Property Investment

Africa: the last frontier

Africa

HomeFront finds out who is investing where – and why – in sub-Saharan Africa 

WORDS: DEBBIE HATHWAY – PHOTOS: SUPPLIED AND SHUTTERSTOCK

If you’re thinking of expanding your property portfolio in sub-Saharan Africa, the 2019 AfrAsia Bank Africa Wealth Report could point you in the right direction. According to authors New World Wealth, the most expensive prime residential property in Africa is in SA. Cape Town topped the list for a prime 200m2-400m2 apartment priced at $5,600. Umhlanga was second ($2,800), followed by Sandton ($2,600), Nairobi ($1,800) and Marrakesh ($1,700). The report states that residential property usually comprises 25% to 30% of the net assets of the average high net worth individuals (HNWIs) living in Africa. In terms of average wealth per person, the wealthiest countries in Africa are Mauritius, SA, Namibia and Botswana. For South Africans who want to invest, live or work close to their home country, Mauritius holds all the cards. Richard Haller, director for Pam Golding Properties (Mauritius) says: “Historically we’ve seen good capital growth over the long term for clients who invest early in the development phase. In the current environment there are also resale opportunities where some clients need to liquidate their investment. So it’s about choosing the best opportunity at the time.

“Also driving the demand in Mauritius is the ability to do business from here. It makes sense for South Africans looking for a new lifestyle and business environment to route their ‘rest of Africa’ business through the island.” Pam Golding Properties (Mauritius) presents the northern part of the island as a fully serviced environment. “New infrastructure is increasing, which supports a growing South African and French contingency that is very community based. You see them enjoying the outdoor lifestyle, sitting at the coffee shops and restaurants, and on beaches and at sporting facilities. Many live in the suburb of Grand Baie, including Pereybere, whereas Mont Choisy brings another wave – I’d say 50% who’ve bought at Mont Choisy Golf and Beach Estate are now residing there permanently, while at other schemes it’s closer to 25%,” says Haller. 

Famous blue city of Chefchaouen, Morocco

Offshore property

The island government has made investing in Mauritius even easier and more attractive. Incentives to do business from Mauritius include attractive tax rates, tax-free dividends and no capital gains tax. Recent amendments include lowering the entry level for residency based on property purchased from $500,000 to $375,000. Several relaxations have also been applied to various investor, retiree and work permit requirements, fuelling the increase in demand. “Mauritius is at the forefront of where South Africans are currently looking to invest in offshore property. It ticks so many boxes but most importantly it offers a hedge in terms of investment in a US dollar-, euro- or Mauritian rupee-based asset and provides the opportunity for permanent residency in a safe, proven and dependable jurisdiction,” says Mauritius Sotheby’s International Realty partner Timo Geldenhuys. “I recently acquired the Mauritius Sotheby’s International Realty licence for the island as I believe the demand will continue to grow, both from sub-Saharan Africa as well as from our other feeder markets in Europe and the Middle East.” The Pan-African real estate investment business Growthpoint Investec African Properties (GIAP) has a quality portfolio of prime income-producing commercial assets in key cities across Africa with a value of more than $500m.

It’s asset base is in four countries, largely consisting of prime shopping centres and office towers. In late August 2020, GIAP acquired a further significant minority acquisition of the Wings Office Complex, arguably one of the most desirable prime office towers in Nigeria, to achieve a controlling stake. This follows the successful acquisition of 100% of RMB Westport Real Estate Development Fund Limited, possibly the largest transaction concluded in sub-Saharan Africa’s real estate market to date. “We are excited to add quality yielding assets in select cities to our asset base at competitive prices, with the potential to offer strong growth prospects. The business enjoys significant momentum and we expect this to aid in the delivery of sustainable long-term investor returns,” says GIAP MD Thomas Reilly. The company is expected to support the development of capital markets for real estate as an asset class across the countries in which it operates, thereby contributing to the wide-ranging developmental impact the real estate sector can have in such markets.

Villa Charlotte at Anahita Mauritius
 

Investment strategy

bronwyn-corbett

Grit Real Estate Income Group continues to fly the flag for African real estate investment. Its strategy enables it to retain exposure to the growth potential of the continent’s emerging economies, while substantially de-risking it by leasing property to blue-chip multinational corporations and government embassies on US dollar- and euro-denominated leases. Grit’s model is focused on diversification of asset classes and jurisdictions, as well as counterparty strength. Jurisdictions are segmented into what the group calls investment-grade Africa, comprising Botswana, Mauritius and Morocco, and high-growth Africa, which covers the balance of its investment countries. This is further augmented by a targeted exposure limit of no more than 25% of portfolio value to each of its asset classes. “I have always said Africa is the last frontier of growth,”says Bronwyn Corbett,

Grit’s CEO. This is substantiated by the significant interest in Grit’s investment case and growth in its share register since it listed on the main market of the London Stock Exchange in July 2018. Grit delisted from the Johannesburg Stock Exchange in July this year to consolidate its capital market exposure. Most of the eligible shareholders opted to retain their shares and move their holdings to the London Stock Exchange or the Stock Exchange of Mauritius. The delisting was partially underwritten by Botswana Development Corporation and ZEP-Re (a regional African reinsurance company established by an agreement of the heads of state and governments of the Common Market for Eastern and Southern Africa [Comesa]), introducing new strong strategic shareholders to Grit.  

“Mauritius is really at the forefront of where South Africans are currently looking to invest in offshore property” Timo Geldenhuys, partner, Mauritius Sotheby’s International Realty

Major African cities ranked by price per square metre

Below are the highest prices of a prime 200m2-400m2 apartment in the best part of each city or town:

Cape Town: $5,600
Umhlanga: $2,800
Sandton, Johannesburg: $2,600
Nairobi: $1,800
Marrakesh: $1,700
Tangier: $1,700
Casablanca: $1,500
Luanda: $1,300
Accra: $1,200
Lagos: $1,100
Abidjan: $1,000
Alexandria: $1,000
Maputo: $900
Cairo: $900
Kampala: $800

Source: 2019 AfrAsia Bank Africa Wealth Report by New World Wealth; figures for December 2018 

Hospitality assets

Says Corbett: “Although our hospitality and retail assets were more severely impacted by various lockdown and travel restrictions, our light industrial, office and corporate accommodation assets performed exceptionally well.” Huge government support programmes in Mauritius have lent reassurance to the future viability of Grit’s hospitality assets, which comprise three Beachcomber hotels and a LUX* hotel. “If I wanted to sit on any hospitality investment in the world it would be Beachcomber and The Lux Collective because of the importance of these groups to the economy of Mauritius,” says Corbett. Concern about multinational office tenants has also been negligible. Ghana, Mozambique and Kenya closed for two weeks during the pandemic. This had no impact on Grit rentals and there were no requests for a reduction in office space. For the next chapter of its growth, Grit intends to grow its partnerships with embassies and financial services in Africa. The rest of the pipeline is mostly industrial sector-driven, with warehousing and distribution centres out of West and East Africa and Morocco. “Africa real estate is so exciting,” says Corbett. She warns, however, that asset devaluations as a result of the impact of Covid-19 will affect everyone across the real estate sector. She predicts a devaluation in Grit’s hospitality assets purely from the point of view of prudence while Mauritius remains closed for business. And although she expects some retraction in the retail class, she remains bullish that it will not be sizeable.

gerhard-zeelie

Gerhard Zeelie, divisional executive for Property Finance Africa at Nedbank CIB, says valuations of assets on the entire continent have dropped, along with expected cash flows, given the uncertain environment. “Although prices are lower, it is still too early to say whether assets offer good value. Our view is that a cautious approach should be taken,” he says. “The medium to longer-term impact on office space (working from home) and retail centres (online shopping) is yet to be understood. However, light industrial space offers significant opportunities given a rapidly developing logistics sector.” The Nedbank CIB Property Finance Africa team was established in 2018 with the intention of growing into Africa following its dominant commercial property finance position in SA. Since then the team has been involved in various landmark transactions on the continent and won the Best Real Estate Bank in Africa Award at the Africa Property Investment Summit in 2019.

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