Africa Property Fund to Raise $85 Million for Retail

HBW Group Pty Ltd., a South African real-estate developer, plans to raise $85 million by selling shares in an African property fund as retailers look for land to expand in the world’s second fastest-growing region.

African Land Investments Ltd. will list on the Johannesburg Stock Exchange in July and on the bourse in Lusaka, Zambia’s capital, Chief Executive Officer Tony Vassilopoulos said in an interview on April 23. The fund will invest in property in nations including Ghana, Kenya, Zambia and Mozambique, he said.

As South Africa’s commercial property market becomes saturated, retailers are looking to other countries on the continent for expansion, Vassilopoulos said. Sub-Saharan Africa is also attracting European retailers struggling in their home markets, he said. Growth in the region is forecast at 5.6 percent this year, faster than 3.3 percent globally, according to the International Monetary Fund. Only developing Asia is projected to have a higher rate, at 7.1 percent.

Six of the 10 fastest-growing countries in the world over the past decade were African, according to Johannesburg-based Rand Merchant Bank. The FirstRand Ltd. unit completed a $250 million fund raising in August to develop real estate in West Africa. Liberty Holdings Ltd., a Johannesburg-based insurer, plans a $150 million property-development fund for countries including Nigeria and Kenya.

Competitive Market

“A number of funds are putting money into Africa,” Ndibu Motaung, head of South Africa research at real-estate manager Jones Lang Lasalle, said by phone from Johannesburg. “That is starting to gain momentum.”

African Land Investments will have an initial distribution yield of 8.5 percent annually, Vassilopoulos said. Growthpoint Properties Ltd., South Africa’s largest real-estate company, has a dividend yield of 5.1 percent.

The FTSE/JSE South Africa Listed Property Index has gained 33 percent over the past 12 months, beating the bourse’s all-share index, which advanced 15 percent over the same period.

The JSE declined to comment on the listing in an e-mail today. Beatrice Nkanza, CEO of the Lusaka Stock Exchange, said by phone she’s unaware of the planned listing and that they usually find out when an application takes place 90 days to six months before the initial public offering. Java Capital, based in Johannesburg, is managing the sale, Vassilopoulos said.

Greater Risks

Retailers including closely held clothes seller Top Shop are “starting to look seriously” at African expansion, Vassilopoulos said. European companies “are certainly also going to become a major influence in the next five to 10 years on the continent,” he said.

The African property market will become more competitive in the next decade, Vassilopoulos said.

While countries including Kenya and Zambia have “huge potential,” the risks there are “much greater than South Africa,” Evan Robins, senior portfolio manager at Macro Solutions, a unit of Old Mutual Plc, said by phone from Cape Town. “You’ve got commodities, currency, political risk, and another is property rights. It’s a steep learning curve.”

Zambia is Africa’s biggest copper producer and Ghana relies on gold, oil and cocoa for foreign currency. Mozambique has offshore natural-gas reserves and Kenya is the world’s largest exporter of black tea.

HBW, which owns the Bedford Centre mall in Johannesburg, will sell its Manda Hill shopping center in Lusaka to African Land after an independent assessment, Vassilopoulos said. HBW will spend $125 million on a 38,000 square-meter (409,000 square-foot) mall in the Zambian Copperbelt province town of Kitwe, set to open by April 2015, he said. That will also be bought by African Land, he said.