Tower Property Fund 2018 Results Presentation

Tower Property Fund 2018 Annual Results Presentation

Financial Highlights

• Distribution of 40.3 cents per share representing 5% growth from corresponding period

• Distributable earnings of R266 million

• Portfolio at 46 properties after the continued sale of non-core assets

• Portfolio value of R4.9 billion

• Market capitalisation of R2.3 billion

• Loan-to-value of 39%

• Net asset value of R9.68 per share

• Properties sold or in the final process of sale of R247 million

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Tower Property Fund Earnings up 72% as Portfolio Grows to R4Bn

Cape-based Tower Property Fund increased distributable earnings by 72% to R109 million in the six months to November 2015 as the fund embarked on an offshore acquisition strategy.

Revenue for the half year grew by 55% to R183 million and operating profit by 38% to R133 million. An interim distribution of 45.2 cents per share has been declared, an increase of 8% over the previous interim distribution, with the number of shares in issue increasing by 60%.

Tower’s portfolio includes 48 retail, commercial and industrial properties valued at R4 billion.

Last week Tower announced its largest acquisition to date with the purchase of a portfolio of four retail shopping centres in Croatia for R1.1 billion (€66.4 million). The acquisition, which is subject to conditions precedent and shareholder approval, will increase Tower’s retail exposure to 50%, achieving its short-term target of exposure to this sector.

This follows the fund’s first offshore acquisition in August last year when it purchased 15 floors of the premium grade VMD KVART office property in Zagreb, Croatia, for €23.7 million.

Three properties were acquired in South Africa in the past six months. These were the Links Hill Shopping Centre in Waterfall, KwaZulu-Natal (R217 million), Evagold Shopping Centre in Evaton, Gauteng (R110 million) and 15 Wellington Road, a mixed use retail and office property in Gauteng (R81 million).

Chief executive officer, Marc Edwards, said: “Tower has performed well in a difficult trading environment, particularly in South Africa. Our investment strategy is to expand the portfolio by targeting well located properties with strong cash flows and to ensure a diversified sectoral and geographic portfolio.”

“Tower’s acquisition strategy in Croatia enables the fund to diversify shareholder risk to South Africa’s macro-economic challenges. We have a strong local equity and management partner which owns 20% of our subsidiary, Tower Europe.”

The fund has benefited from the weakness in the Rand relative to the Euro, with the value of its Croatian property increasing by R41 million at 30 November 2015 and by R110 million at 11 January 2016 owing to currency appreciation.

Edwards said greening will continue to be fundamental to Tower’s investment case as it has proven to make both financial and ethical sense. Greening projects are expected to save the fund over R3.2 million a year by reducing energy usage by 3.8 million kWh which should in turn cut carbon emissions by more than 3.8 million kg.

Portfolio vacancies have reduced to 5% as tenant retention has been enhanced by the fund’s greening and cost reduction programmes.

Tower is also actively pursuing development opportunities, including a commercial and residential development at 32 Napier Street at the Cape Quarter precinct. Construction is expected to start in the first half of 2016.

On the outlook for the fund, Edwards said the current state of the local economy is a major concern and could lead to higher vacancy levels and increased bad debts from tenants as economic conditions deteriorate.

“Management continues to look for innovative ways to ensure affordable occupancy for the tenants of our properties, most notably through greening,” he said.

“Properties valued at R700 million are under negotiation and the fund also has a pipeline of refurbishment works of over R200 million. We expect the value of the Tower portfolio to reach R5.5 billion by the end of the 2016 financial year.”

Edwards said the fund’s Croatian strategy provides a hedge against local uncertainty as this Eastern European country is currently in a growth phase following years of recession. “Tower’s reputation in Croatia is gaining strength, based on our partnership relationships and we expect growth from the region in the medium term,” he added.

Interim Results


Tower Property sees 38% jump in Interim Revenue

Tower Property Fund has said that its revenue increased by 38 per cent for the six months ending 30 November 2014.

The South African property investment fund saw revenue increase to 117 million rand in 2014 from 85 million rand for the five months ended 30 November 2013.

“Tower performed well in the six months ended 30 November 2014 in an increasingly difficult trading environment,” it said.

“The investment strategy is to expand the portfolio by targeting well located, mainly medium-sized properties with strong cash flows and to ensure a diversified sectoral and geographic portfolio.”

Tower Property added that its longer term objective is for the portfolio to comprise approximately 50 per cent in retail space, followed by office at 30 per cent and industrial at 20 per cent.

“During the period two properties totalling 122 million rand were acquired. Active asset management of the portfolio has continued to reduce operating costs,” the company said.

“Greening initiatives undertaken include lighting retrofits at Cape Quarter and the De Ville Shopping Centre, and a large solar installation at Cape Quarter which is predicted to yield a 17 per cent return.”
According to the company, this solar project will ensure that most of the roof space is being utilised to generate energy.

“This is a strategically important programme given the country’s electricity supply constraints and the expected tariff increases from Eskom,” Tower Property said.

“Savings at Cape Quarter have exceeded predictions with 850,000 rand being saved per annum as a result of lighting changes. The electricity demand of the property has been reduced by 13 per cent.The property fund saw its net property income for the 2014 period increase to 103 million rand from 75 million rand for the previous corresponding period, and a profit before taxation of 98 million rand from a loss of 31 million rand. Its operating profit grew by 37 per cent and its basic and diluted earnings per share, of the weighted average shares in issue, increased to 69 cents in 2014.

“Management continues to focus on the acquisition of strategic properties to ensure the sustainability of the fund and to enhance returns for investors,”

“The directors remain committed to meeting the distribution forecast of 86.6 cents for the 2015 financial year, as published in the company’s pre-listing statement in July 2013.”

Tower Ups H1 Revenue