Sanlam seems to be ready to pioneer the big northwards march of South African commercial property operators and investors after promising to launch a pan Sub-Saharan Africa Real Estate Fund at the end of March.
Sanlam, one of South Africa’s largest financial services group, is obviously preying on rising income levels across the continent which has caused a healthy demand for modern social amenities and attended bricks and mortar structures.
The move resonates well with several observations. These include the MasterCard African Cities Growth Index compiled by Professor George Angelopulo of the University of South Africa (UNISA). The index notes a phenomenal rise and demand in urban socioeconomic amenities. “One of Africa’s key economic and social challenges is how its cities attract significant inward investment by being globally competitive, serving as magnets for investment and growth, hot-spots of innovation and, most importantly, developing attractive and thriving business environments,” said Angelopulo.
Michael Miebach, president, MasterCard Middle East and Africa said “Africa is a region where the lines between the developed and developing worlds are dissipating owing to various economic, demographic and technological factors. Most of these factors have been associated with the increased urbanization of the continent. ”
“This growth in urbanization, combined with the fact that the center of global economic gravity is shifting to dynamic emerging markets such as those found in Africa, means that the continent’s cities will play a much bigger role in driving the economic growth of their respective countries,” Miebach continued,” added Miebach.
Sanlam Investments CEO Johan van der Merwe says that the timing for the fund launch is opportune. “While the majority of the developed world is struggling to find yield, the African continent currently has seven of the top 10 growing economies in the world. This creates a unique opportunity for the Sanlam Group to take advantage of its positioning and provide the investor community with a suite of products that facilitates participation in these markets. This fund aims to take advantage of the favourable supply and demand imbalance for quality real estate across the subcontinent, as well as its strengthening demographics and resultant return characteristics.”
The fund will allow local and international investors to invest in high quality retail and commercial real estate across select Sub-Saharan African countries.
Van der Merwe said the fund forms an integral part of the Sanlam growth strategy into Africa and takes advantage of the group’s large, established footprint which currently has substantial businesses in 11 key countries across the African sub-continent.
Thomas Reilly, CEO of Sanlam Properties said the problem for the sophisticated investor to date has largely been to find an internationally acceptable product to access this growing market. This fund has been structured to the highest international standard to provide an acceptable platform for both local and international investors to tap the growth potential of the Sub-Saharan African real estate market. “It has taken over two years of hard work to finalise and we have been able to secure a strong pipeline of select assets with attractive returns. Investors will benefit from the first mover advantage created by the launch of this fund.
“We intend listing the fund from inception on the Stock Exchange of Mauritius and will target double digit US Dollar investor returns. Given the fact that the fund assumes little or no development risk, these returns are proving to be attractive to investors, particularly when taking into account the lowered risk profile of the fund.”
Sanlam expects to grow a portfolio in excess of US$500m over the medium term with the bulk of initial investors expected to be sourced from the US and Southern African investor markets. It plans to close the initial capital raising process on 31st March with the target audience being the larger institutions in the savings industry. The fund excludes investments in South African real estate.
JSE based property funds are expected to follow suit. Nobert Sasse, CEO of the largest JSSE listed property fund, Growthpoint, recently noted that “Given the local market is becoming increasingly competitive with more listed property funds, some will start focusing more on opportunities outside South Africa with property acquisition and developments”.
“However, investment into developed markets will be tougher with the current Rand weakness. Also, most of these property markets most rerated substantially, driving yields significantly below South Africa’s. Investments in the US, UK and Europe are likely to be dilutive in most cases, but there are still some opportunities in Australia.”
Head of Listed Property Funds for Stanlib Keillen Ndlovu also noted that while local funds have ventured into markets like Australia, UK, Germany and Romania, the focus is now shifting to the rest of the African continent.
“Investment in property up Africa is gaining momentum. Several SA property companies, listed and unlisted, are targeting countries like Nigeria, Ghana, Kenya, Angola, Mozambique, Zambia and Mauritius,” says Ndlovu. “Most projects are at infancy stages and it will take the listed property sector two to three years to see the benefit of this.”