Q&A: STANLIB DIRECT PROPERTY INVESTMENTS - JSE MAGAZINE

Q&A: STANLIB DIRECT PROPERTY INVESTMENTS

Amelia Beattie, head of Stanlib Direct Property Investments, on mixed-use developments, risk appetite in Africa and the importance of understanding what customers want

Q&A: STANLIB DIRECT PROPERTY INVESTMENTS

Q: What ingredients do you need to maintain your excellent returns in the property industry?
A: The most important ingredients are a good-quality management team focused on delivering to all stakeholders, and creating a long-term, sustainable and growing income stream that remains resilient during difficult times. I believe in management for income, and then capital growth will take care of itself.

Q: What do you look for in a prime property investment?
A: Our philosophy is to be the asset manager of choice for long-term investors with an investment appetite for quality real estate in carefully chosen economically growing nodes on the African continent. This is what we live by and what we look for in the properties we invest in.

Q: What is the appetite for quality retail and commercial property developments in Africa?
A: There is great demand. SA property developers are making an increasing mark on the continent, especially in countries such as Uganda, Ghana and Kenya. Africa’s property markets have traditionally lagged behind developed and many developing economies. There’s a lot of research, such as PwC’s recent Real Estate – Building the Future of Africa report, which suggests that the impact of global megatrends on Africa will be huge. We’ve launched our first private-equity fund to help satisfy the demand.

The Stanlib Africa Direct Property Development fund aims to capitalise on the retail sector in these countries, and is in the final stages of capital-raising. We already have a number of developments planned. With retail identified as a compelling investment opportunity, the fund’s focus is on creating quality retail developments. Retail is expected to be the main driver of economic growth because of the concurrent growth of the emerging middle class. Many of the retail-specific opportunities will link back to SA retailers, and we have developed a symbiotic, collaborative relationship with them.

As an asset manager, we are deeply committed to continuing to develop our property assets across Africa, especially in markets where we already have a presence. We are looking opportunistically at other markets, as well as moving into income and other development funds. Significant challenges continue to exist in exploiting potential developments but our belief in the opportunities and the countries in which we invest drives the appetite for quality real estate.

Q: Which countries and sectors do you consider to hold great potential?
A: Each of the 10 countries in which Stanlib operates provides a different type of opportunity. We’re privileged to be represented in these markets with our asset-management businesses, and therefore we are able to get a deeper understanding of the markets through our people on the ground. I am particularly optimistic about the potential in Nigeria, especially after recently spending a week there to gain a better understanding of the customers that we need to serve in those markets. It remains critically important to spend a day in the life of the customer so that we can put them in the forefront of the solutions that we create.

‘Our belief in the opportunities and the countries that we invest in drives the appetite for quality real estate’

Formalising retail markets will continue to be a great opportunity in this market. Kenya also continues to show great potential and this is evident in the activity taking place in that market. There are also good income-producing opportunities that make it ready for the creation of real estate investment trusts or companies that manage, operate and own a real estate portfolio consisting of income-producing property.

Q: What role can the commercial property sector play in rejuvenating cities?
A: For many years the property industry has been instrumental in rejuvenating cities, as investments made by property owners contribute to improve-ments. Property owners are the largest ratepayers in cities and therefore contribute directly and indirectly to the upliftment of the cities, together with local governments.

The City of Cape Town is a great example of this, as is evident in the work that has been done by the City Improvement District. Property developments can serve as powerful catalysts for further transformation within cities and communities. They have potential long-term benefits, including the creation of a significant number of jobs, thriving communities in nodes around the developments, and new trading platforms for retailers. We evaluate every investment decision on the basis of whether it is a responsible investment choice – both for our investors and the people our properties will service.

Our investment in Botshabelo – one of the largest Free State townships and where we see great growth potential – is an example of this. Stanlib has partnered with Khora Investments to develop a 21 000 m2 mall, which is expected to commence trading in the third quarter of 2016. It will create jobs both during and after completion, and will provide a much-needed service for the community, whose current mall is 50 km away in Bloemfontein.

Q: What have you learned from your investment in Melrose Arch, Johannesburg?
A: Great investment opportunities such as Melrose Arch don’t come around often, so we are very proud of our investment in the precinct. Large, complex transactions take time and good relationships during that period remain paramount. It’s an exciting investment for us and also one that is good for our investors. So we are looking forward to the value it will continue to create.

Q: What potential do you see in mixed-use developments such as the V&A Waterfront in Cape Town?
A: The potential of mixed-use developments is enormous and there are many examples from around the world where one can see that. The owners of the V&A Waterfront are doing a fantastic job of continuing to create value and making it an international destination. Africa is ready for mixed-use developments such as Melrose Arch, the Sandton precinct and V&A. There will be more good examples of this on the African continent in years to come.

Q: How will rapid urbanisation and the rise of Africa’s middle class impact on the property investment industry?
A: It will still be one of the drivers of growth over time. It’s important that we don’t assume we know what these customers want – we need to remain research-led in understanding their needs fully, so that we can serve the market.

‘Property developments can serve as powerful catalysts for transformation within cities and communities’

Q: What are some of the Obstacles and risks involved when investing in property in African countries?
A: There are many obstacles and risks in investing in Africa, and it is important that companies are clear about their risk appetite before launching into their strategy. Also important is that you can’t apply the same mitigation everywhere; a term that is very popular currently is ‘glocal’ – global best practice adapted for local context. One of the risks that I have been discussing with the Royal Institute of Chartered Surveyors is around standardised valuation practices on the continent. Until we can be assured that valuations undertaken are done according to internationally accepted practice, we will struggle to raise the right amount of capital destined for Africa. It’s something we need to work on together, as an industry, to get right.

Q: What impact do you think technology will have on the property sector?
A: The evolution of technology will dramatically change the way the property industry does business. Property people will not be replaced by technology; they will be replaced by property people who embrace technology. Multi-channel retailing is set to have the biggest – and a very exciting – impact on our shopping centre environments.

Q: How do you find the right partners and governments to help boost property developments in African countries?
A: Local partnerships remain key in all aspects, and we rely on our local offices to play a crucial role for us in the management and understanding of local partners. Advocacy in the property industry is a vital aspect of success and we liaise with all levels of governments where required through our various stakeholders.

Q: Where do you see opportunity in residential developments within SA and other African countries?
A: We have not invested in residential developments to date, but I do believe there are opportunities around SA and in Africa. Good-quality management and an understanding of how to manage residential tenants will be key, and very different from commercial management.

By Kim Cloete
Image: Matina Steyn