The Growthpoint Investec African Properties (GIAP) fund, a joint venture between Investec Asset Management and Growthpoint Properties, plans to invest around $500 million (R7.2 billion) this year in shopping malls and office buildings in Nigeria, Kenya, Zambia and Ghana, according to the partners.
The fund raised $212 million (R3 billion) by a first close a year ago, including $50 million (R728.9 million) from Growthpoint and $40 million (R583 million) from the International Finance Corporation, part of the World Bank. It is negotiating with lenders to raise more cash through debt, fund MD Thomas Reilly said by phone from London, where he is based.
As the commodity crisis has receded in many African economies and macroeconomic indicators such as inflation and GDP have stabilised, the fund sees an opportunity to improve market liquidity and become an aggregator of assets that may form their own class of investments, says Reilly. The fund started its search for assets slowly, but now believes the investing climate has improved, he adds.
“We’re actively engaging in certain transactions. There is some excitement on the rise in terms of getting something done.”
The focus will be on so-called gateway cities such as Lagos in Nigera, Accra in Ghana, Lusaka in Zambia, Nairobi in Kenya and perhaps also Abuja in Nigera, places where some degree of scale can be achieved and where development is relevant as opposed to a town where it would be the only large development, says Reilly.
Also important are locations showing good growth from geopolitical and macroeconomic points of view, those hosting legal protections for shareholders and ones that are “generally decent places to do business”.
Buying in Nairobi will be difficult because the market is somewhat saturated with retail and office space that is a little overpriced vis-à-vis the risks and gross returns of 15% to 18% the fund is targeting. A large part of returns will come in the form of distributable income, making the fund a sort of private real estate investment trust, says Reilly.
Growthpoint, the largest real estate investment trust (Reit) with a primary listing on the Johannesburg Stock Exchange, branched into the fund management business to add revenue as it copes with a struggling domestic real estate market of rising yields and lower property valuations.
The Reit is also increasing its assets in Europe and Australia as it seeks to downsize its South African holdings, according to Growthpoint Properties SA CEO Estienne de Klerk.
“The idea is to build bespoke funds in our fund management business – which includes the healthcare fund we’ve got as well now – that you can leverage off third-party capital to build a decent fee-generating business,” says De Klerk, adding that Growthpoint plans to maintain a 20% stake in both the GIAP and healthcare funds.
Investors in the healthcare fund, which raised about R700 million from institutional investors, include “some very well-known, prominent pension funds as well as some significant private investors,” says De Klerk, declining to name them because of non-disclosure agreements.
The healthcare fund plans to buy a half share of a hospital in Somerset West outside of Cape Town and take on Pretoria’s new head and neck hospital being developed by Growthpoint. According to De Klerk, the fund already holds R2.6 billion in assets comprising two hospital in KwaZulu-Natal and two in Cape Town, and will also target so-called second tier or emerging healthcare providers aside from the big three of Netcare, Life Healthcare and Mediclinic.
“There’s certainly a big drive from some of the regulators, such as the Competition Commission, to see whether they can diversify the healthcare environment in terms of the providers,” he says.