Amidst slowing down global economy, Private Equity (PE) investors are actively looking out for compelling opportunities in emerging world.
Despite varying degrees of political risks and a slowdown in commodity exports that drove the continent’s growth for many years, Africa continues to generate notable interest amongst both global and regional private equity firms. 2016 saw an overall value of deals worth USD $3.8 billion, a 40% year-on-year rise. A sizable amount of such investment fell within the real estate sector.
An environment of cheaper asset prices, devalued currencies, and higher returns (18-20%) on moderately sized investments has resulted in a steady flow of foreign capital into African property. The route to investment is generally via real estate focused funds that deploy capital across a range of markets to contain risk and maximize return value.
Listed below are 5 of the largest private equity deals in African real estate over the previous 5 years:
1. Actis Africa Real Estate Fund; Sub Saharan Capital Cities: The third installment of the Actis Africa Real Estate Fund (ARE3) has raised USD $500 million. This is significantly larger than the previous fund which deployed a total of USD $278 million. The proceeds of the funds will be primarily channelled toward development of offices, retail and industrial properties in a range of sub-Saharan capital cities.
2. Novare Africa Property Fund II; Nigeria: This South Africa based fund has raised USD $350 million. Over 20% of the fund has been deployed to develop the iconic Novare Lekki Mall in Lagos, spread across a sprawling area of 22,000 square meters. The fund is also involved in a string of other retail and mixed use development projects.
3. RMB Westport Real Estate Development; Nigeria, Ghana and Angola: A 50-50 joint venture (JV) between Rand Merchant Bank (RMB) and Westport Property Group, the entity first came into existence in 2008. In late 2012, it completed its first round of funding of USD $250 million. Thereafter, it completed a host of high-end retail and office projects in Nigeria, Ghana and Angola, including Ikeja Shopping Mall (Lagos), Circle Mall (Lagos), Accra Financial Centre (Accra), and many more. It is involved in the construction of 5 more shopping centers and an office complex in Nigeria, Angola and Ghana.
4. Momentum Global Investment; Mozambique and Kenya: The recently launched fund is targeting a value of USD $250 million. The tenure of the fund is 8 years with an expected return of approximately 20%. The fund will initially focus on buildout of shopping malls in Mozambique and Kenya. Favorable demographics, a surge in disposable income, and demand for modern shopping experiences are fueling growth of quality retail space in various corridors of the continent.
5. Momentum Africa Real Estate Fund; Nigeria, Ghana, Kenya, Mozambique and Mauritus: Launched in 2014, this is a JV between Momentum Global Investment Management and Eris Property Group. The fund officially closed in February 2017, garnering a total of USD 170 million. They now plan to execute with the development of high quality retail, office and warehouse projects in Nigeria, Ghana, Kenya, Mozambique and Mauritius.