By Sinead Cruise and Daryl Loo
LONDON (Reuters) - Africa is brimming with undiscovered real estate gems and has begun to intercept opportunistic capital earmarked for China, Brazil and India, a partner in one of Europe's oldest African real estate advisers said.
Peter Welborn, a partner of private equity real estate fund manager Rutley Capital Partners, said on Tuesday that the African continent presented real estate investment opportunities just as good, if not better, than those seen in Asia or Latin America.
"In Nigeria, for example, you have increasing political stability ... an environment based on English law for land ownership, and also oil and gas which produces the hard currency that enables financing of infrastructure," Welborn told the Reuters Global Real Estate Summit in London.
"Basically everything that investors are looking for to access opportunities is there," said Welborn, who is also head of Africa for global property services firm Knight Frank, Rutley's parent.
Once dubbed the final frontier for real estate investors, Africa has been steadily blossoming.
Welborn, who started on the continent in 1979 helping Western energy firms and governments with their property needs in the Nigerian city of Lagos, said many investors see Africa as a viable emerging market alternative to the Middle East or China.
Other attractive markets include Libya, where investors are looking to build service offices and apartments, and in Tanzania and Mozambique, where tourism-related properties such as hotels and resorts are being developed, he said.
There are more inquiries from U.S. hedge funds, sovereign wealth funds from China and the Middle East, as well as endowment funds of U.S. universities, seeking to diversify from the more traditional Western real estate markets, Welborn said.
"The one thing about Africa that interests many American investors is that it does not correlate (with the U.S. economy). It's the perfect diversification tool," he said, adding that funds are seeking internal rates of return of about 20 percent.
One exit strategy that investors are considering for their real estate investments in Africa is to have portfolios of assets listed on a local stock exchange, with the shares sold to growing local pension funds in countries such as Malawi and Botswana.
CHANGING ATTITUDES
Rising oil prices, a telecommunications revolution and greater economic stability shored up by the emergence of an aspiring middle class, is transforming investor attitudes toward the continent, he said.
The relationship between rental income yield and price remains intact in Africa, unlike in Europe, where highly-leveraged investors paid record-breaking prices for smaller and smaller sums of annual rental income, setting the foundations for a buyer-seller impasse on values that has kept Europe's market dormant for nearly two years.
By contrast, well-advised buyers can regularly achieve double-digit rental income yields for prime assets in the capital cities of some of Africa's most developed countries, Welborn said.
Knight Frank, which has been operating on the continent since 1965, has 19 offices in nine African countries and directly employs more than 380 people and a further 600 indirectly. Continued...
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