Johannesburg - The value of a Croatian office property acquired by listed Tower Property Fund rocketed by more than R110 million in less than two months because of the depreciation of the rand.
Tower made its first offshore acquisition in August when it purchased 15 floors of the premium grade VMD KVART office property in Zagreb in Croatia for e23.7m (R420.9bn).
Marc Edwards, the chief executive of Tower, said yesterday that the fund had benefited from the weakness of the rand relative to the euro, with the value of its Croatian property increasing by R41m by November 30 and by R110m by January 11 because of currency appreciation.
Diversify risk
Croatia accounts for 8 percent of the fund’s total property portfolio value of R4 billion. This excludes another acquisition in Croatia, which was announced last week.
Edwards said Tower’s acquisition strategy in Croatia enabled the fund to diversify shareholder risk to South Africa’s macroeconomic challenges, adding that it provided a hedge against local uncertainty because this south-eastern European country was currently in a growth phase following years of recession.
Tower last week announced its largest acquisition to date with the purchase of a portfolio of four retail shopping centres in Croatia for R1.1bn.
The acquisition is still subject to conditions precedent and shareholder approval, but if it proceeds it will increase Tower’s retail exposure to 50 percent to achieve its short-term target.
The fund currently has a sectoral spread of 35 percent retail, 55 percent office and 10 percent industrial.
Tower yesterday reported a 72 percent increase in distributable earnings to R109m in the six months to November.
An interim distribution of 45.2 cents a share was declared, 7.6 percent higher than the previous interim distribution, with the number of shares in issue increasing by 60 percent.
Revenue grew by 55 percent to R182.89m from R117.89m.
Operating profit improved by 38 percent to R132.8m from R96.5m.
Tenant retention
Portfolio vacancies were reduced to 5 percent, largely because of enhanced tenant retention following the fund’s greening and cost reduction programmes.
Tower’s portfolio comprises 48 retail, commercial and industrial properties, with four properties acquired during the reporting period.
These acquisitions were the VMD KVART office property in Croatia, Evagold Shopping Centre in Evaton for R110m, the mixed use retail and office property at 15 Wellington Road in Parktown, Johannesburg for R80.5m and the Link Hills Shopping Centre in Waterfall in KwaZulu-Natal for R217m.
Shares in Tower rose by 0.91 percent yesterday to close at R8.83.
BUSINESS REPORT