Africa property not for the Faint-Hearted but for the Talented

Speakers which included the likes of Bronwyn Corbett and Ian Anderson at the South African Property Owners Assocaition (Sapoa) Convention suggested that property markets in the rest of Africa continent were full of opportunities.

African countries offer exciting returns for property investors if they do their homework and study each market.

South African real estate investment trusts are looking for strong returns offshore and some opportunities may lie in Africa.

A panel discussion at the South African Property Owners Assocaition (Sapoa) Convention said that markets outside of South Africa were full of opportunities. The conference was recently held at Sandton Convention Centre in Johannesburg.

Ian Anderson, the chief investment officer at Grindrod Asset Management said more and more companies were looking for opportunities in Africa, outside of SA, and abroad.

The experts said investors need to treat African property markets with respect. Property is a long term game in America, Europe and also in the rest of Africa.

Addressing the conference, Bronwyn Corbett, the head of Mara Delta, which is the only listed pan African fund, admits interest is growing in African real estate but says it is a challenging continent to invest in.

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“Every African country is different. Each is a challenge and it wouldn’t be worth doing this if it wasn’t a challenge,” she says.

Mara Delta had some early teething problems but issues have started to improve.

“I appreciate that investors want us to make good deals. We are starting to find things but we have to learn as we go along. Many South African investors don’t actually know what happens on the ground in Africa and may expect things to happen more quickly,” Corbett said.

Mara Delta Africa owns a US$430m (about R6.3bn) property portfolio of office, retail, corporate accommodation and light industrial properties located in Morocco, Mozambique, Zambia, Mauritius, Kenya and Nigeria.

“Real estate, as we have seen in SA, will sustain in difficult times as long as you have quality assets and you purchase assets for the right price. We see the growth in the continent and don’t see it in SA,” she says.

There are risks in Africa which putting some investors off nonetheless. These are things which include laws and regulations changing too quickly in some jurisdictions in Africa.

There can also be limited debt facilities and sometimes property companies may have to wait to convert African currencies into US dollars or may struggle to get their money out of some African countries.

Corbett has said many South African-listed property funds also felt that Africa was too risky a market. Some fund managers have also said many African property assets are too expensive compared with other markets such as those in Asia and parts of central and Eastern Europe.

Even well developed markets may be better bets in some investors’ eyes.

"Our research indicates that prices per square metre have been significantly higher (in Africa) than similar investments in developed markets such as the US, Canada and Spain," Alternative Real Estate Capital Management’s Garreth Elston says.

There is also the possibility that Mara Delta will separately list its Moroccan assets. The company is in talks with middle eastern investors. These would be shopping centre focused assets and a real estate investment trust (Reit).

One can expect some South African and other foreign private equity money to try its hand in Africa. Growthpoint Properties, the biggest South African based Reit is slowly looking for assets on the African continent, working with an investment team from Investec.

Africa remains a challenge and it takes time to build property portfolios there but there is value on the continent. Given the uncertainty caused by Brexit, where the UK voted to leave the European Union, developing and frontier markets may regain some attention and investment funds.