Tower Property Fund, which owns properties in SA and Croatia, said on Friday distributable earnings fell in the year to end-May as it grappled with lower rental hikes, higher costs and foreign exchange losses.
“The South African economy has experienced poor growth and institutional instability which has resulted in a sluggish economy forcing downward pressure on rentals,” the fund said. “This has resulted in certain property sectors – mainly office and more recently retail – showing relatively flat or negative lease escalations, with increasing costs, across the sector resulting in rising vacancies.”
Earnings were also dented by property sales “at yields above our cost of funding”, the establishment of a Mauritian entity, and other initiatives aimed at “strengthening the company”.Tower, which mainly holds retail and office properties and is led by CEO Marc Edwards, said net property income was expected to grow by 3.5% in SA and 1%-2% in Croatia on a like-for-like basis going forward.
“The period, however, represents a very small percentage of the period in which property has been a star performer in SA, so this must be viewed in context.”
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