My guest on this latest episode of May Africa Month and The Property Pod is Thomas Reilly, Managing Director of Lango Real Estate. Lango in Swahili means ‘gateway’, and the group is a major investor in the continent, targeting property opportunities in the rest of Africa (excluding South Africa).
As the brainchild of JSE-listed property giant Growthpoint and InvestCate Asset Management (now Ninety-One), the Africa-centric fund was established as Growthpoint InvestAfacia Property, or GIAP, several years ago, led by Riley Group.
However, as Investtech Asset Management became a separate company and Nine was renamed One, GIAP changed its name to Lango last year.
In this podcast, London-based Riley offers insights into investing in Africa as well as Lango’s next phase of expansion, including listing funds in the UK and first acquisitions in Kenya.
The highlights of his interview are displayed in the gallery below. You can also listen to the full podcast above or download it from iono, Spotify or Apple Podcasts.
Some property of Lango
“Lango has grown tremendously since we last spoke. You remember, it was pre-covid [that] We had a catch up last. Since then we have grown into one of the top real estate companies on the continent, the former South Africa. ”
“We have more than $ 620 million-odd assets on our balance sheet – and that’s effectively close to assets worth about R10 billion. So, in a reasonably short time, it’s a significant asset group.”
“We have a management team that is tailored to the size of the business, so we have people on the ground, not just in London. [but in] Johannesburg, Mauritius, Ghana, Nigeria and elsewhere. So, Lango has become a good oiled machine. ”
Hyprop Growthpoint Investc finalizes sale of Zambian mall to African properties
Growthpoint-Investac African JV secured its first two contracts
“We are in a good position to continue growing at this stage. Right now [we are] Outside of South Africa, investments have been made in the continent’s leading economies, and common names, basically. We’re stuck in big cities like Accra, Lusaka, Lagos, and we’re looking forward to expanding that footprint in the coming months. ”
Is Growthpoint still the largest shareholder? Which is the other investor?
“Growthpoint is a big shareholder. It’s the biggest shareholder, to be exact. It makes up about 16% of our business, so a large shareholder but obviously not a majority shareholder in that sense. Nonetheless, Growthpoint is a key stakeholder in our business and the old investor asset management, now Ninety One. And in terms of business growth and that’s a side we’re looking forward to helping in different areas. ”
“More and more languages have become independent. This is ultimately a business that will IPO separately [initial public offering]. So we aim to make a list in the next three years and a project on that is currently underway. ”
“The intention at this stage is that we will be London-listed, [with the] The possibility of seeing the secondary list somewhere else at that time or later; But at this stage, we are primarily looking at London-listed. ”
“Growthpoint is clearly a key stakeholder. These are huge businesses in the South African context and that is why we have decided not to pursue acquisition strategies in South Africa. There is no point in competing with the biggest writ [real estate investment trust] In that country and at the same time they are a major stakeholder in our business. ”
Kenya is calling
“But there are many opportunities for us north of the border. We are seeing opportunities right now in countries like Kenya, and more specifically in Nairobi, which will continue the theme of investing in our capital cities. ”
“You are very unlikely to find investment outside of our capital city. It’s a very focused approach to where we want to invest and where we see sustainable assets that we can achieve. ”
“It also leads to the type of assets, I guess we want to invest. So again, without you being unlikely to invest outside our capital city, it is unlikely you would see us investing in other asset classes. The real estate market. So it’s office, retail. And the industry is going to be where we find it. You’re not going to see our residential. You’re not going to see our hospitality, healthcare and so on. So it’s a very attentive approach everywhere. ”
“I think that in these major capital cities, combined with the quality of the resources we have invested, [it] We’ve been in a really good position over the last two years, dealing with Covid and its effects. ”
“I think the next step for us is to go to Nairobi. That’s the decent thing to do, and it should end there. ”
“We hope to complete the process of raising additional capital in the next few months. The purpose is to relocate a large part of that capital to Nairobi. So this is the first choice for us. ”
“The reasoning behind this is quite simple. We are very attentive at this time in West Africa. We have about 47% of the assets in Accra, which has done really good for us so far. Accra, and Ghana more generally, democracy, has become one of the brightest lights on the continent in terms of growth. The whole underpin was really good in terms of the resources we had there, so we were very happy with our performance there.
Define the Nigerian Office Tower share ‘sell’ set
Hyprop dividends hit by up-for-sale Nigerian and Ghanaian resources
Nedbank’s billion-rand loan financing agreement with Kenya Centum
“We have decided to look at Kenya in terms of scattering our eggs and not putting them in a basket. This is the clear entry point to East Africa. It is indeed the center of East Africa, and arguably – outside of Johannesburg – perhaps the most developed financial center on the continent.
“So we are very excited about it. It adds a different set of geopolitical drivers to the business. It adds a different tenant base. This logically adds a slightly more mature property market, which enables us to make a potential investment at a price at this current juncture which looks quite attractive. That is why we are following Kenya and more specifically Nairobi. ”
“Apart from that, there are opportunities elsewhere. We see Morocco as a special opportunity in terms of industry [assets] Perhaps we are trying to unlock. So we are not really interested in office or retail space in that country. It’s a much more logistical move that we’re considering. ”
In addition to Growthpoint and International Finance Corporation [IFC]Is Lango targeting other new investors, such as pension funds?
“Yeah. I think you’ve got a nail in the coffin with a pension fund, Suren. If you look, the lion’s share of our investor base at the moment is actually a pension fund. We don’t see that change. The pension fund is clearly looking for long-term stable returns in terms of yields.
“We are a business that is strategically located to deliver it. I think from a yield perspective we have a hard-currency business at the end of the day suitable for them at this time, and I don’t see it changing. So I think DFIs like that [development finance institutions] And so, yes.
“Even though we have IFCs, they are obviously our main anchor shareholders; They were in business from the beginning. We would like to assume that they will continue to pursue their own rights in the event of subsequent share issues [Lango]”
“But I think over time most of our shareholding pension funds have been able to maintain the dominance of the industry and it speaks to the global industry. So we’re seeing potential shareholders emerge from the various pockets of the global savings industry. ”
Is hard currency going to dominate the landscape of African real estate investment?
“Yes, I think in terms of the dollarisation of the rest of the African markets, if we look at our specific business at the moment, our income is about 96% to 97% of the dollar. This is the current situation. How this will unfold forward may be a separate discussion.
“Personally, my view is that if one has to take a 10- or 15-year approach, which is very difficult to do, I think it would be fair to hope that some of these countries could be better. Much more liquid in terms of their own currency.”
“What they don’t have now is their own capital market, a suitable level of development for their own internal capital market.”
“So they have to go through a program to really move forward in capital market development, in order to have adequate liquidity in the bond market, basically, in those countries, so that one can actually finance in local currency properly and cost-effectively.”
Listen / Read: Real Estate Investments in Africa and Conversions from Strong Dollars
“We will not object to the amount we can finance, at a relatively competitive level, on CDs in Ghana or Nigerian Naira, or whatever. We will be happy to consider it. ”
“It simply came to our notice then. You will not be able to finance real assets in that local currency to any significant degree at this time. The dollar remains the currency of the tender. ”
What are the other challenges and opportunities for Lango in Africa?
“Doing business with a shareholder base in Africa is a very complex exercise internationally. We are fortunate that we have a management team who are highly experienced. We are very consistent with our resources and manage these resources effectively with a very strong hands-on approach. ”
“Without this kind of hands-on approach, I think it has been a very difficult practice, especially in the last two years, to manage resources in these different countries. But we were able to turn it around. ”
“It simply came to our notice then. Just a title as an example. If we look at the rental invoices that we’ve issued to our tenant base over the last two years, we’ve been able to collect more than 112% of those bills. ”
Read: Grit still has strong SA links despite being JSE delisted
“This means that not only have we collected invoices that we have issued, but we’ve been able to search in the past – where we’ve almost certainly acquired a lot of these resources with historically outstanding or historically bad debts.”
“So, although people can often be a bit – I don’t mean to say – a negative diagonal in Africa, it’s not necessarily familiar to people. I think the reality and the output that we’ve been able to deliver in the last two years or so has really surprised a lot of people. ”
“We are very excited about what the next 12 to 24 months will bring us in terms of resources, and then obviously [there’s] IPO planned for the next three years. So we have an exciting time for Lango’s growth. ”