Mauritius joins listed property fray
Commercial real estate market now open to SA investors
ALTHOUGH MAURITIUS has in recent years become an attractive residential property investment destination for South Africans, foreigners have until now not been able to share in the spoils of the Indian Ocean island’s commercial real estate market.
However, SA property group Grapnel recently teamed up with Mauritian partners Cim Asset Management to assemble the first commercial property fund to be listed in Mauritius. The listing – known as the Ascencia Property Fund – made its debut on the development & enterprise market (DEM) of the Stock Market of Mauritius on 23 December 2008.
Grapnel, which is also the joint asset managers of Ascencia, is currently offering SA investors the opportunity to take up shares in the fund through a capital-raising exercise. Grapnel is an established player in the SA listed property sector, fund manager of JSE-listed Sycom until 2006 and responsible for assembling and listing niche hotel fund Hospitality on the JSE in February 2006.
Grapnel director Justin Bass says the Ascencia share offer should appeal to SA investors looking to diversify property income streams and assets offshore. He says Mauritius is an attractive rand hedge destination because of the strength of its rupee against major currencies, such as the US dollar and British pound. The rupee appreciated 30% against the rand over the past 12 months.
Mauritius also boasts a stable economy and is becoming an important global financial hub. Bass says other attractions include the absence of exchange controls and no capital gains tax or tax on dividends, the island’s close proximity to SA plus the fact South Africans are familiar with the island as a holiday destination.
The fund offers an initial income yield of 9%. Ascencia’s current portfolio of 10 commercial properties is valued at Rs1,5bn (R450m) and includes two shopping centres, a number of Spar supermarket outlets, two office blocks and an industrial park located in the Mauritian capital of Port Louis and suburban centres along the commercial axis of the island. The fund is also in the process of acquiring a portion of Barkly Wharf, a prime office building that overlooks the Port Louis waterfront.
Bass says they expect to raise Rs600m (R180m), of which Rs265m (R79,5m) is already subscribed for. The offer price of Rs1020/share (R340), is equivalent to Ascencia’s listing price and net asset value/share.
Bass concedes Ascencia’s income yield of around 9% isn’t much more than that currently available on JSE-listed property funds. Ascentia’s portfolio is also small relative to that of most JSE real estate counters, which generally have portfolios worth more than R2bn.
But the idea is to double Ascencia’s assets within the next two to three years. Besides, says Bass, there’s long-term capital growth upside by investing in an untapped market early. “Ascencia has a distinct first mover advantage in this market. Commercial property is a new investment class in Mauritius, but the door won’t be open forever.”
The Ascencia share offer comes at a time when SA property investors have plenty of bargain buying opportunities beckoning in other offshore markets. Listed property prices in the United States, Britain and Australia have tumbled up to 60% in some cases last year, offering dirt-cheap entry levels to new buyers.
Anton de Goede, property analyst and portfolio manager at Coronation Fund Managers, says the Mauritian property market looks interesting within an African property market context due to a relatively stable economy and political environment. Ascencia also offers investors a vehicle to invest beyond the Mauritian leisure property segment in a growing economy.
However, De Goede says developed markets probably offer better opportunities for SA investors currently looking for offshore diversification. Says De Goede: “Investors with no international exposure should benefit more from entering developed markets first – especially at current levels, which are providing the best long-term buying opportunities in 10 years.”
De Goede says income yields offered by commercial property in Britain, Europe and Australia are close to that of emerging market levels. As such, he believes developed real estate markets offer the potential of strong capital growth upside once those markets re-rate. De Goede says going the developed market route would also give SA investors exposure to major, first world currencies rather than emerging market currencies. Ascencia’s share offer closes on 27 February 2009.
Door won’t be open forever. Justin Bass