Stanlib?s trump for Africa is engineering its own exit

Roberto Ferreira, fund manager of the Stanlib Africa Direct Property Development Fund. Picture: STANLIB

STANLIB?s pilot African property development fund that launched in May has expanded its core focus from Nigeria and Kenya to also include Ghana and Uganda ? as the asset manager gears up for its investments into direct African real estate.

The Stanlib group, which is the product of a merger between Standard Bank Asset Management and Liberty Asset Management, has more than R500bn worth of assets under management and is increasingly offering more African exposure to institutional investors.

The asset manager?s direct African property development fund has $50m seed capital from Liberty and is targeting a capital raising of $100m from predominantly European and Middle Eastern investors, while it will also raise debt finance from commercial banks and development finance institutions.

The fund is targeting between six and eight developments, and can exit its developments between years four and eight. Roberto Ferreira, fund manager of the Stanlib Africa Direct Property Development Fund, says one of the most compelling features of the fund is its ability to "engineer its own exit", given that most other development funds on the continent are highly illiquid.

Stanlib is focusing on developing domestic real estate investment trusts (Reits) in the markets it is targeting, and is playing an instrumental role in formalising pension money in those markets, he says. It also intends to develop an income fund. Mr Ferreira says the group has the ability to create development funds (such as the Stanlib Africa Direct Property Development Fund ) and sell the stock "into either income funds to be created by Stanlib and Liberty or in local capital market instruments such as Reits".

"The biggest challenge for any private equity investor in Africa is your exit opportunities and how you identify them. Our strategy is to create these income funds and domestic products and present our investors with these opportunities." He says that while property assets are an obvious target for pension funds in countries such as Nigeria, "there are so few quality assets of collective investment schemes that they can actually target, so we think that?s an opportunity for us".

Stanlib intends to identify and commit to the portfolio within the first two years so that it can begin exiting from years four, five or six, he says. The fund will have a minimum of 50% retail exposure but is targeting 70%-80% retail. The balance would be office and hospitality exposure. Mr Ferreira says while the fund would welcome local retailers in the target countries, "at the end of the day we are following South African retailers to make the investment case work".

The four targeted countries are high-growth countries that remain underserviced from both a retail and office perspective. Furthermore, Stanlib can leverage off the skills and know-how that Standard Bank and Liberty already have in place in those countries.

The assets being developed, mostly in metropolitans and capital cities, "would theoretically fit into an income fund ? so Stanlib would seek to extend its economics in this by managing that as well, and also managing the domestic capital market instruments like Reits". Stanlib would also look to create a much larger African property development fund at a later stage, Mr Ferreira says.

Stanlib?s main competitors include the likes of Actis, RMB Westport and Novare. In the listed property space, Resilient Property Income Fund and Hyprop Investments are growing their African exposure ? with Hyprop co-investing in the Atterbury Group?s Atterbury Africa property investment company. P roperty developer Billion Group, which is also the asset manager of JSE-listed Rebosis Property Fund, is targeting retail developments on the rest of the continent, which may be listed separately in the future.

Generally, JSE-listed firms have avoided African real estate, choosing to focus more on Europe and Australia.

Source: http://www.bdlive.co.za/business/property/2013/07/26/stanlibs-trump-for-africa-is-engineering-its-own-exit

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