Out of the Foreshore…into Croatia

73 Herzog Boulevard. 73 Herzog Boulevard.

LOCAL property group Tower has banked a nifty profit on selling a non-core property in Cape Town’s bustling Foreshore – and the proceeds may bank roll further expansion internationally.

Last month Tower advised that it had sold 73 Hertzog Boulevard to the Kia Joy Trust for R111m. The office block and motor showroom currently houses construction and engineering giant Murray and Roberts, digital media company Trudon and Lexus Cape Town. The property was recently upgraded and is well located on the Foreshore close to the Cape Town International Conference Centre with easy access to the N1 and N2 highways. The gross lettable area is almost 5,500m2, and – according to Tower’s website – there were no vacancies in the property. It seems Tower will bank a clear profit on the sale with the original purchase price on the property being around R89m.

The buyer seems to have scored a fair deal with the weighted average rental per m2 is R145,49m2 and net operating income is forecast at R9,3m for the year to end March 2017.

Tower directors said 73 Hertzog Boulevard was no longer core to Tower’s strategy – which now appears to focus strongly on building a meaningful offshore presence.

In mid-2015 Tower snapped up part of a newly built office tower VMD Block B in Zagreb in Croatia. Recent reports in Business Day newspaper suggest the Croation acquisition has proved more successful than initially anticipated. Tower owns 15 of the 26 floors in the VMD building and is reportedly considering acquiring seven more.

At the time of writing Tower had also proposed acquiring shopping centre properties in Croatia for a whopping €66m (R1,1bn.) Tower wants to acquire Sub Dubrovnik, which owns the Sub City Centre situated in the Dubrovnik area. Sub Dubrovnik is owned by Agrokor, which focuses on food retail and wholesale, as well as food production. It has an annual turnover of €6.5bn (over R100bn.) Agrokor is also the controlling shareholder of Konzum, the largest supermarket retailer in Croatia and Bosnia and Herzegovina.

Tower also wants to acquire the superKonzum shopping centres situated in Zagreb and Velika Gorica as well as the Meridijan 16 shopping centre in Zagreb. Konzum owns more than 740 stores in Croatia. Tower said the Croation retail properties were situated in prime locations, built to European standards and featured internationally renowned tenants.

Tower directors said the 73 Hertzog Boulevard disposal would allow the company to focus on its pipeline of acquisitions – “which allow for higher and more sustainable growth.” The sale of 73 Hertzog Boulevard will go a little way in funding the determined Croation thrust.

Tower has indicated that intends raising 50% of the purchase price of the Croation properties via a rights offer and through additional debt facilities.

Whether Tower will consider selling off other South African properties to raise funding for its East European endeavours remains to be seen. Tower owns several well known Cape Town retail properties – including the Cape Quarter in central Cape Town and the DeVille Shopping Centre in Durbanville. It also owns the Sunclare office block in Claremont, and an array of properties in Gauteng.

By Jenni McCann 

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