Tower sets its sights in R300 million for placement

BUSINESS DAY: July 15 – Nick Hedley

Tower Property Fund, which will officially list on the JSE on Friday, said last week its private placement was fully committed of underwritten.

The fund said that based on its engagements with those investors providing pre-commitments and an underwrite, the board considered R300m “to be the optimal amount of capital to be raised” in its private placement.

Tower, which has an experienced management team in the listed property space, aims to differentiate itself with a focus on “greening” its properties over time to save costs and make its buildings more competitive.

At listing, if certain acquisitions are implemented, the fund’s property portfolio will consist of 27 properties valued at R1.65bn. The portfolio includes mixed-use Cape Quarter complex in Green Point, Cape Town, as well as a five star, green star-rated office complex in Grayston Drive, Sandton.

Tower is being launched by Spire Property Group and partners, and has an experienced management team with a successful track record. Spire successfully listed Paramount Property Fund, which grew to R3.5bn when it was sold to Growthpoint Properties in 2006.

The management team includes Spire’s Marc Edwards, Bruce Kerswill and Keit Craddock, as well as partners Johan Malherbe and Bruce Rogerson, who are former founding members of Mettle Property Group.

Tower said on Friday it had received binding subscription undertakings totalling R178m, equating to 20.4-million shares at R8.70 per share.

Stanlib Asset Management committed R73m, while Grindrod Asset Management and Prescient INvestment Management had each committed R50m. 3PM Investment had committed R5m. JSE-listed Fortress Income Fund had committed to an underwrite of up to R150m.

Tower’s acquisition portfolio includes five properties that are being acquired from Fortress.

Stanlib head of listed property funds Kellen Ndlovu said that Tower was an attractive investment for Stanlib partly because of its management team.

In addition, he sais, “we believe that pricing – a yield of 9.5% including the underwriting fee – is reasonable for the portfolio and is relatively attractive compared to similar smaller cap property companies, who are trading at around 8.5% yields.

Mr Ndlovu said Tower was trading “quite higher than the sector average yield of 7.1%.

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