties by value are located in Croatia.
The fund’s portfolio of 49 properties is spread across
retail (47 percent), office (45 percent) and industrial (8 percent).
Distributable earnings for the period increased to R130
million. After the board’s decision to no longer distribute once-off earnings
to shareholders as dividends, Tower’s distribution per share declined by 15
percent to 38.4 cents per share, it says. The number of shares in issue
increased by 42 percent.
CEO Marc Edwards says “2016 was a watershed year for
Tower. Our asset management company was internalised in line with market best
practice and the company took the prudent decision to only distribute its core
earnings to shareholders, being tenant rental, less expenses and interest.
Read also: Cape developments a boon to Tower's future income
“Tower’s South African portfolio is performing well, with
additional profits anticipated from refurbishments and other initiatives
expected in the medium term. These profits will be re-invested and used to boost
core earnings.”
Tower’s portfolio in Croatia is now valued at more
than R1.3 billion (€92 million). Edwards says Croatia is growing steadily
from a low base after the recession which ended in 2015 and gross domestic
product growth of 2.5 percent is forecast for 2017.
“The risk on our Croatian properties is low as we have
secured long-term head leases from the sellers. We are planning to ring-fence
our Croatian portfolio into a new investment vehicle to provide greater
opportunity for growth in this exciting region,” he says.
Tower’s development of over 70 residential units at the Cape Quarter Lifestyle Village,
its biggest South African asset, is expected to come on stream from December
2017 through to mid-2019. Given the high demand for residential property in the
area, Tower will dispose of all the units and re-invest the profits in the
business.
Portfolio vacancies have reduced to 4 percent, with
vacancies of 4.6 percent in South Africa and zero in Croatia owing
to the long-term head leases on the properties. The weighted average lease
expiry of the fund is 4.5 years, with the domestic portfolio at 3.5 years.
Seven non-core properties in the portfolio with a value
of R450 million are being sold and the proceeds will be used to best effect in
the company, it says.
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