Johannesburg - African Rainbow Capital (ARC), a company that was founded by prominent businessman Patrice Motsepe, has entered into a joint venture with the BuffetKLT Consortium that will focus on empowerment linked property transactions.
African Rainbow Capital Real Estate (ARC RE), the joint venture, has already closed its first investment.
In December it acquired the Setso Property Fund, comprising 13 retail and commercial assets in a R1.2 billion property portfolio across Gauteng and Cape Town, from listed Pivotal Property Fund and Redefine Properties.
ARC RE, a well-capitalised and majority black-owned property investment vehicle with property expertise encompassing land acquisition, development and asset management, believes it was well placed to partner with leading South African corporates and property funds on their underlying property portfolios.
It will be jointly headed by Mark Fox and Kentt Ellis, both of whom have a background in structured finance and property investment.
They will be supported by a key directorate representing both ARC and BuffetKLT.
Motsepe said their rationale for the joint venture with BuffetKLT was largely underpinned by its partnership investment ethos and track record.
“Jonathan Beare is one of the significant shareholders of BuffetKLT, and together with its partners, the consortium represents a substantial privately held property and private equity investor in South Africa,” he said.
KLT Holdings chief executive Bradley Kark said a key success factor in Buffet and KLT had been their partnership formula with entrepreneurs and businesses across all the property sub-sectors as well as in direct private equity.
“Over the years, the BuffetKLT group has been a growth catalyst to some of the leading residential, commercial and hospitality property companies in South Africa.
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“This is a similar role that ARC RE is looking to take forward in building a significant presence in the property landscape through a wide variety of platforms, partners, funds and direct investments, both in the traditional asset types as well as some of the niche sub-sectors,” he said.
Kark added that apart from focusing on traditional property sectors, ARC RE was considering areas such as student housing, education, agriculture, hospitality and general housing.
Leaseback
Fox said property ownership versus sale and leaseback for corporate South Africa had always been a hotly debated management board topic.
“In the current economic cycle, there is definitely a trend of corporates monetising their property portfolios, either to deleverage the balance sheet or to redeploy that capital back into the business to fund growth.
“I believe this will continue as shareholders press for higher growth in the challenging current environment,” he said.
Fox said that ARC RE offered an alternative off-take by which corporates could consider the sale of the asset to a black-owned fund and benefit not only from the capital realisation but also from the ownership and/or procurement recognition in terms of their broad-based black economic empowerment scorecard.
ARC, a subsidiary of Sanlam’s empowerment partner Ubuntu-Botho Investments, is jointly headed by former Sanlam Investments chief executive Johan van der Merwe and former Sanlam chief executive Johan van Zyl.
Since its launch 11 months ago, ARC has sought to build interests in banking, insurance distribution, asset management, property, private equity and health care administration and management.
ARC made its first investment in South Africa's residential property market in June last year when it acquired a 20percent stake in Val de Vie Investments located in the Paarl-Franschhoek Valley.