Tower diversifies by buying eight industrial properties

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Tower acquires a R375m industrial property portfolio in Gauteng and KwaZulu-Natal in a bid to diversify its investment offering.

Tower, which was originally more a Western Cape-based property fund, listed in July 2013 with a portfolio that consisted of about 70% offices and 30% retail properties.

The acquisition of eight industrial properties is its first major foray into industrial property.

CEO Marc Edwards said of the purchase that it “provides us with our first significant exposure to the industrial property sector and will see us raise our exposure from 0.9% to approximately 12% — well on the way to our 20% overall target”.

The properties were bought from private developer HBW Holdings.

They include the Meadowbrook Distribution Centre in Edenvale east of Johannesburg; and 8 Industry Road in Kempton Park and 10A Cleveland Road in Cleveland, both of which are in eastern Gauteng.

Included in the portfolio as well are 320 Kuit Street in Pretoria, Route 21 Industrial Park in Irene, and the Pick n Pay, Nampak and Arrowfield distribution centres in Pinetown, Durban.

The properties fetch rentals of up to R65/m² and the largest property is 15,500m² in size.

This latest acquisition takes the fund’s portfolio to 44 properties valued at R3.5bn.

Mr Edwards said the industrial subsector of property was performing relatively well regardless of poor economic growth in SA.

“Despite challenges such as sluggish economic growth and unstable electricity supply, certain nodes of the industrial sector are strong,” Mr Edwards said.

“According to the recent IPD annual South African property index, the best-performing sector this year so far has been industrial, and although the commercial property market is still under pressure, the sector is still yielding attractive returns for investors.”

Tower has been on an acquisition drive and in addition to the deal with HBW, recently purchased 15 Wellington Road in Parktown, Johannesburg, for R80.5m, Evagold Shopping Centre in Evaton, Gauteng, for R110m, and Link Hills Shopping Centre in KwaZulu-Natal for R217m.

The fund also recently concluded a deal to buy a stake in an office property in Croatia.

Tower’s total return for the first half of this year was 4.99%, according to research by Catalyst Fund Managers.

The South African listed property index achieved an overall return of 6.61% over the same period.


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