Tower Property Fund 31 July 2018 Media Release

31 July 2018


Cape Town – Cape-based Tower Property Fund increased its total distribution to

shareholders by 5% to R275 million in volatile trading conditions in the financial

year to May 2018.

Tower owns a diversified portfolio of 46 properties in South Africa and Croatia

valued at R4.9 billion. The five properties in Croatia comprise 28% of the fund’s

value. Tower’s focus is mainly on convenience retail (46% by value) and office

properties (47% by value).

Non-core properties totalling R151 million were sold during the year which

contributed to Tower’s revenue declining by 7% R416 million for the year. A

further nine non-core properties are being actively marketed and are expected to

be sold during the 2019 financial year.

Chief executive Marc Edwards said the fund has not been immune to South

Africa’s severe economic pressures over the past year. “Vacancies in the

portfolio reached a high of 12% in January 2018 but reduced to 5% by year end

with excellent tenancies secured late in the year. We have had to offer lower than

anticipated rentals and longer periods of beneficial occupation, particularly in

Gauteng, which is a clear sign of the times.”

Edwards said Tower is reaping the benefits of its strategy of extracting maximum

value in its portfolio by increasing lettable areas and refurbishing properties to

attract higher rentals.

The Cape Quarter Precinct, one of the flagship properties in the portfolio, has

increased in value from around R650 million when the properties were purchased

in 2013, to approximately R1 billion at year end. This represents at total return of

15.6% pa. The success of the strategy is also evident in the R80 million increase

in the value of the Sunclare Office Building in Claremont since 2015 to R277

million at year end, a total return of 26.2% pa. The De Ville Shopping Centre in

Durbanville has generated a total return of 15.4% where the property value has

grown from R226 million to R246 million.

He said Tower’s Croatian portfolio is performing well, with increasing rentals in its

office property VMD Block B. The fund has also secured a back-up lease to its

anchor retail tenant, Konzum. The back-up lease agreement with Spar Hrvatska

adds to the security of the retail portfolio and demonstrates the demand for

Croatian properties.

Tower has ring-fenced its Croatian portfolio through the establishment of TPF

International, based in Mauritius. “The new company will aim to grow Tower’s

Eastern European exposure and will raise its own equity capital to fund the

acquisition of new properties. Tower’s shareholding in TPF International will

continue to diversify the overall portfolio and provide a hedge against exposure to

a single market,” he said.

TPF International has attracted an investment of R300 million from Oryx

Properties, a Namibian property fund. “We plan to use these funds to reinvest in

TPF International, reduce our Euro debt and reinvest the balance in South


Edwards said the directors are confident in the fund’s Croatian strategy. “While

the income growth from our properties in this region is low relative to South

Africa, debt funding is also lower, and we believe it offers a secure Rand hedge

with upside for capital growth.”

Tower continues to focus on generating proceeds from asset management

initiatives in the portfolio. These include the addition of 54 residential apartments

in the Cape Quarter Piazza, realising approximately R25 million in profit from

residential sales from Napier Street and the R300 million investment from Oryx in

TPF International.

“While these activities do not impact directly on the fund’s distributable earnings,

generating proceeds from our existing portfolio for reinvestment into new growth

opportunities or balance sheet management is core to delivering attractive total

growing returns to shareholders, and is likely to be a consistent feature of the

portfolio well into the future,” concluded Edwards.


Issued by Tier 1 Investor Relations on behalf of Tower Property Fund

For further information kindly contact

Marc Edwards

Tower Property Fund

082 885 8805

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