Tower Property’s dividend slips
Tower Property Fund will sell some of its local assets in a bid to decrease its debt, CEO Marc Edwards said on Thursday.
The group, which also has assets in Croatia, says it is waiting for confidence to return to the struggling South African economy before it makes new acquisitions. Tower, which owns the mixed-use Cape Quarter development, declared a dividend of 36.83c per share for the six months to November, results showed on Thursday, 9.5% lower than in the corresponding period.
Edwards said Tower’s dividend growth would ease while the company decreased its debt position and upgraded its assets. It was also looking to improve its balance sheet and net asset value. Tower’s debt position or loan-to-value (LTV) sat at 33% at the end of the reporting period.
Edwards said Tower’s change of strategy, from an income-focused fund to one equally focused on income and tangible net asset value growth, was taking shape.
He said he wanted the LTV to remain “in the lower 30s”, as this would be prudent while Tower was operating in a weak economic environment in SA. Tower owns a diversified portfolio of 44 convenience retail, industrial and office properties valued at R5bn across SA and Croatia.
About 27% of the portfolio is exposed to Croatia, where Tower owns five properties. Initially Tower was criticised for entering the east European country given that it did not have a management team there and was a relatively small property fund.
Tower also faced challenges when its main retail tenant, Konzum, could not pay its rent in 2018 because its parent group, Agrokor, had gone into administration.
However, Agrokor s financial position has improved.
The Croatia assets were ringfenced through the establishment of TPF International, which is based in Mauritius.
TPF International received an investment of R300m from Oryx Properties, a Namibian property fund, reducing TPF’s euro debt.
Edwards said TPF International would raise capital for acquisitions from European sources which would give it access to larger amounts of money than if it sought funds from SA investors. “This way we avoid putting strain on our local balance sheet,” he said.
Tower was also well under way in converting part of its Cape Quarter in De Waterkant retail development to 70 apartments. Edwards said there was significant demand for residential accommodation in this part of Cape Town. Edwards said it was difficult to forecast what dividend growth would be for the full 2019 financial year given economic and political uncertainty in the run-up to SA’s national elections in May.