First SA property fund to list under the new REIT structure

Tower Property Fund says it officially became the first new fund in South Africa to list on the main board of the JSE under the diversified REITs sector when it listed on July 19.

Tower raised R300m for the listing.

Real Estate Investment Trust's (REIT's) have been introduced in SA to bring the listed property sector in line with international standards and are tax advantaged investment vehicles that invest in and derive their income from income-producing property and distribute rental income to the holders of shares or units.

"By investing in REITs investors are given exposure to a diversified portfolio of properties - which may be high-quality office, industrial and retail properties - in one investment," says Marc Edwards, CEO of Tower Property Fund.

Tower was well received by investors and its shares rose from the initial offering of R8.70 to R10 per share on the first day of trade. The fund has benefitted from its REIT status as a number of smaller developers have placed their properties into the fund in exchange for shares to take advantage of the Capital Gains Tax Rollover relief they obtain.

The fund's property portfolio is diversified and consists of 27 properties worth R1.65bn, 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 aims to provide investors with strong investment returns, comprising a growing income stream and capital value. This will be achieved, firstly, by adding value through active property asset management, and secondly, through the cost-effective ‘greening' of properties in the portfolio which will result in reduced occupation costs for tenants and increased investment performance," Edwards says.

"Our investment strategy is to target acquisitions of medium-sized (R30 million to R200 million) properties, diversified across the retail, office and industrial sectors, and geographically across the major metropolitan areas. Competition for medium-sized properties is less intense, and well-located, good-quality, medium-sized properties provide a diversified earnings base, better yields, and frequently, the opportunity to improve performance. However, larger properties will not be excluded where suitable opportunities arise."

"Properties acquired, and to be acquired, by Tower were and will be selected for their potential to generate and sustain strong rental income streams," Edwards says. "Diversification is a key component of the company's investment strategy, and is achieved through a geographic spread of properties across major urban centres, a mix of property types, a staggered lease expiry profile, and the fund’s active greening' strategy."

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