National Daily

Foreigners eye Nigeria

•SA firm sets up new fund •To invest $1bn

By OLUTAYO OLUBI

THE downturn currently been witnessed in Europe may turn out to benefit Nigeria and some other countries in Africa as fund managers are busy channeling funds of their clients to invest in real estate in Africa. National Daily reliably gathered that with developed markets such as the UK and France now suffering a cyclical property decline, Capitalworks Investment Partners, the South African fund manager, is aiming to raise a fund of $1billion (£512million) to tap into forecast growth in African real estate on the back of the commodities boom. The fund, which is targeting a 25 per cent internal rate of return, is mainly aimed at UK and Middle Eastern investors but is open to all overseas investors. It will run alongside a South African partnership for South African investors. The first round of fundraising is expected to be closed by late summer Deloitte Real Estate Corporate Finance is providing fund advisory and placement services.

If the scheme works out, analysts said that it would be the first property development fund focused on sub-Saharan Africa.
Experts admitted that there would inevitably be an element of political risk but that growing stability and the untapped middles classes in the area made an attractive prospect. “There is a new middle class fuelled by the commodities boom with nowhere to spend their money. With mature markets now generally heading south, there is the chance to tap into this growth.” The fund has an equity target of $500m which will be matched by debt of $500million provided by two South African banks and will focus on a number of Sub-Saharan countries, including Mozambique, Zambia, Mauritius, Nigeria and Ghana, although will avoid countries where there is the chance of higher political risk.

It will be seeded with a portfolio of eight retail and office properties in South Africa and Zambia. The fund will be partly used to fund the future development pipeline of South African developer HBW Group, which is a 50 per cent joint venture partner with Capitalworks Investment Partners.? The founders of PIK, the London-listed Russian residential developer, are to sell $500m of shares in the company to help it acquire two large developments in the region.

The development is coming on the heels of the call by the Managing Director of the Federal Mortgage Bank of Nigeria, FMBN, Mr. Ahmed that the country's building industry needs N42trillion to provide 12million houses. Ahmed disclosed the figure in a report titled "the housing finances system in Nigeria" presented to the Presidential Committee on Affordable Houses chaired by Chuka Odom, Minister of State for Environment, Housing and Urban Development.

He explained that each of the houses is to be built at the cost N3.5 million adding that the nation's estimated housing deficit runs in the region of tens of millions. The United Nation's study in a recent study had put Nigeria's housing deficit at 17 million while the National Bureau of Statistics (NBS) put the housing requirement at between 12 and 14 million.

Giving an update on the activities of the securities issuance and market development department, Ahmed said in May 2007, the FMBN floated Series 1 of its N100 billion mortgage-backed bond amounting to the sum of N26 billion. The N26 billion bond was raised by FMBN in collaboration with Unity Bank, Wema Bank, Aso savings & Loans, Intercontinental bank, Union Homes plc, Zenith bank, First Generations Homes, Abbey Building Society and FBN Mortgages.

"The bond issuance is to refinance civil servants' acquisition of over 30,000 non essential FG-owned residential houses in Abuja for which primary mortgage loan originators have advanced mortgage loans. "The bond which is the first of its kind in Sub-Saharan Africa was floated at a single-digit market-determined rate. The bond enjoys the full guarantee of the Federal Government of Nigeria as well as a number of fiscal concessions which makes it a high quality and attractive investment instrument."

Ahmed said prior to the floatation of the bond, the bank had received underwriting commitment from institutional investors to the tune of N273.5 billion, indicating its high attraction. He said "banks and primary mortgage institutions had started using their own resources to originate mortgage loans under an agreed uniform underwriting standard between the bank and such institutions.

The series 1 was utilised to repurchase or refinance such mortgages create fresh liquidity for them." The FMBN boss explained that the bank is currently working on modalities for the issuance of second tranche of the bond to the tune of N25 billion.