Tower Property Fund to list on JSE under REIT structure

Posted On Wednesday, 19 June 2013 00:03 Published by eProp Commercial Property News
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A new and exciting property fund, Tower Property Fund, is aiming to list on the Johannesburg Stock Exchange under the brand-new REIT structure, in July 2013.

Marc Edwards Tower Property FundThe fund's property portfolio consists of 27 properties worth R1.65-billion, and includes the iconic 'Cape Quarter' complex in Green Point, Cape Town, and a 5 Star Green Star-rated office complex in Grayston Drive, Sandton.

Tower is being launched by Spire Property Group and partners, and has an impressive management team with an exceptional depth of experience. Distinguishing factors for the fund are management's proven ability to add value, and a strong commitment to "greening" initiatives which are aimed at reducing occupancy costs.

The management team involves Spire's Marc Edwards, Bruce Kerswill and Keith Craddock, as well as partners Johan Malherbe and Bruce Rogerson, former founding members of Mettle Property Group. Spire is highly regarded, currently manages a portfolio of over R4-billion for private clients, and successfully listed Paramount Property Fund - which it grew to R3,5-billion before it was sold to Growthpoint in 2006.

Tower's property portfolio is diversified, comprising 30% retail and 70% offices, and is based 60% in Gauteng and 31% in the Western Cape with a small component in KwaZulu-Natal. The largest asset is Cape Quarter, a trendy mixed use development with blue-chip offices and unconventional retail in one of the most strategic locations in Cape Town. Tower believes the property has excellent growth potential, attracting a young, upwardly-mobile clientele close to the CBD.

A portion of the portfolio comprises decentralised office properties, where the management team believes they can add value. Tower CEO Marc Edwards notes that "decentralised offices provide convenient locations, particularly for smaller local tenants who are looking to be close to home or factory, avoiding congestion and toll road taxes. They provide diversified income streams and potentially higher rentals."

"Going forward, we will look to increase the percentage of retail to 50%, targeting mainly convenience centres, which we believe have excellent prospects as there is an emerging trend of customers seeking local face-to-face services while larger centres lose custom due to Internet shopping".

The theme of "greening" will strongly underpin the fund. Recent global research has shown that green buildings outperform normal buildings significantly - on average achieving rental premiums of 6%, capital value improvement of 12%, while reducing operating costs by 30%.

Bruce Kerswill, an Executive Director of Tower who is also Chair of the Green Building Council of South Africa, says that they are delighted to have one of very few 5-Star Green Star SA-rated buildings in the portfolio. "As we grow Tower's portfolio, we will seek to acquire further green-rated buildings, but we recognise that stock is limited and will therefore focus our efforts on greening the existing buildings over time. The initial focus will be on reducing energy consumption, which, with the rapidly rising cost of electricity, will have significant benefits for tenants. Tower will focus initially on no- or low-cost energy efficiency measures to reduce consumption and therefore total occupancy costs."

Tower will be one of the smaller cap companies in the Real Estate sector, an aspect that Edwards believes to be an advantage. "Being smaller, we are able to add significant value through active management and the selection of assets with upside potential, which larger funds aren't able to do due to their sheer scale. We also believe that Tower is going to grow rapidly – we have a big contact network and are already looking at potentially a R1,2-billion "pipeline" of high-quality assets over the next 18 months."

With its targeted mid-July listing, Tower is hoping to be the first new listing on the JSE under the new REIT structure. "We are coming to the market with an attractive yield, good growth prospects, and a strong pipeline of future acquisitions. We have quality assets, a successful management track record, and a focus on competitive 'greening' strategies that differentiate us. We believe that Tower will prove to be an excellent investment," concludes Edwards.

Last modified on Thursday, 17 April 2014 13:54

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