Thursday, February 5, 2009

New commercial property fund opens Mauritius to South African investors

04 Feb 2009 - eProp - AFP

Ascencia Ltd, which listed on the Development & Enterprise Market (DEM) of the Stock Market of Mauritius in December 2008, represents the first commercial property fund in Mauritius undertaking a capital raising exercise open to SA investors

Representing the only current opportunity for South Africans to invest in Mauritian commercial property, Ascencia has an investment portfolio comprising 10 quality income-earning properties which are located in the Mauritian capital of Port Louis and suburban centres situated along the commercial axis of the Island.

The Fund comprises seven retail properties, including two shopping centres, two office buildings and an industrial park. The carrying value is Rs1,32 billion, contributing to Ascencia’s enterprise value of Rs1,5 billion (approximately ZAR450 million).

Ascencia was assembled by Mauritian company Cim Asset Management a subsidiary of Rogers and Co Limited, and Grapnel Property Group. The Rogers group is the third largest conglomerate in Mauritius and was established in 1899.

Grapnel is one of South Africa’s pre-eminent property companies. It is possibly best known to local investors as the fund manager of Sycom Property Fund which Grapnel managed until 2006 when it sold the fund management company. Subsequently, Grapnel successfully assembled and listed Hospitality Property Fund in February 2006. In addition to its fund management business, Grapnel is a leading commercial property developer, both for institutional investors and for their own property investment portfolio.

This offer is expected to raise capital estimated at Rs600 million for Ascensia, of which Rs265 million is already subscribed for and allocated. The offering price of Rs1,020.00 per share, is equivalent to the net asset value per Ascencia share.

Justin Bass of Grapnel explains that proceeds raised will be used to repay a bridging facility, in line with the company’s objective to ensure conservative gearing of 30%. In addition, the fund has agreed terms for the acquisition of a portion of Barkly Wharf, a prime office building which overlooks the Port Louis Waterfront.

The offer closes on Friday, 27 of February 2009 and applicants will be notified of allotments and any refunds on Friday, 13 March 2009.

Listed on 23 December 2008, Ascencia’s investment objective is to provide an attractive dividend yield and long-term capital growth to investors.

“New investments and development opportunities will be selected to optimise returns as well as enhance liquidity, critical mass and diversification,” explains Bass. This will be achieved by targeting high-quality tenants with a low default risk, underpinned by medium- to long- term leases.

Mauritius is one of Africa’s most developed countries and has become a global financial hub with its stable political and institutional environment and good relationships with countries in the West and Indian Ocean Rim.

Ranked first of all African countries for ease of doing business, Mauritius is receptive to foreign investors and already has strong foreign direct investment. Other attractions to investors include the absence of exchange controls and no capital gains tax or tax on dividends. This SADC (Southern African Development Community) member country also has a low corporate tax rate of 15% and a tax treaty with South Africa.

“The economy of Mauritius has been diversifying to high value-added sectors and it’s well capitalised and profitable banking sector supports growth,” Bass points out. Whilst the country has not been immune to the world financial crisis, Mauritius’s recent strong economic growth and stabilising inflation outlook means that the Mauritian Rupee is likely to maintain its stability following recent appreciation against the Rand, Sterling and US Dollar.

Mauritius’ property environment is characterised by hotel developments, office, industrial and retail properties concentrated around major commercial nodes. “A limited availability of suitably serviced and zoned sites means that existing properties are ideally placed for market demand, as are new commercial business parks planned around key residential areas,” notes Bass.

With its restricted foreign investment in commercial property, Real Estate Schemes (RES) and Integrated Resort Schemes (IRS) have recently been introduced in Mauritius, opening up the residential property sector to foreign investors. The Government has earmarked the property sector as a key driver of economic growth and there are a number of development opportunities in decentralised growth nodes which Ascencia has identified and which will form part of its initial acquisition pipeline.

Ascencia has a distinct first mover advantage in this market. This is a new investment class in Mauritius and it is expected to appeal to investors who are attracted to the stable fundamentals in Mauritius and the current opportunities for development and growth in the commercial property market.