JOHANNESBURG - Listed Tower Property Fund is set to double its exposure to the Croatia property market through the acquisition of several buildings for about 100million (R1.47billion) in the next 18 to 24 months.
Tower’s portfolio in Croatia is valued at 96m or R1.4bn. It comprises 30percent of Tower’s total R5.1bn portfolio by value.
The company took the first step in its broader strategy of establishing an offshore operation in July 2015 by acquiring a newly built office tower in Zagreb in Croatia for 23.7m. It subsequently acquired four Konzum stores and shopping centres in Croatia from Agrokor and Konzum for 66.6m in June 2016.
Marc Edwards, the chief executive of Tower, confirmed yesterday that the first smaller acquisition would probably happen in the next six months with the others happening in the next 18 to 24 months “to really bulk that business up”.
Edwards said Tower would also be ring-fencing the Croatian properties in a separate offshore company.
He said the new company would aim to grow Tower’s eastern European exposure and raise its own equity capital to fund the acquisition of new properties.
Edwards said the rationale for ring-fencing its Croatian properties was because it had become far more difficult to raise money in South Africa than it used to be.
To grow, it would look to attract other investors that were primarily focused on offshore and did not want exposure to South African property, he said.
Edwards confirmed this would slightly dilute Tower’s investments in Croatia, but would enable it to take some profits off the table that it could deploy better at the moment in opportunities in South Africa.
He anticipated the ring-fenced company would be finalised within the next four months and Tower would have an about 70percent shareholding in it.
He said Tower would be happy to dilute its shareholding down a bit further to accommodate new shareholders, but planned to maintain it at about 50percent.
Edwards said Tower would not make any property investments outside of Croatia in the short term, but in the medium would look at opportunities in the countries that surrounded Croatia.
Tower yesterday reported a 6percent growth in distributions a share to 40.7cents in the six months to November.
Edwards said this growth was in line with its forecast and was achieved in a challenging but slowly improving operating environment.
It reported a net operating loss of R43.5m compared with the R99.7m profit in the previous reporting period.
Shares in Tower rose 0.68percent on the JSE yesterday to close at R7.35.