SA firms ‘should target Africa’

ALTHOUGH property buying and development in SA remains the first choice for expansion-hungry listed property companies, there could also be opportunities in the rest of Africa — albeit with higher risk.

On the other hand, investing in countries such as the UK and the US can be problematic unless a company can partner with a local property player.

At the annual convention of commercial property association Sapoa last week, the question was raised about the possibility of local companies and funds acquiring property in Europe and the US.

Norbert Sasse, CEO of Growthpoint Properties, the largest listed property company on the JSE, said it was difficult for South African property companies, on their own, to go and invest offshore. “They don’t know what is going on in the UK and US market. You need local knowledge and unless they can partner with someone who has local knowledge, I don’t think it makes a lot of sense for South African listed property companies to invest offshore.”

He said investors in South African property companies and funds also invested specifically to obtain exposure to SA. “If they want offshore exposure there are probably a couple of hundred property funds they can invest into directly.”

Africa, on the other hand, was far more “local” because a lot of non-property South African companies had infrastructure in countries such as Botswana, Mozambique, Namibia, Lesotho and Zambia.

Sasse said there was also access to local property knowledge because a lot of South African property service companies, retailers and banks were already operating in other African countries. He said the market was seeing a “lot more interest” in investing in other parts of Africa.

“There is definitely money available for investment in Africa. I do believe that in the near future you might see the creation of a listed or unlisted property fund which focuses on investment into Africa.”

There were also a number of listed property companies that had expressed interest in diversifying into the rest of Africa.

Although South African property groups intending to invest in Africa had the advantage of access to more “local” knowledge, a major issue was that these countries did not “offer size and scale” in terms of investment opportunity, said Sasse.

He said SA was always the better property investment bet because of the size, liquidity and developed nature of its property market.

“These other African countries offer higher returns in terms of yields, but clearly that comes with higher risk.”

Sasse was expecting to see a “lot of action” in African property markets in the short to medium term.

But Frank Berkeley, MD of Nedbank Corporate Property Finance, said he did not think there would be a “very big appetite” to develop properties in other African countries from South African property companies aiming to grow their asset bases.

Berkeley said there were a “huge number of property development opportunities” in SA, particularly in areas such as Soweto.

He said Soweto’s population equalled the combined populations of Botswana and Namibia. From a property perspective, Botswana and Namibia were “good places” for property companies to operate because they had good legal systems.

“The effort you would put in looking at former South African townships would probably give you a far quicker return,” said Berkeley.

He said SA’s larger township areas, such as Soweto, Khayelitsha, in Cape Town, and Umlazi, in KwaZulu-Natal, needed large shopping centres to cater for the demand for retail shops in their areas from consumers.

Berkeley believed office property opportunities would come later to those areas.

“I think the offices will come as you get more and more black businesses driven by black entrepreneurial spirit, which I believe is very prevalent in South Africa. We have a nation of entrepreneurs.”

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