36873 - Africa Real Estate Platform

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Summary of Investment Information

Project Number

36873

Company Name

LANGO REAL ESTATE LIMITED

Date SPI Disclosed

Nov 9, 2015

Country

Africa Region

Region

Africa

Projected Board Date

Nov 13, 2015

Environmental Category

FI-2 - Limited

Status

Active

Last Updated Date

May 17, 2018

Department

Regional Industry - MAS Africa

Industry

Tourism, Retail and Property

Previous Events

Approved : Nov 6, 2015
Signed : Apr 8, 2016
Invested : May 14, 2018

Sector

Construction and Real Estate

Project Description

The proposed investment involves IFC’s participation in the establishment of and the first capital raise for the Africa Real Estate Platform (AREP), an investment platform, which will acquire (and in certain instances develop) and manage a portfolio of income producing commercial properties in Africa. It is expected that, after several rounds of capital raising and deployment, AREP will reach an optimal size for an initial public offering (IPO) on a major stock exchange and convert into a form analogous to a real estate investment trust (REIT), which will achieve liquidity within 5-7 years. AREP is conceived to become one of the first REITs in SSA and the first Africa-focused collective investment vehicle designed to ramp up to a size feasible for a major stock exchange listing. AREP will target multiple countries in the Sub-Saharan Africa (SSA) region and will provide institutional investors, including African pension funds, with an opportunity for diversification.
AREP will comprise: (i) an investment holding company (HoldCo), which will pool investors’ funds and use them to acquire income producing commercial properties in target African countries; and (ii) an asset management company (ManCo), which will manage HoldCo’s assets on commercial terms. Investors’ returns will come from rental cash flows of the property portfolio, as well as from capital appreciation.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan
Equity	40.50

Development Impact

The proposed project is expected to have strong development impacts. AREP will contribute to the development of capital markets in SSA and bring about positive effects on its clients in target countries. Specifically, the creation of AREP and its eventual conversion into a REIT listed on a major stock exchange will encourage capital inflows from international and regional institutional investors into SSA, as well as overall development of more liquid, diversified and sophisticated financial markets in the region. Further, through improving management practices at its properties and through developing new properties in SSA, AREP will contribute to improving the quality of business infrastructure in the region. The limited availability of high quality business infrastructure has been identified as a constraint to private sector and economic development throughout the African continent, and the modern efficient business infrastructure developed with AREP''s support in its target countries will (a) serve as a catalyst for local urban development; (b) result in improved business efficiencies, reduced operational costs and waste in the supply chain; and (c) cultivate linkages with a broad range of local businesses.

IFC''s additionality in this project is threefold: (i) the fact of IFC''s participation as an anchor investor in AREP''s first capital raise may provide other potential international and regional institutional investors with the comfort that the platform''s terms are in line with international best practices and that its investment strategy is justified; (ii) IFC will work with AREP to facilitate AREP''s adoption of best practice environmental and social (E&S), health and safety standards to its property assets; IFC will also support AREP''s adoption of "green" and "climate smart" technologies to its portfolio properties; finally, (iii) IFC''s regional knowledge and expertise are also likely to be useful in AREP''s work on the development of a pipeline of commercial property assets.

E&S Category Rationale / Risks and Mitigation

The project has been categorized as FI-2 in line with IFC’s Environmental and Social Review Procedures. The platform will own and manage existing income-generating real estate properties as well as new developments across SSA. Although greenfield real estate development projects have the potential for significant environmental and social impacts, the majority of platform’s assets will be developed/existing retail and commercial assets. The predicted adverse impacts associated with these assets are considered limited and can be avoided or mitigated by adhering to recognized building and construction standards and design criteria, IFC Performance Standards and EHS Guidelines as well as local regulations. The overall portfolio risk is thus considered medium. The key environmental and social requirements applicable to this project are: compliance with national regulatory requirements in countries where the assets are located; and assessment of assets against relevant IFC Performance Standards and the World Bank Group EHS Guidelines.

Contacts

For Inquiries About the Project, Contact

Thomas Reilly
Head of Africa Real Estate
The Place, 1 Sandton Drive, Sandton, Gauteng, 2196
South Africa
Telephone: +27 11 944 6289
Email: mailto:thomas.reilly@investecmail.com

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Local Access of Project Documentation

Thomas Reilly
Head of Africa Real Estate
The Place, 1 Sandton Drive, Sandton, Gauteng, 2196
South Africa
Telephone: +27 11 944 6289
Email: mailto:thomas.reilly@investecmail.com

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