Abu Dhabi commits to RMB Westport’s sub-Saharan fund

The joint venture fund between Johannesburg-based Rand Merchant Bank and Westport Property Group has almost raised half the $250 million of equity it aims to corral for its sub-Saharan development fund, thanks partly to an investment from an Abu Dhabi investor.

RMB Westport, a Johannesburg –based joint venture between FirstRand Bank division Rand Merchant Bank (RMB) and Westport Property Group, has brought the capital raising for its first real estate opportunity fund to $120 million.

The JV launched in May last year and is targeted at investments in development projects across sub-Saharan Africa, has been backed by an unnamed large Middle Eastern investor, understood to be from Abu Dhabi.

The JV has subsequently held a first hard closing for the RMB Westport Real Estate Development Fund, garnering $70 million from external investors in addition to $48 million of seed equity committed by Rand Merchant Bank and $2 million from the seven staff of RMB Westport.

Backing for RMB Westport’s fund, particularly from Abu Dhabi, will be welcome news for the small opportunistic real estate fund market in Africa which has long been considered too risky for many global institutions. Others hoping for similar fundraising success include Actis, the London-based emerging markets private equity firm, which is also in the market with its second Africa real estate fund, Actis Africa Real Estate Fund II, seeking the same amount of capital.

RMB Westport’s fund is slated to run for eight years, the first four of which RMB Westport expects to invest in assets primarily in Nigeria, Ghana and Angola although investments in Mauritius, Tanzania, Kenya and Zambia might also feature. Typical equity investments made should be between $15 million and $40 million.

The fund is expected to generate a net IRR of more than 30 percent and a gross equity multiple of more than 2x.

Adopting a “value-adding” approach, the RMB Westport Real Estate Development Fund has an existing deal pipeline with an end valuation of more than $350 million. According to its marketing documents, central to its investment thesis is: direct demand for commodities; increasing foreign direct investment flows; higher demand than supply for commercial property across the asset class’ sectors; government reform; and a rising middle class.

Investments in assets, 80 percent of which are earmarked to be developments, the remainder land investments, are expected to be made across the capital stack including equity, mezzanine finance and debt. The fund’s investment period is four years and assets are expected to be exited between two and four years from the date of acquisition.

RMB Westport was formed in July 2008 between Property Finance, the real estate business of Rand Merchant Bank and Westport Property Group in a move aimed at amalgamating the structuring and finance expertise of RMB with the real estate operating and development experience of Westport.