South Africa €100m fund launch

Opportunistic fund targets 25 percent IRRs by acquiring prime land in Sub-Saharan Africa with a particular focus on South Africa.

South African company SP-aktif Properties has launched a R1 billion (€104 million; $143 million) opportunistic private equity real estate fund.

The Bellville-based company says it could deliver 25 percent internal rates of return by acquiring land for commercial, residential, and alternative uses, and adding value to it before selling the land off.

The opportunity fund, called Terra Optima One, says in its marketing literature that it would charge 2.5 percent a year on the first R250 million of committed capital and 2.5 percent onwards with a 3 year investment period that can be extended by the general partner by another year. It would earn the usual 20 percent carried interest above a 10 percent hurdle rate.

The general partner has committed to co-invest 2 percent of the equity committed at the first close and one percent of the final close sometime in 2012. A first closing has been slated for this summer.

SP-aktif Properties, which took its name from strategy partners and active management, is targeting private shareholdings in companies that own land and related rights such as development or usage.

The firm already has a private equity fund. The Agri-Vie Private Equity Investment Fund focuses on agricultural businesses in Sub-Saharan Africa.

SP-aktif said there was broad agreement that Africa’s real estate market was on an “upwards trend” towards recovery, but also highlighted how experts were cautioning that the duration and rate of recovery would be long and slow. That suggested a “sideways move¬ment” for most of 2010 and parts of 2011.

“From our perspective, the most important aspect is to determine whether the downward trend has fi¬nally been broken. Given the information and data at hand, we are confident that this is the case and are therefore extremely optimistic about the medium to long term returns from property as a general asset class,” said the firm.

The fund will invest primarily in South Africa but also explore opportunistic investments in the Sub-Saharan region, including Mosambique, Botswana, Namibia, Angola, Zambia and Zimbabwe.