Actis, the pan-emerging markets private equity firm, has held a successful final closing for its second Sub-Saharan Africa private equity real estate fund, Actis Africa Real Estate 2, it announced today.
In raising $278 million, the London-based firm has meaningfully exceeded its original capital raising target of $250 million, demonstrating an improvement in sentiment for investments in its target markets including Kenya, Ghana, Nigeria and Zambia.
Indeed, the firm becomes the second third-party capital manager in a matter of months to reach its capital raising target for private equity real estate investments in the region after RMB Westport, a joint venture between Johannesburg-based Rand Merchant Bank and property company Westport Property Group, also held a final closing of $250 million for their first fund in August.
David Morley, head of real estate at Actis, told PERE shortly before the firm announced the closing this morning, he expected the successful capital raisings for Sub-Saharan African real estate to precipitate further interest from global investors in the asset class going forward. He said: “That’s entirely to be expected and in many ways welcome. Success will breed success in terms of additional investors in the market.”
He also predicted the arrival of core real estate investors to the marketplace, which he agreed would mark something of a milestone. He said: “In a sense we are creating the portfolio and I’m sure that will catalyse the development of core funds.”
After raising $150 million for debut fund Actis Africa Real Estate Fund 1 in 2006, the firm has exited from three of its seven assets already, returning the original capital of the fund to the investors. The fund is well on course to exceed its return target of more than 25 percent IRR and 2x equity.
These early successes have enabled the firm to grow its investor base from a single investor in the first fund – CDC, the UK government developing economies investment division that originally spawned the firm – to 17 different investors in fund two, including CDC once again. Other investors in the fund include family offices, endowments and pension funds.
The second fund will continue the investing theme of the first. Actis plans to invest its capital in retail and office developments in east, west and southern Africa excluding South Africa itself. Similarly, the second fund's 25 percent-plus IRR target is to be repeated. Morley said: “To attract offshore capital for Africa you're expecting to offer something with a two in the front and that's both in terms of multiple and IRR, and that's net of all costs.”
Morley said: “This is not a mainstream product clearly but it appeals to a subset [of investors] that either knows the Africa story well or is filling a gap in a global portfolio.”
He described private equity real estate as an “early stages marketplace”. “It is in some ways where private equity was a decade ago. I’m sure it will attract more players and more capital as it matures.”