Tower Property Fund: value chasers climb in

Cape-based Tower Property Fund, the owner of trendy mixed-use precinct Cape Quarter in Cape Town's Green Point

Though Tower Property Fund didn't initially create much excitement among investors when it listed in July last year, the owner of trendy mixed-use precinct Cape Quarter in Cape Town's Green Point has in recent months started to appear on the buying lists of a number of prominent fund managers.

Renowned value investor Allan Gray bought a 24,6% stake in Tower late last year. Grindrod Asset Management has also been punting the stock.

And the better-than-expected 33c/share maiden distribution for the six months to November 30 declared last week, exceeding the prelisting forecast of 31,4c/share, will no doubt further pique the interest of investors who have been sitting on the sidelines until now.

Tower was assembled by Cape-based Spire Property Group, founded in 1999 by industry veterans Bruce Kerswill and Rodney Squire-Howe. The duo was previously involved in the listing of Paramount Property Fund on the JSE in 2001.

Ian Anderson, chief investment officer at Grindrod Asset Management, says Tower offers "tremendous" value, making it a prime takeover target. The share fell around 18% since July, placing the stock at a forward yield of 11% versus the sector's 7,5%.

Tower CEO Marc Edwards says while he is aware of consolidation talk he hopes to avoid being the target of a takeover. "Though we are open to strategic plays to enhance value for our shareholders, we believe the quality of our portfolio and management team will enable us to be the drivers of any potential corporate action.''

Meanwhile, Edwards is keen to bulk up Tower's R1,64bn portfolio to increase liquidity. He said the company is on track to deliver on its prelisting promise to add assets of around R1,2bn to the portfolio within 18 months of listing. The focus is on midsized properties of R30m-R200m.