Investors advised to take long-term view on African Property Stocks

Stanlib's head of listed property funds, Keillen Ndlovu says that the market capitalisation for the listed property sector in sub-Saharan Africa, excluding South Africa, is about $827 million.

Africa Property News.com has learned that growth seekers should look at property stocks with a five year time horizon in mind according to Stanlib's head of listed property funds, Keillen Ndlovu.

Ndlovu told Africa Property News this week that he launched an African property fund for investors which falls under the Stanlib banner and has exposure for retail investors to African properties.

Ndlovu's fund is gaining traction because realised various companies are buying or developing properties in Africa. Many of these are South African funds. His fund can gain exposure to these.

Delta International is the first pan African listed property fund. It sprung out of Delta Property Fund and listed in July last year. The fund is focussed on owning office properties in Mozambique to benefit from the natural resources boom there and to own shopping centres in Morocco where it can benefit from a strong consumer.

Resilient Property Income Fund, one of the larger property funds in SA has recently launched Resilient Africa. This African arm has a deal with Shoprite, one of the largest South African retailer. Resilient Africa is developing assets in Nigeria.

Hyprop Investments, the large premium shopping mall owner in SA also owns malls elsewhere across the continent.

Under its subsidiary Hyprop Mauritius the group opened West Hills Mall in Accra, Ghana, last year. It also owns Accra Mall in Accra and Manda Hill in Lusaka, Zambia.

Rockcastle Global Real Estate is also pursuing property assets in Africa.

Clearly, companies have realised that South Africa is still, despite its strong performing listed property market, only one medium sized country in among a massive continent.

Some property types like residential property are only getting attention from listed companies in SA. Others like retail properties have become saturated. There is a diminishing availability of retail assets in SA. This is while Africa is a fast-growing continent with a large middle class.

Ndlovu's fund is STANLIB Africa Property Fund. The fund was launched in January 2012. It is the only fund in the world that focuses on African listed property for indirect investors.

The fund has delivered good returns since its launch. These will be better to measure when an Africa property benchmark or index is created.

Ndlovu uses the index - US dollar Libor +3 interest rate simply as a reference for the The fund is now R337m in size.

"It received net inflows of R224m in 2014 and we are seeing the interest continue so far in 2015," he says.

"The minimum investment is currently R1m. We are looking to open it to a wider retail market over time," says Ndlovu.

He says that the market capitalisation for the listed property sector in sub-Saharan Africa, excluding South Africa, is about US $827 million (ZAR R10bn). For comparison purposes, South Africa’s listed property market capitalisation is about US $33 billion (ZAR R400bn).

While South African property groups are showing an interest in various African countries and various African companies are listing funds in their own countries, Ndlovu would like to see others, like Kenya, feature more.

 "We hope to see new listings in Kenya with the progress in the REIT - Real Estate Imvestment Trust - legislation.  In South Africa, Resilient mentioned that they are looking to list Resilient Africa. Pivotal is also considering listing an Africa property fund. Existing African companies may issue equity as they look to grow over time. There are a number of properties in the private equity space that could fall into the listed space over the next three to five years," he says.

The interest in Africa comes not only from property companies, but also spreads to local banks, local construction companies,  property management companies, architects and local retailers.

He adds that Africa is growing at a great pace, despite short-term challenges in Nigeria.

"Consistent growth over time creates wealth, a rising middle class with aspirations and who require better shopping facilities, nicer eperiences and product offerings," Ndlovu says.

"We have seen that in South Africa, where 20 years ago there were no decent shopping facilities in the townships. But now you find good malls offering similar quality, offering and experience as the ones in the suburbs.  This takes time but the market evolves with a rising middle class," he says.

However, there are challenges to the African property growth story. These include political insecurity, currency risk, execution, transfer delays, a lack of data in some markets when trying to build and redevelop and land ownership issues.

"Nevertheless, the fundamentals are there for African property growth But the economic growth, fundamentals and demographics strongly support a case for  pan-African property," Ndlovu concluded.