Mau­ri­tius joins listed prop­erty fray

Com­mer­cial real es­tate mar­ket now open to SA in­vestors

Finweek English Edition - - Companies & Markets - JOAN MULLER joanm@fin­

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

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