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A GOOD TIME TO INVEST IN AFRICA A boom in affordable housing in Uganda and government incentives for the residential sector in Kenya present significant opportunities for both small and large investors looking to tap into offshore opportunities in the African property market, writes MOSES LUTALO, managing director of Broll Uganda
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eal estate investment trusts (REITs) offer smaller investors, who are typically more risk-averse, an ideal opportunity to build a more balanced and diversified portfolio. Listed investment vehicles provide a softer entry for smaller players so they can manage their risk and any potential liquidity issues by ensuring sufficient returns. The residential sector is an ideal proposition for large players – typically institutional investors with access to long-term funding. There is a huge demand for affordable housing in Uganda and Kenya. In Kenya, the government has introduced incentives for investors to encourage them to enter the space, and the returns are good. Institutional investors with major strong balance sheets and long-term capital will have the most success here, as demand continues to outstrip supply. Niche asset classes like data centres, healthcare facilities, cold rooms and logistics centres are also ripe for diversifying a portfolio. It depends on how the investor wants to structure the investment, the risk appetite and the desired return. This will determine if they play within the affordable housing space, opt
Moses Lutalo
for listed property investments or go for niche sectors like large industrial warehousing. There is no “one-size-fits-all” model for offshore investment. A medium-size private equity fund may have anything from $10- to $40-million to invest. These flexible investors can invest in listed funds, while taking on a $20-million affordable housing project at the same time, for example. Long-term capital requires a long-term outlook, with a typical return on investment window of three to ten years. These sorts of investors are willing to wait for the economic
cycle to turn in favour of real estate and then, crucially, exit at the best time. The Ugandan economy has seen an upsurge since the general election in January, with projects such as signing of the oil pipe line deal. Despite the impact of COVID-19 on the economy, growth is expected to be north of five to six per cent. When that happens, the real estate sector will pick up due to the increased gross domestic product per capita. As a result, investors will be able to take well informed positions on real estate as an asset class whether residential, commercial or retail. Also prompting offshore investment is the current shift from rental to home ownership. Any investors geared towards real estate that can offer a good gated community or a planned neighbourhood with a large masterplan of about 20 to 50 acres will definitely attract buyers in the medium- to long-term.
NICHE ASSET CLASSES LIKE DATA CENTRES, HEALTHCARE FACILITIES, COLD ROOMS AND LOGISTICS CENTRES ARE ALSO RIPE FOR DIVERSIFYING A PORTFOLIO.
OFFSHORE INVESTMENT GROWTH IN THE AFRICAN MARKET Investing in the African property sector makes business sense even during transitional uncertainty, writes LEVI LETSOKO
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frica’s growth potential is obvious for investors to see, believes GREA CEO Greg Pearson. Africa, a continent constantly recovering from the effects of global challenges such as recession and COVID-19, attracts investors and multinational companies to comb through its markets to capitalise on the upswing. “The African property sector is still in its infancy, with demand for A-grade commercial properties, especially bespoke developments such as logistics parks, data centres
and warehouses, outstripping supply,” he says. “There is a greater focus on sustainability and community involvement from international investors. Property developers, owners and investors are realising that their responsibilities extend beyond the fence line of the development,” says Pearson. “Technology will increasingly play a role in how property managers, investors, owners and consumers interact. There is a strong demand to develop buildings that are future-proof from a technology and lifestyle point of view.”
“THE AFRICAN PROPERTY SECTOR IS STILL IN ITS INFANCY, WITH DEMAND FOR A-GRADE COMMERCIAL PROPERTIES, ESPECIALLY BESPOKE DEVELOPMENTS SUCH AS LOGISTICS PARKS, DATA CENTRES AND WAREHOUSES, OUTSTRIPPING SUPPLY.” – GREG PEARSON, GREA COMMERCIAL PROPERTY
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