<\/p>\n
You can also listen to this podcast on iono.fm here.<\/p>\n
SIMON BROWN: I\u2019m chatting with Casey Sprake, market strategist at AG Capital.<\/p>\n
Casey, always appreciate the early morning. You wrote a piece recently and opened with it at the API [African Property Investment] Summit.<\/p>\n
You were talking about a warehouse fitted with solar and batteries and its own water before a tenant would sign. In many senses that building is sort of the future of property and investing. It\u2019s no longer the story around where the continent used to be \u2013 where is the fast-growing population, what\u2019s the GDP?<\/p>\n
It becomes sort of an investment player, an investable premium in many senses. It\u2019s more than just the basics. There\u2019s a whole lot more around that property investment in the continent.<\/p>\n
CASEY SPRAKE: Yes, good morning, Simon. That\u2019s precisely it. I feel the nature of property, particularly within the African continent, has changed from, as you mentioned, the status of where opportunity is sitting.<\/p>\n
I think we all are of the belief now that opportunity within the African continent is certainly there. It\u2019s more just understanding where the growth is going to not just occur, but how we actually determine how it can be captured through investment. That\u2019s the next key.<\/p>\n
I\u2019ve been saying that, again, growth is not the scarce commodity anymore, but certainty actually is.<\/p>\n
Read: Africa\u2019s property opportunity: Growth prospects, but certainty is scarce<\/p>\n
SIMON BROWN: It is that. And you make the point. Scarcity has kind of shifted. We have a lot of land across the continent. I know the clich\u00e9 that \u2018they are not making more of it\u2019, but there is a lot of it.<\/p>\n
What matters now is that certainty, and I suppose it is regulatory, it\u2019s tenant, it\u2019s the developmental process \u2013 it\u2019s simple things like patient capital and infrastructure. It\u2019s all that that exists around the opportunity.<\/p>\n
CASEY SPRAKE: Hundred percent. Land is clearly abundant across many African markets, and we can see that demand is clearly visible. What I feel is a lot scarcer, as you mentioned, is the combination of reliable infrastructure, regulatory uncertainty, creditworthy occupier demand.<\/p>\n
And I think, more importantly, transparent development processes and what sort of drives that patient long-term capital you mentioned.<\/p>\n
We find that when these elements come together, property doesn\u2019t only compound value over time. When they don\u2019t come together, even the most compelling demographic story, for example, will struggle to translate into investment returns. It\u2019s about getting to that end point.<\/p>\n
Read:
Today\u2019s leading home, land and business buyers
Land reform: How new landholders can prosper from wildlife, not just farming<\/p>\n
SIMON BROWN: Absolutely. You talk around the capital pipes as well, and listed Reits. In South Africa we have 33 market cap. When you were doing the article, around R230 billion, but not much across the rest of the continent. Kenya has three, Nigeria four.<\/p>\n
Most of the other markets have none, no Reits at all. That\u2019s opportunity, I imagine, for our local Reits as well, but also I imagine for country Reits. There must be investors in Kenya, Nigeria, Morocco and other markets.<\/p>\n
You are thinking, hang on a second, there\u2019s opportunity here to start their own Reits. I hadn\u2019t realised the markets were so small in other markets.<\/p>\n
CASEY SPRAKE: Yes. It\u2019s quite startling when you go through the numbers. I think often when we think of African property we get lost in the strength of South Africa\u2019s property in particular. But again, as you mentioned, access to capital is such an important and critical part of this whole equation.<\/p>\n
I think where we find institutional investors in particular can sort of participate actively. We see where regulation is credible, and transparent reporting et cetera. Property markets can then access those deeper pools of domestic and international capital.<\/p>\n
Read:
The business case for owning commercial property
Confidence returning to SA\u2019s property sector \u2013 K\u00f6nig
Top real estate firm eyes luxury property market in Zimbabwe\u2019s capital
SA Reits have outperformed equities and bonds year to date<\/p>\n
But if we find spots where, as you mentioned, other countries such as Uganda, Mozambique where those systems remain underdeveloped, attractive projects really struggle to move beyond the potential that\u2019s a face value.<\/p>\n
So developing, I would say, pension-fund participation, improving project preparation and creating credible valuation and exit mechanisms importantly as well, forms part of that really important property story itself, when that all transfers around the term we like to use called \u2018investability premium\u2019.<\/p>\n
SIMON BROWN: Yes. Also it gives opportunity. In the article you referred to Growthpoint \u2014 landlords as infrastructure providers. Growthpoint got the V&A deal. They\u2019re looking to spend some R30\/40\u00a0billion over the next decade and a half to expand the V&A Waterfront precinct.<\/p>\n
But they\u2019re now managing energy, they\u2019re managing water security. It\u2019s not just buildings. This in my sense is the new normal. It favours well-capitalised players, but also favours those coming into the market at this point, because they start with that new kind of clean slate.<\/p>\n
CASEY SPRAKE: 100%. As you mentioned, Cape Town in particular offers a useful example around this. But, as you were saying, I think the property market is really moving into a sort of new defining feature of the sector overall. We\u2019ll see that successful property owners will increasingly manage resilience, as you mentioned, across energy, water, mobility security, et cetera.<\/p>\n
Read:
V&A launches R1.4bn retiree residential development
Growthpoint expects environmental approvals for R24bn Granger Bay expansion next year<\/p>\n
And a real focus is now shifting towards overall tenant experience. So I would say that successful investors in turn are buying the productive capacity of a place as much as the actual building on it. And that\u2019s the new phase that we\u2019re shifting through to now.<\/p>\n
SIMON BROWN: Productive capacity \u2013 I like that, absolutely. It\u2019s not just the bricks and mortar; it is that productive capacity.<\/p>\n
We\u2019ll leave it there, Casey Sprake, market strategist, AG Capital, always appreciate the early morning time.<\/p>\n
#Property #investment #evolves #scarcity #certainty #productivity #Africa<\/p>\n","protected":false},"excerpt":{"rendered":"
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