African property fund to raise $85m as retailers eye land

by | May 16, 2013 9:50 am

HBW Group Pty Ltd., a South African real-estate developer, plans to raise $85 million by selling shares in an African property fund as retailers look for land to expand in the world’s second-fastest growing region.

African Land Investments Limited will list on the Johannesburg Stock Exchange in July and on the bourse in Lusaka, Zambia, Tony Vassilopoulos, its CEO, said in an interview on April 23.

The fund will invest in property in nations like Ghana, Kenya, Zambia and Mozambique, he said, saying as South Africa’s commercial property market becomes saturated, retailers are looking to other countries on the continent for expansion.

Sub-Saharan Africa is also attracting European retailers struggling in their home markets, he said.

Growth in the region is forecast at 5.6 percent this year, faster than 3.3 percent globally, according to the International Monetary Fund. Only developing Asia is projected to have a higher rate, at 7.1 percent.

Six of the 10 fastest-growing countries in the world over the past decade were African, according to Johannesburg-based Rand Merchant Bank.

The FirstRand Ltd., unit in October raised $350 million to develop real estate in West Africa. Liberty Holdings Ltd., a Johannesburg-based insurer, plans a $150 million property-development fund for countries including Nigeria and Kenya.

“A number of funds are putting money into Africa,” Ndibu Motaung, head of South Africa research at real-estate manager Jones Lang Lasalle, said. “That is starting to gain momentum.”

African Land Investments will have an initial distribution yield of 8.5 percent annually, Vassilopoulos said further.

Growth Point Properties Ltd., South Africa’s largest real-estate company, has a dividend yield of 5.1 percent. Johannesburg-based Java Capital is managing the sale, Vassilopoulos said, noting retailers including closely held clothes seller Top Shop are “starting to look seriously” at African expansion.

European companies “are certainly also going to become a major influence in the next five to 10 years on the continent,” he said. The African property market will become more competitive in the next decade, Vassilopoulos added.

While countries including Kenya and Zambia have “huge potential,” the risks there are “much greater than South Africa,” Evan Robins, senior portfolio manager at Macro Solutions, a unit of Old Mutual plc, said. “You’ve got commodities, currency, political risk, and another is property rights. It’s a steep learning curve.”

Zambia is Africa’s biggest copper producer and Ghana relies on gold, oil and cocoa for foreign currency. Mozambique has offshore natural-gas reserves and Kenya is the world’s largest exporter of black tea. HBW, which owns the Bedford Centre Mall in Johannesburg, will sell its Manda Hill shopping centre in Lusaka to African Land after an independent assessment, Vassilopoulos said.

HBW will spend $125 million on a 38,000 square-meter (409,000 square-feet) mall in the Zambian Copperbelt province town of Kitwe, set to open by April 2015, he said. That will also be bought by African Land, he said.