African real estate is set to create new ways to attract capital

This year’s Africa Property Investment (API) Summit & Expo is set to put more emphasis on African real estate market markets’ ability to attract capital from different investor types.

The two day expo will take place at the Sandton Convention Centre on 24 and 25 August 2017. Absa, API Summit & Expo sponsor, believes there have indeed been notable developments in the last ten-year period.

Absa’s Klaus-Dieter Kaempfer, Head of Commercial Property Finance, and Africa said: “This is largely linked to the improvement in the macroeconomic environment within a number of African countries, many of which are still largely commodities dependent.”

“One important development within African real estate markets over the past decade has been the adoption, in some markets, of Real Estate Investment Trust (REIT) structures as vehicles to enable the participation of diverse investor types.”

Boasting a young and growing consumer base, urbanisation in Africa is also expected to drive over 50% of Africans into cities by 2050, compared to 40% today.

Bronwyn Corbett, CEO of Grit Real Estate Income Group said: “To many investors, this makes Africa the last frontier for growth.Listed property has always been regarded as a relatively low-risk investment. Given the see-through and longer-term predictability of earnings, the asset class provides investors with a much more stable earnings profile than other equity classes and its exposure to interest rates makes listed property a proxy for bonds,” she said.

While there are currently only four countries with REIT promulgation in Africa, this is expected to change. The JSE was the first to introduce real estate investment trusts (SA REITs) on the continent.  “Starting from a R5 billion market capitalisation in 1998, the combined market capitalisation of listed property companies in South Africa today exceeds R500 billion.”

Thomas Mundy from JLL, the official content sponsor of the API Summit and Expo, believes that while sub-Saharan markets may still be opaque by global standards, this real estate in the region is slowly becoming more transparent.

“According to the JLL Global Real Estate Transparency Index, three of the region’s markets were among the global top 10 improvers in the world last year in terms of real estate transparency.  Botswana was in fact among the top five improvers globally with advances in the ‘Market Fundamentals’, ‘Governance of Listed Vehicles’ and ‘Regulatory and Legal’ sub-indices. Meanwhile, Zambia has entered the ‘Semi-Transparent’ category for the first time, while Ethiopia is also among the top 10 global improvers albeit from a very low base,” he said.

“In our view, as transparency and regulatory oversight improve, we do expect to see a deeper pool of domestic liquidity in sub-Saharan Africa. We remain very optimistic about the future of the REIT industry in this region to provide a conduit for the necessary capital.”

Kfir Rusin, Managing Director for API Events said : “Understanding and navigating the many opportunities and avenues for capital investment in real estate on the African continent is an important step in building future African cities. The property industry on the continent is growing and evolving, and the two-day summit will look at Africa’s biggest property development and investment successes whilst considering solutions to the challenges still plaguing the continent. It is through these discussions that we are able to unlock Africa’s true property potential.”