File picture: James White

PRETORIA – Listed Tower Property Fund reports that its distributions for the six-month periods to November last year and May this year would be negatively impacted by a delay in the completion of the acquisition of a prime industrial property in Zagreb in Croatia.

Tower said the delay, for reasons outside of the company's control, would impact distributions for these periods, because of a resulting six-month cash drag on the funds set aside for the purchase of the property.

The company announced the acquisition of the 5 755m² property located in Žitnjak, the largest industrial node in Zagreb, from VMD Grupa for a total of €8.59 million (R133.23m) in September.

VMD Grupa is Tower’s partner in its Croatian office property VMD Kvart building B, which was Tower’s first Croatian acquisition.

The Žitnjak property was acquired by Tower Industrial, a wholly-owned Croatian subsidiary of TPF International, the newly incorporated Mauritian 74 percent owned subsidiary it established to ring-fence its Croatian assets. It was let to a leading manufacturer of wiring harnesses in the automotive industry, with the lease agreement expiring in August 2027.

Tower said yesterday that Building A of the property had closed with rental income already accruing to TPF and the transfer of building B was expected on the finalisation of the approved debt funding with Eerste Bank for 40 percent of the purchase consideration, with the cash portion being funded from the investment in TPF by Oryx Properties.

It added that TPF was in the process of refinancing all its Croatian euro loans on an interest only basis, which was a major achievement for the company.

These interest-only loans were at a reduced interest rate to their existing rates and importantly would positively affect the company’s cash flow, it said.

Tower previously reported on an initiative to reduce its Standard Bank euro loans, which used the South African properties as security. 

Shares in Tower dropped 5.51 percent on the JSE Monday to close at R6.