A number of funds have recently released results and virtually all have said something like: “despite macro-economic headwinds”. This talks to an overall pessimistic view of the South African economy (which has increased since the original drafting of this note, given the chaos in the market created by the removal of the finance minister) showing how susceptible our economy remains to sentiment which has resulted in a number of property companies (and slightly more concerning to the economy, other businesses), looking at opportunities offshore.

Tower is no different and this year has seen the watershed moment of our first investment into Croatia, a country we believe has enormous growth potential. Croatia, fresh from an 8 year recession, is clawing its way back into a position of growth, mainly off the back of excellent tourism numbers. An expected 2.5 growth rate seems achievable and foreign investment is returning to the country. The greater Eastern European region has shown continued and increased interest from South African companies, with Tower, Attacq, Rockcastle and the already established and very successful Nepi, seeking out investments for their South African shareholders.

Our first acquisition, the premium grade VMD Block B in Zagreb, has exceeded our expectations and is now fully let (on paper at least) with strong national and international tenants occupying the premises. Rentals are at the upper end of the market – testament to the building’s quality. A strong pipeline of retail assets is under negotiation off the back of our bedrock investment and through our in country partnerships, which we believe will dramatically enhance our overall portfolio. We look forward to reporting on these soon.

Despite “macro-economic conditions” in South Africa, Tower have had a relatively good year on the property front. Vacancies are the lowest they have been, we have implemented our greening programme on a further 5 properties, with our largest solar initiative just having been completed at the DeVille Shopping Centre, and we have retrofitted our largest asset, Cape Quarter Square, resulting in Deloitte taking additional space in the property. We will shortly be breaking ground on our first foray into residential property with the addition of 11 apartments at 32 Napier Street, part of the Cape Quarter precinct.

We have an excellent pipeline of properties in South Africa as well, however are being more selective in our purchases, only looking at slightly larger, well located properties in popular nodes where there is long term value enhancement through refurbishment and greening opportunities. We have seen that the old adage of “location, location, location” continues to speak truth and the success of a property like Cape Quarter is testament to this. As a property fund Tower will continue to seek the best assets we can afford in the best locations, resulting in long term capital and income growth.

We do see challenging and exciting times ahead and we look forward to continuing to partner with you.

From our team to you and your families, we wish you a blessed Christmas season and hope that you have a well-deserved break. Go easy on the carbs…



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