A partnership involving FirstRand Bank division Rand Merchant Bank (RMB) has launched a sub-Saharan Africa real estate development fund with a capital raising target of $250 million.
RMB has committed $48 million to the eight-year fund, co-sponsored by Westport Property Group in a joint venture called RMB Westport. The vehicle will be used to acquire assets primarily in Nigeria, Ghana and Angola but could also include investments in Mauritius, Tanzania, Kenya and Zambia.
RMB Westport’s seven staff, previously responsible for RMB’s proprietary offshore and certain domestic real estate investments, will commit a further $2 million of equity to the fund.
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.
The fund is expected to generate a net IRR of more than 30 percent and a gross equity multiple of more than 2x.
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.