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MAREF closes at $170m

Anna Lyudvig
April 5, 2017, midnight

Word count: 540

The Momentum Africa Real Estate Fund (MAREF) has raised $170m at the final close, receiving commitments from a total of 18 investors including African pension funds, institutions and family offices.

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The Momentum Africa Real Estate Fund (MAREF) has raised $170m at the final close, receiving commitments from a total of 18 investors including African pension funds, institutions and family offices.

MAREF is a joint venture between Momentum Global Investment Management in London, UK and Eris Property Group in South Africa, which are both subsidiaries of Johannesburg-listed MMI Holdings, Africa’s third largest life insurer.

Momentum is responsible for the fund raising, investor relations, fund management and operational oversight, while Eris is responsible for the origination, development, management and exit of MAREF’s assets.

David Lashbrook, Head of Africa Real Estate at Momentum Global Investment Management, said that the target size for the fund was $250m, adding: “We are extremely grateful to our investors for the support they have given for our maiden fund.”

MAREF seeks to achieve an 18% net IRR for its investors by investing in a portfolio of commercial real estate developments (office blocks, shopping malls and warehouses) in Sub-Sahara Africa outside of South Africa. 

Currently, 23% of investor capital is committed to three projects which include an office block in Mauritius and two office blocks in Accra, Ghana.

“We are not as far invested as we’d want to, but we’re pleased under the circumstances that we have managed to get three deals,” Lashbrook told Africa Global Funds.

“Our investment pipeline is looking good. We’ve got a lot more projects in Ghana and we’ve got an additional project in Mauritius. We are also looking at projects in Uganda, Tanzania and other places in East Africa. We had a lot going on in Nigeria, but dollar repatriation is a big issue there at the moment and those projects have been put on hold.” he added. 

Lashbrook said that the typical deal size for the fund is around $40m: “We can use up to 60% gearing, so a $40m deal translates into $24m debt and $16m equity, which is a decently sized position for MAREF’s portfolio. Our local partners might take some equity as well.”

Commenting on the outlook, Lashbrook said that hopefully 2016 was the low point: “I think 2015 and 2016 were extremely tough for Africa. We still have three years until 2020 to invest and I think $170m is a manageable amount to invest. Different countries blow hot and cold at different times, but we certainly are finding things to do.”

“Liquidity in the exit market is deepening through the launch of African real estate income funds, REITs and the development of local institutions such as pension funds and insurance companies. So, when we are ready to exit in 3 to 4 years’ time, we anticipate that there will be REITs and Pan-African income funds who may be potential buyers of our assets,” he said.

Lashbrook added that the fund has multiple exit strategies and that besides REITs and income funds, the exit could be achieved via direct sales to institutions. 

“Our first office development is likely to be bought by the tenant, because it’s their head office. They don’t want to take the development risk, so our fund will take the development risk and when the project is completed, they will probably look to buy it,” he said.

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