Apart from South Africa, the continent has few high-quality property assets. While this means most JSE-listed funds have little desire to invest in Africa, the development of high-quality stock by predominantly private equity funds is expected to lure greater interest from the listed sector.

Actis, which is one of the pioneers of African real estate development, has two dedicated real estate funds, both of which are closed-end, meaning that once stock is developed, it is sold to annuity-type investors.

Actis director Louis Deppe says while Actis has been developing in Africa almost on its own for a number of years, there is now "a lot more noise in the private equity space", with the recent emergence of players such as RMB Westport and Stanlib.

Meanwhile, JSE-listed Resilient Property Income Fund has also taken a developmental role in Africa. Resilient Africa, an initiative with partners Standard Bank and Shoprite, to which Resilient has committed R600m, has begun construction of a mall in Warri, Nigeria, to be anchored by Shoprite.

In Actis’s first fund, which has closed, about $155m of equity was committed, while the firm’s second fund is "the biggest private real estate fund in Africa" at about $278m, Mr Deppe says. These figures exclude debt, and as the funds usually target a debt-to-equity ratio of about 60%-40%, total capital spent is substantially more than the $433m equity commitments.

The funds’ investments have targeted all real estate classes in sub-Saharan Africa, excluding South Africa. Investments have focused on Tanzania, Zambia, Kenya, Uganda, Ghana, Nigeria and Mauritius.

Among the six developments being constructed in the second fund is a major office development in Ghana, and a sizeable mixed-use Garden City project in Nairobi. The $250m Garden City development will house a 50,000m² retail centre, more than 420 apartments and townhouses, commercial offices and a 1,2ha central park.

Other completed projects under the first fund include Ikeja City Mall in Lagos, Accra Mall in Ghana and The Junction in Nairobi.

Mr Deppe says while the first fund had only one large investor, an encouraging sign is that the second fund has a wider investor base.

He says most of the investor interest for African real estate developments funding is coming from Europe, North America, the Middle East and Asia.

Moreover, when selling completed developments, "the depth of the exit market has grown dramatically", with interest too from South African property groups.

Atterbury Africa, jointly controlled by Atterbury Group and JSE-listed Hyprop Investments, has acquired a 47% stake in Accra Mall, which has become a springboard for the consortium for its own investments into Ghana.

Mr Deppe says the growth of the exit market, and with it growing interest from investors in the countries where stock is being developed, is being spurred by the formalisation of real estate investment trust (Reit) markets in Africa. This is "starting to unlock the pent-up demand for assets", which is positive for those who develop and hold stock, he says.

Naledi Mongoato, investment analyst at Novare Equity Partners, says given the growing number of shopping mall developments in Africa, Reit legislation "offers property developers another exit avenue for their investments, rather than the traditional trade sale".

Mr Deppe says besides Shoprite and a handful of other large groups, retailers from South Africa "have only woken up in the past 18 months" to the African expansion opportunity.

Smaller South African retail groups "haven’t moved fast enough to get there — they are behind the curve". This will see many South African retailers with international franchises missing out, given the proliferation of Middle Eastern and European retailers, including the likes of fashion retailer Zara.

Meanwhile, Mr Deppe punts Actis as front-runner in sustainable initiatives in Africa. He says while there are no formal green building councils on the continent outside of South Africa, Actis is "introducing new technology into all of these markets" and is using rating benchmarks from more established countries to "follow the ethos of green buildings as far as we possibly can".

Heath Andersen, associate director at global engineering firm Arup, says projects in developing parts of Africa generally have bigger issues securing a resilient supply of power and water, "hence this is usually a more pressing issue than sustainability".

"As these markets mature, the more sophisticated drivers such as sustainability will become more relevant," Mr Andersen says.

Mr Deppe says while there is space for an African-focused property fund on the JSE, the challenge at the moment is the limited stock available for such a fund to acquire. Ndabe Mkhize, portfolio manager at Stanlib, says "there is certainly a very strong case" for the establishment of an African-focused property fund on the JSE, which could hold high-quality assets such as Ikeja City Mall.

However, the timing of such a fund’s listing would be important, as much of the stock being developed will only be completed within the next one to three years.

Source: BD