Real Estate Investor Magazine South Africa August 2013 | Page 55
OFFSHORE
Investing in Africa property does not come
cheap. Large institutional investors – the guys
who manage your pension and provident funds –
have already committed nearly US$ 100 million
to the fund and high net worth individuals who
participated in the first round of capital-raising
would have parted with lump sums of US$ 5
million or more.
From an institutional perspective the investment
case is strengthened by the fact that the fund is
structured to international standards and that
it provides the first acceptable platform for
investors to tap the growth potential of the subSaharan African real estate market with minimal
development risk.
You can participate in Africa’s property dream
by investing in an appropriate private equity fund
or, for example, by purchasing shares in the Africa
Core Real Estate Fund directly on the Mauritian
stock exchange. South African residents will
have to obtain the necessary SARS
approvals to take their funds offshore.
to deliver double-digit dollar-based yields to
investors. High returns often go hand in hand
with high risks and an investment in the fund
must be considered against the backdrop of the
unique challenges Africa property investors face.
The property rights issue is held up as one reason
why even high net worth individuals should
not attempt to “go it alone” when investing in
commercial property in Africa. “Property rights
is often considered as one of the biggest risks to
the portfolio we are building,” says Reilly. “We
address this risk by being very specific about the
due diligence elements surrounding both the
assets and regions we’ll consider investing in.”
T here a re some cou nt r ies t hat have
comparatively poor property and land rights track
records and Sanlam will not consider investing in
them. Others have land registries and title deed
offices that are arguably on par with those in
South Africa.
“The secret to success in Africa is to be
thorough with regard to your level of diligence
concerning land and property rights,” says
Reilly. “We spend a great deal of time getting
the necessary comfort that our investments are
safe – and further mitigate risk by applying ‘core
fund’ principles of only investing in established
properties rather than new developments.” This
ensures an ‘edge’ over so-called ‘greenfield’
developers in that most issues have typically
been resolved by the time the Africa Core Real
Estate Fund makes its purchase.
“The Africa Core Real Estate Fund compares
favourably with the private equity development
funds on a risk return basis,” concludes Reilly.
“We are very confident that we will hit and
hopefully even exceed our return targets.”
RESOURCES
Sanlam
Sanlam decided to list the fund in
Mauritius because many of the fund
targeted assets and leases concluded
on these assets are denominated
in US dollars. It also expects a
large percentage of future inward
investment to the fund to come
from international investors. “South
Africa’s exchange control regulations
mean that it is impossible to list a
dollar denominated fund locally,” says
Thomas Reilly, CEO of the Fund’s
advisor.
Retail investors who purchase shares
in the first pan sub-Saharan Africa
real estate fund must do so with due
consideration for liquidity constraints.
Liquidity is a measure of the supply
and demand for a listed entity or, in
layperson’s terms, the ability to find a
buyer for your shares when you wish to
sell your investment. “At the mom [???H\?HH ?[]]?[ H ?X[\?[???]\?H???\]ZY] H ??[[\ ??H[???H ?[?X??YHH?X\?X?H? [????H^H[??\??8?'H ?^\??Z[ K???[?[H ?[X[?Y?H H?[? ?]???]?[ ???X\?[??[?Y?]?[ ??[???YH\? ?X?][??[??\??˜?Z[XY????B??]Y?\? ? L??H?X[\?]H[??\????L??