FINANCE

A HEALTHY INVESTMENT OPTION

New-look medical real estate developments offer investors a profi table alternative, writes

SAMANTHA BARNES

Investors in medical real estate developments are looking at new ways to incorporate healthcare facilities into communities and reap the bene ts of the sector’s stability and growth that is driven by an increasingly high demand for medical care.

While the need for expert medical care is a given, investors in hospitals, day facilities, specialist care and frail care centres are adopting a fresh approach.

“A shared vision is extremely important to our company’s success,” says Dirk Engelbrecht, CEO of Safari Investments, “and a clear and proper strategy to ensure that assets perform well under economic pressure.”

These elements are a lot to deliver on, but achievable. The Soweto Day Hospital project is the only medical facility in Safari’s portfolio of nine commercial properties. Advanced Health handled the concept and design of the hospital with Safari Investments responsible for acquisition.

“With part of our strategy involving property investment in low LSM peri-urban areas, we believe medical facilities can, ultimately, be a value-added service,” says Engelbrecht. “Our market relies heavily on public transport.

“A one-stop destination for service offerings, such as shopping, of ces, medical care facilities, health clubs and libraries, signi cantly strengthens our nodes and supports our communities’ needs.

“Soweto Day Hospital provides stateof-the-art medical facilities, including a specialised opthamology facility, in a previously disadvantaged area and contributes to the provision of advanced healthcare to the community,” explains Engelbrecht.

De Waldorf Lifestyle and Retirement Estate in Stellenbosch is the brainchild of the HDK Property Group. The project is breaking the mould in terms of integrating community with medical care and differentiates De Waldorf from other lifestyle estates on the market in the area.

“By including medical facilities, we ensure that once residents move to De Waldorf Lifestyle Estate they never have to move again,” says Pieter Horn, managing director of HDK Property Group.

“Medical services – for a wide array of needs – are not restricted to the medical centre itself and can be provided in residents’ homes.”

Once complete, De Waldorf will include a frail care centre, memory care clinic, assisted living apartments and assisted living care packages, all managed by medical services provider, Medwell SA.

Assisted living facilities are planned for Durbanville, Strand, Paarl and Wellington. “COVID-19 has shown us that health, safety and medical care is of the utmost importance,” explains Horn.

Soweto Day Hospital

INVESTING IN SUB-SAHARAN AFRICA

Sub-Saharan Africa continues to be a viable proposition for both large and small investors. By SAMANTHA BARNES

Momentum Africa Real Estate Fund (MAREF) has multiple pipeline projects across its targeted countries while Emerging Africa Infrastructure Fund (EAIF) mobilises private capital to support economic development in Africa.

MAREF describes itself as a conservative investor. “We aim to mitigate a signi cant amount of risk before investing,” says David Lashbrook, director and fund manager at MAREF.

“MAREF can only present an investment for approval when we have legally binding lease commitments for at least 60 per cent of a development. Additionally, all developments are completed by our sister company and dedicated developer, Eris Properties, which has delivered more than 120 developments in Africa over 30 years.”

Target countries are Cote d’ Ivoire, Ghana, Kenya, Nigeria, Mozambique, Rwanda, Uganda, Tanzania and Mauritius. MAREF will also consider projects with strong tenant agreements in other countries.

“We invest in and develop Grade A commercial real estate,” says Lashbrook, “including of ces, logistics, light industrial, healthcare and student accommodation in sub-Saharan Africa, excluding South Africa.”

Flagship properties include Omicane’s head of ce in the Mon Tresor Business Gateway. Omnicane produces 40 per cent of Mauritius’s sugar cane and one-third of the island’s power. Mon Tresor Business Gateway was Winner of the Best Green Building in Africa at the 2019 API Awards.

FUNDING INFRASTRUCTURE FOR ECONOMIC GROWTH

“As a debt fund supporting private sector infrastructure projects we are what is known as a ‘patient lender’,” says Martijn Kroos, director at Ninety One, which manages the EAIF.

EAIF has an established presence in 18 African countries. “Our primary role is to support economic development in Africa by mobilising private sector capital to fund infrastructure. New infrastructure usually lifts economic activity and over time should help to improve asset values in property,” explains Kroos.

The fund’s projects are diverse and include an affordable housing project in Kenya. “Our rst property transaction was in Kenya in 2019. We backed a bond note issue to nance the building of green, safe, and affordable accommodation for 5 000 students,” Kroos says.

EAIF has supported over 20 renewable energy projects and currently has clients that are building a hydro project between Uganda and Tanzania, a solar plant in Mozambique, and another hydro project in Cameroon.

“As a well-capitalised public-private partnership, EAIF has a two-decade track record of success,” says Kroos. “The loan book is currently over $1-billion, so we are a signi cant presence in African infrastructure project nance.”

Agahoza Shalom Youth Village, Rwanda

DID YOU KNOW?

The 8.5MW solar power plant at Agahozo Shalom Youth Village in Rwanda was developed by Gigawatt Global and was EAIF’s fi rst solar project. Completed in 2015, it was fi nanced, built and operational in just over a year and supplies the equivalent of 15 000 homes.

Sainsbury in Swansea, UK is among 14 properties held by the UK Fund of Investec Property Fund; the supermarket portfolio has been a strong performer, having achieved several lease extensions with Sainsbury.

A WORLD OF OPPORTUNITY

Offshore property is a winner reports SAMANTHA BARNES, with some properties performing better than expected

Investors who have included offshore property in their investment portfolios believe that this is a solid asset class offering growth and strong performance. Tower Property Fund identifi ed Croatia as the fi rst country in its offshore property investment strategy. The fund fi rst invested there in 2015 and that investment has exceeded expectations. “Our partners, VMD, were the most important decision when investing in Croatia,” says Marc Edwards, CEO of the fund. “Without strong, honest partners, we would never have invested. They are a large reason we have done well overseas.”

Tower Property Fund has purchased fi ve additional properties since 2015 – four retail and one industrial – and recently sold two non-core retail properties. “We would like to increase our offshore investments, particularly convenience retail assets,” Edwards confi rmed.

Outside South Africa, Investec Property Fund has investments in the UK and Europe with a Pan-European logistics portfolio in France, Germany, Italy and Poland. Gross asset value is around Eur1bn (R19.5bn).

FINDING NEW WAYS TO MANAGE INVESTMENTS

One of South Africa’s real estate investment trusts (REIT), Rede ne Properties, has a portfolio of revenue-generating retail, of ce and industrial assets in South Africa and Poland. Geographic diversi cation has been a key strength in managing its investments during the economic challenges resulting from a global pandemic.

Andrew Konig, CEO of Rede ne Properties, explains: “An offshore asset base valued at R15.6-billion and diversi ed local property assets valued at R65.4-billion provide Rede ne with geographic diversi cation.”

With COVID-19 prompting a changed approach, Konig says: “Our top priority is to address the group’s loan-to-value (LTV) ratio. Our LTV improvement initiatives – which included being the rst SA REIT to implement a dividend payout policy and exiting non-core investments in the UK and Australia – resulted

Alice Lane in Sandton is one of Redefi ne’s well-located assets occupied by a high-quality tenant.

in us concluding property disposals in 2020 totalling R13.4-billion.

“On the operational front, we have adapted to exible working policies for our people, embedded our company values and introduced a stronger focus on tenant experience management.”

Konig acknowledges the role of Environmental, Social, and Corporate Investec has a 65 per cent equity stake.

“Focusing on Europe and comprising almost 50 per cent of balance sheet, fundamentals are very strong,” says Andrew Wooler, joint CEO, Investec Property Fund. “This is underpinned by strong demand drivers (like online retail and shifting supply chains) and supply factors; limited new stock – most new developments are pre-let – and land and planning constraints.

“Vacancy rates are low and high demand is driving rental growth. Investment money wanting to enter the sector is driving valuations up. The fund’s European strategy is valueadd, with assets managed by UREP (owned by Investec Property), spearheaded by Paul Rodger, who has over 20 years experience across European logistics and light industrial.”

Hoppegarten Logistics Park in Berlin is a key asset, comprising over 80 000m2 with plans to develop a 20 000m2 facility. The United Kingdom forms a small part of the portfolio. Given the fairly large exposure to supermarket assets, risk has been limited. Light industrials have a wide tenant base, mitigating risk.

Investec Property Fund has stuck to developed markets where it has a deep understanding of market drivers, achieving success over time.

Governance (ESG) in measuring the sustainability and societal impact of investments. “COVID-19 has accelerated the execution of our strategic priorities. We have worked very hard at deepening engagement with intensi ed collaboration, and heightened our focus on ESG.”

Rede ne was the rst local REIT signatory to the UN global climate change compact.

Rede ne will continue to leverage opportunities to expand through the development of well-located assets occupied by high-quality tenants.

“Over the next ve to seven years, we will be looking to increase our Polish industrial assets to up to two million m2 in size and target EUR1-billion in gross asset value,” Konig states. “Poland is a prime location for the logistics sector due to its position in central Europe. It is a liquid real estate market with high investor appeal and hard-currency-free Andrew Konig cash ow,” he says.