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Disposal of Velica Gorica property in Croatia and update on COVID-19
TOWER PROPERTY FUND LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2012/066457/06)
JSE share code: TWR ISIN: ZAE000179040
(Approved as a REIT by the JSE)
(“Tower” or the “company”)
DISPOSAL OF VELICA GORICA PROPERTY IN CROATIA AND UPDATE ON COVID-19
1. INTRODUCTION AND RATIONALE
Tower is pleased to advise shareholders of the conclusion of an agreement to sell its Velica Gorica retail
property in Zagreb, Croatia (the “property” or “Velica Gorica”) at its book value of Euro 9.1 million (the
“disposal consideration”).
As with the recently announced Vukovarska disposal, this disposal is line with Tower’s strategy of actively
recycling assets which are considered to have reached their growth potential, and where Tower believes the
sale proceeds could be better utilised elsewhere.
Tower has been focused on strengthening its balance sheet, reducing its loan to value across the board, and
particularly reducing Euro debt secured against its South African portfolio. In the SENS announcement
dated 17 April 2020, we advised that post the receipt of our share of the proceeds from the disposal of
Vukovarska Tower’s loan to value was expected to reduce to 38%. The application of the proceeds from the
sale of Velica Gorica against Euro debt will further reduce the loan to value ratio of the company to 37%.
The sale agreement has been concluded between Tower Europe Retail No. 2 d.o.o. (“Tower Retail”) and
3D Real Estate No.1 d.o.o. (“3D Real Estate”). Tower Retail is a wholly-owned Croatian subsidiary of
TPF International Limited (“TPF”), Tower’s Mauritian 74% owned subsidiary which houses Tower’s
Croatian assets.
Velica Gorica, which measures 15 741m2 in extent, with a GLA of 4 858m2, comprises a stand-alone Super
Konzum with a small number of line shops linked to the property. The property was acquired in 2016 for
€8.8 million and the disposal consideration represents a 7.5% yield.
2. TERMS OF THE DISPOSAL AND CONDITIONS PRECEDENT
The disposal is subject to certain conditions, including the cooperation of the seller with 3D Real Estate’s
bankers and the final transfer of the property. The effective date of the disposal is the first day following
payment of the full purchase price, which is expected to be in July 2020.
The agreement in respect of the disposal contains warranties, undertakings and indemnities which are
normal for a disposal of this nature.
3. PROPERTY SPECIFIC INFORMATION
Property name Zagreb superKonzum Velica Gorica
Location Zagreb, Croatia
Sector Retail
Total GLA (m2) 4 858m2
Weighted average rental per m2 per month (€) €11.73/m2
Disposal consideration (€ million) €9.1
Value attributed to the property (€ million) €9.1
Net operating income (1 December 2018 – 30 November 2019) (€ million) €0.7
Estimated transaction costs (€ million) €0.4
The disposal consideration is considered to be in line with the fair market value of the property, as
determined by the directors of the company. The directors of the company are not independent and are not
registered as professional valuers or as professional associate valuers in terms of the Property Valuers
Profession Act, No. 47 of 2000.
4. CATEGORISATION OF THE DISPOSAL
The disposal is classified as a category 2 transaction in terms of the JSE Listings Requirements and is not
subject to approval by shareholders.
5. SOUTH AFRICAN OPERATIONAL UPDATE – COVID-19
Since the national lockdown commenced at midnight on 26 March 2020, Tower’s credit committee has
met regularly in order to evaluate rental concession requests received from tenants. To date, Tower has
approved rental concessions with a total value of R3.3 million (excluding value-added tax) for tenants most
impacted by the lockdown (including, amongst others, coffee shops, restaurants, travel agents and event
management businesses). A further R4.2 million (excluding value-added tax) of rental payments has been
deferred for periods ranging from six to twelve months.
Of the rental invoiced for April, Tower has collected 76% after rental concessions, and as at 25 May 2020,
had received 61% of May’s rentals due, which represents an approximately 10% lower collection rate than
at the same point in April. Sectoral collections for April and May are as follows:
% collections
Retail 65%
Office 71%
Industrial 85%
6. CROATIAN OPERATIONAL UPDATE – COVID-19
Croatia’s lockdown measures have been gradually lifted over the past few weeks, with all businesses now
permitted to trade. The Croatian rental income is billed monthly in arrears. Tower has collected 90% of the
rental billed for April. The full May rental is not yet due.
Tower has granted VMD a 15% rental reduction for April and May 2020 with regard to the head lease over
the VMD Office Block in Zagreb. In addition, the company has offered Konzum, the head lease tenant of
its retail portfolio, a rental reduction of 50% for the line stores under sublease for the same period, which
offer has been accepted. Tower’s share of the total rental reduction granted to VMD and Konzum amounts
to €108 321 and assists in ensuring that Tower’s properties retain a strong tenant mix. Essential services
tenants, including the large supermarkets, are paying full rental over this period. From 1 June 2020 VMD
and Konzum will pay full rental.
1 June 2020
Sponsor
Java Capital
Date: 01-06-2020 04:00:00
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