Real Estate News – Boost for African real estate

30 Aug 2006 - Business Day -

UK government-backed fund aims to invest in office and retail properties in sub-Saharan Africa - Property Correspondent

PRIVATE equity investor group CDC, which is backed by the UK government and focuses on emerging markets, has invested $100m in a new African real estate fund — called the Actis Real Estate Fund.

The fund aims to invest in office and retail properties in sub-Saharan Africa to meet demand for office space created by foreign direct investment and retail space on the back of the expansion of South African retailers.

The fund, which is managed by Actis, is the first “dedicated real estate fund” in which the CDC has invested.

London-based CDC CEO Richard Laing says that the CDC used to be known as the Commonwealth Development Corporation. He said that it is now the British Development Finance Institution.

Its shareholder, the UK government, requires that about 50% of its funds available are invested in sub-Saharan Africa and southeast Asia, says Laing.

The CDC capital is not invested directly, but is instead invested in private equity funds, which in turn invest in emerging markets.

The CDC’s mission is to provide capital for sustainable private-sector businesses in emerging markets. Laing says that the CDC uses about 25 different fund managers for its investments.

It used the Actis Real Estate Fund because Actis has a specialist property team.

“We select fund managers according to their skills and experience,” he says.

The CDC has been investing in property for the past six to 10 years. “It (property) has always been an important part of what we do. We were doing that in east and west Africa.

“During that experience we spoke to South African national retailers like Shoprite and they are looking north — to either east or west Africa,” says Laing.

He says South African retailers require property for stores, as well as offices for head offices.

“The Actis fund will be in a good position to do business with retailers. The retailers will be the tenants in the properties.

“When it comes to nonretail property, it will be for anyone who wants good commercial property,” says Laing.

The CDC says there is strong, and growing, demand for quality retail, commercial, industrial and residential property in Africa, driven by gross domestic product growth, foreign direct investment and outsourcing.

It says that growth in west and central Africa in particular is being fuelled — directly by the oil industry, and indirectly by companies seeking to service a growing domestic market, with South African companies playing a key role in this development.

Laing says the CDC hopes the new fund’s investment in property will encourage other investment in Africa.

“What might well happen is that, because it is the first stage and no one has done it before, others will see the success of it and then follow,” says Laing.

He says that the CDC has been operating in east and west Africa and is interested in any market where there is growth potential.

Laing says that South African retailers have expressed an interest in the west and east African markets and that “some of them are already there”.

The Actis Africa Real Estate Fund also includes about four of five existing properties the CDC injected into it.

These include properties in Nairobi, Kampala and Dar es Salaam, an early stage retail development in Accra, and a soon-to-be-completed retail mall in Lagos.

The Actis Africa Real Estate Fund aims to work alongside local developers in the countries in which it invests to co-develop and acquire start-up property developments off plan.

It also aims to acquire and add value to existing properties held by governments, companies, individuals or institutions.

This may include the “turnarounds of distressed properties”, says the CDC.

Prior to the fund being established, the CDC and Actis had invested $25m to date in seven African property companies.

Article by: Nick Wilson - www.eprop.co.za