Tower Property Fund is planning to bulk up its investments in Croatia as it hedges against weak economic conditions in SA, CEO Marc Edwards said on Tuesday.
"We are a bit weary about conditions in SA so it is helpful to have exposure to an offshore market," he said.
Tower owns five Croatian properties, which represent 28% of its total assets by value.
The Croatian assets were ring-fenced through the establishment of TPF International during the reporting period. The new unit is based in Mauritius.
TPF International received an investment of R300m from Oryx Properties, a Namibian property fund, which will reduce TPF’s euro debt.
Tower, which owns a diversified portfolio of 46 convenience retail, industrial and office properties valued at R4.9bn, located in SA and Croatia, grew its dividend by 5% during the year to May after granting numerous concessions to get some tenants to renew leases.
Noncore properties worth R151m were sold during the year which contributed to Tower’s revenue falling 7% to R416m for the year. A further nine non-core properties are expected to be sold during the 2019 financial year.
Edwards said he was pleased with the group’s annual results, released on Tuesday, which were achieved amid difficult economic conditions.
Vacancies in the portfolio reached a high of 12% in January 2018 but were reduced to 5% by year-end with "excellent tenancies" secured late in the year.
"We have had to offer lower than anticipated rentals and longer periods of beneficial occupation, particularly in Gauteng, which is a clear sign of the times," he said.
Although the results were "quite flat on the previous year, they have been achieved in a challenging market. It’s very difficult out there especially in SA. Tenants are under pressure in a low-growth environment. I think we will see flat results at many property groups and possible negative dividend growth at some funds in the next few months," Edwards said.
Tower’s local portfolio is located in SA’s richest metropolitan areas in Gauteng, Cape Town and KwaZulu-Natal.
Edwards said it would not be prudent to provide a forecast for the 2019 financial year, given the economic uncertainty in SA.
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