Tuesday 12th September 2017

Global Real Estate Trends, Africa

and Opportunities for 2017/2018
Sabina Kalyan, Global Chief Economist and Head of EMEA Strategy & Market, CBRE
Global Investors
James Green, Partner, K&L Gates LLP, London
Gaimin Nonyane, Head of Economic Research, Ecobank
Adri Kerciku, Investment Consultant, M3 Capital Partners (UK) LLP
Mike Phillips, UK Editor, Bisnow
Nathalie Villette, Group Head, Global Corporates, Ecobank
© Copyright 2017 by K&L Gates LLP. All rights reserved.
PRESENTED TO: CONFIDENTIAL AND PROPRIETARY

REAL ESTATE OUTLOOK

SEPTEMBER 2017
CONFIDENTIAL AND PROPRIETARY | REAL ESTATE MARKET OUTLOOK 1
THE GDP FORECASTS ARE BENIGN, IF BECOMING LATE
CYCLE
The Eurozone is lagging the US and UK and will thus outperform over the medium term
GDP Forecasts Compared To The Estimated Trend Rate Of Growth, %.
Source: Oxford Economic Forecasting,.

-1
Eurozone Japan UK Australia Singapore Hong Kong Canada USA China

Estimated Trend Rate 5 Year Forecast Difference

CONFIDENTIAL AND PROPRIETARY | REAL ESTATE MARKET OUTLOOK 2

WITHIN EMEA, THE GDP THE RANKING MAY SURPRISE
YOU
With the exceptions of the UK and Norway, the forecasts are weaker as we move later cycle
GDP Forecasts, % Y/Y Average 2017-2021 and 2018-2022.
Source: Oxford Economic Forecasting,.

3.5

3.0

2.5

2.0

1.5

1.0

0.5

0.0

-0.5

-1.0

2017-2021 2018-2022 Difference

CONFIDENTIAL AND PROPRIETARY | REAL ESTATE MARKET OUTLOOK 3

WITH INFLATION WEAK, MONETARY POLICY WILL
TIGHTEN SLOWLY
The Eurozone and Japan will have the most accommodative monetary conditions
Consumer Price Inflation, % Y/Y, Central Bank Policy Rates, %.
Source: Oxford Economic Forecasting.
Average, 2017-2021.
Source: Oxford Economic Forecasting,.
8
2.5

7
USA
2.0
6 Australia

Canada
5
UK
1.5
Eurozone
4
Japan
1.0 3

2
0.5
1

0.0 0

-1
07 08 09 10 11 12 13 14 15 16 17 18 19 20 21

CONFIDENTIAL AND PROPRIETARY | REAL ESTATE MARKET OUTLOOK 4

GLOBAL INVESTMENT VOLUMES ARE FALLING BUT
REMAIN HISTORICALLY HIGH
London in particular has been propped up by Asian capital

Global Transaction Volumes, USD Sources of Cross Border Capital, 12 M

Billions. Rolling, % Of Total. Source: Real Capital Analytics.
Source: Real Capital Analytics.

300 60%

250 50%

200 40%

150 30%

100 20%

50 10%

0 0%
07 08 09 10 11 12 13 14 15 16 17 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17

EMEA Americas Asia Pac Asia-Pacific Europe North America

CONFIDENTIAL AND PROPRIETARY | REAL ESTATE MARKET OUTLOOK 5

LONDON HAS LOST ITS #2 SPOT AND THE GERMAN
METROS ARE CLIMBING FAST
Paris has been impacted (temporarily?) by the elections, San Francisco by pricing

Global Transaction Volumes, USD Billions, H1 17.

Source: Real Capital Analytics.
25

Asia Pac
20
Americas
EMEA
15

10

CONFIDENTIAL AND PROPRIETARY | REAL ESTATE MARKET OUTLOOK 6

WITH PRICING HOT, LOGISTICS AND NICHE SECTORS
HAVE INCREASED VOLUMES
These are global trends, but particularly pronounced in EMEA

Sector Shares In Investment, % Of EMEA Investment Volumes, % Y/Y,

Total. 1 Year Moving Average. Source: CBRE.
50%
Source: CBRE. 100

45% 80
40%
60
35%
40
30%
20
25%
0
20%
-20
15%

10% -40

5% -60

0% -80
Office Retail Industrial Other 08 09 10 11 12 13 14 15 16 17

H1 17 Average since 2006 Office Retail Industrial Other

The Industrial number spikes because Blackstone sold its European industrial arm “Logicor” to CIC for
around EUR 12.2 bn and Hansteen sold a German/Dutch portfolio of EUR1.3 bn to Blackstone/M7.

CONFIDENTIAL AND PROPRIETARY | REAL ESTATE MARKET OUTLOOK 7

PRIME YIELDS ARE AT RECORD LOWS BUT STILL OFFER
VALUE RELATIVE TO BONDS
Capital values per square metre are also attractive in many markets

EU-15 Income Premia Over Sovereign

EU-15 Prime Valuation Yields, %.
Bonds, Basis Points. Sources: CBRE &
Source: CBRE.
800
Thomson Reuters.
10

600
9

400
8

200
7

0
6

-200
5

-400
4

-600
3 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16
86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16
Industrial Office Industrial Office Retail
Retail Industrial trend

CONFIDENTIAL AND PROPRIETARY | REAL ESTATE MARKET OUTLOOK 8

A KEY QUESTION IS WHETHER UK CITIES ARE NOW
ATTRACTIVE RELATIVE TO CE
Yield compression remains strong in German cities and Madrid and Milan

Prime Office Yields In Q2 17 Compared To Previous Cyclical Trough, Basis Points.

200 Source: CBRE.

150

100

50

-50

-100

-150

-200

CONFIDENTIAL AND PROPRIETARY | REAL ESTATE MARKET OUTLOOK 9

PRIME RENTS ARE RECOVERING BUT SECONDARY IS
STILL LAGGING
There is a wide gap between prime and secondary retail in particular

EU-15 Prime Real Rent Indices, EU-15 Prime Real Rent Indices,
1986=100. 1986=100.
300
Source: CBRE. 25
Source: CBRE.

20
250 15

10
200
5

0
150
-5

-10
100
-15

50 -20
86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16

Industrial Office
Industrial Office Retail
Retail Industrial trend

CONFIDENTIAL AND PROPRIETARY | REAL ESTATE MARKET OUTLOOK 10

 EMEA: PREFERRED INVESTMENT THEMES

Office Recovery and Evolution State-of-the-Art Distribution

Shortage of modern space in city centres combined Centers
Shortage of modern facilities and strong
with strong demand from media and tech demand driven by e-commerce
companies in emerging locations

 Amsterdam South Axis

 Berlin  Major NW European markets
Preferred Preferred
 Stockholm & Oslo  Warsaw and Czech Rep
Markets Markets
 Madrid & Barcelona  Barcelona, Madrid, Milan
 For higher risk-adjusted return investors European
– Budapest
Preferred
Investment
Dominant, Experiential Retail Themes Niche residential and under-supplied
markets
Venues Demographic trends combined with shortage of supply
Retailers are concentrating their presence in dominant for Independent/assisted living facilities and student
retail locations/formats accommodation

 Central London & Paris high street retail  Student housing in NW Europe
 NW European dominant shopping centres  Senior living in the UK
Preferred Preferred
with asset management potential  Dutch social housing given regulatory
Markets Markets
 Southern Europe for yield compression & rent change
growth

CONFIDENTIAL AND PROPRIETARY | REAL ESTATE MARKET OUTLOOK 11

 www.cbreglobalinvestors.com

The information in this document is confidential and meant for use only
by the intended recipient. This material is intended for informational
purposes only, does not constitute investment advice, or a
recommendation, or an offer or solicitation, and is not the basis for any
contract to purchase or sell any security, property or other instrument, or
for CBRE Global Investors to enter into or arrange any type of transaction.
This information is the sole property of CBRE Global Investors and its
affiliates. Acceptance and/or use of any of the information contained in
this document indicates the recipient’s agreement not to disclose any of
the information contained herein.
 Africa – an Introduction
James Green

© Copyright 2017 by K&L Gates LLP. All rights reserved.

The “real” world map

Source: http://rue89.nouvelobs.com/2013/12/21/lafrique-grandeur-
nature-carte-bouscule-les-idees-recues-248512
The importance of Africa
• Fifth largest economy in the world after US, China, Japan and
Germany
• IMF projects Africa will be world’s second-fastest growing
economy to 2020
• World-class oil & gas/ mineral assets
• Young and growing population - by 2034, larger workforce
than either China or India
• Consumer industries expected to grow by US$410bn between
2013 - 2020
• Fastest growing and second largest mobile phone market in
the world
• Increasing urban migration
Barriers
• Corruption

• Political instability

• Resource nationalism

• Energy shortages

• Lack of infrastructure

• Currency fluctuations

• Under-developed legal systems

• Restrictions on foreign investment

 Economic Dynamics in
Africa’s Real Estate
Sector
Gaimin Nonyane
Ecobank Group
September 2017

© Ecobank Research | Economic Dynamics in SSA’s Real Estate Sector | September 2017
SSA’s changing landscape as markets adjust to shocks
SSA growth decomposition (2010-2015) Attribution analysis of average growth, 2010-15

8.0% 8.0%
7.0% Other Activities
7.0% 9.1%
6.0% 6.0% Trade, restaurants &
5.0% 10.5% 24.5%
5.0% hotels
4.0% Transport & ICT
4.0%
3.0%
3.0% 10.5%
2.0% Agriculture
1.0% 2.0%
15.9%
0.0% 1.0% Mining & Utilities
2010 2011 2012 2013 2014 2015 13.8%
-1.0% 0.0%
Manufacturing
Agriculture Mining & Utilities 15.6%
Manufacturing Construction Construction
Trade, restaurants & hotels Transport & ICT
Other Activities SSA (rhs)
Source: UN; Ecobank Research

• SSA’s growth averaged 5.2% p.a. in 2010-15 driven by growth in the non-mining sector, which
accounted for 89% of the expansion in SSA growth.
• Non-mining sector has been boosted by revenue from the commodity boom, specifically agriculture,
trade, transport and ICT and other activities, which include real estate and financial services.
• Manufacturing and construction have lagged the broader sectors.
• In recent years, SSA growth has slowed amid the commodity-price shock and tight lending conditions.
• Markets are now adjusting to low growth rates as economic diversification efforts to broaden growth
gains traction and as tight lending conditions continue .

© Ecobank Research | Economic Dynamics in SSA’s Real Estate Sector | September 2017 2
 Real estate share of SSA GDP is relatively small
• Real estate accounts for an average of 6% of SSA GDP
• Countries with higher per capita income appear to have larger shares
Real Estate (% of GDP)
16.0%

14.0%

12.0%

10.0%

8.0%

6.0%

4.0%

2.0%

0.0% Benin
Malawi

Uganda

Chad

Zambia

Burundi
Mauritania

Guinea
Kenya

Mozambique

Ghana
Niger

Burkina Faso

Cameroon

Togo

Nigeria

Botswana

Gabon
Sierra Leone

South Africa
Mali

Angola

Lesotho
Mauritius

Madagascar
Côte d'Ivoire

Zimbabwe

Comoros
Sao Tome & Principe

Namibia

Senegal
Rwanda

Eq Guinea
Gambia

Guinea-Bissau

Swaziland

Cabo Verde
Tanzania
Ethiopia

Source: UN

© Ecobank Research | Economic Dynamics in SSA’s Real Estate Sector | September 2017 3
 Key factors undermining growth in real estate
• Structural constraints: weak property rights regime, poor town
planning systems and a still developing financial sector.

• Restrictions on foreign capital repatriation and an inefficient tax

system affect the involvement of foreign interest and private capital.

• High interest rates which undermine the development of SSA’s

mortgage finance system.

• Currency volatility which tend to dampen foreign investment to real

estate.

• But foreign interest has started to rise in recent years in the hotel and
retail shopping malls sector amid modest financial sector reforms.

© Ecobank Research | Economic Dynamics in SSA’s Real Estate Sector | September 2017
But SSA climate still ripe for more real estate activity

Source: PWC, Building the Future of Africa

© Ecobank Research | Economic Dynamics in SSA’s Real Estate Sector | September 2017
SSA has huge potential – market sizes to grow over M/T
• providing businesses with opportunities to take advantage of economies
of scale and scope

Expected Market Expansion

average nominal growth rate per annum, 2017-21
Nigeria
India
Sierra Leone
Côte d'Ivoire
São Tomé and Príncipe
Senegal
Mozambique
Tanzania
Benin
Burkina Faso
China
Kenya
Niger
Ethiopia
Ghana
Congo, Rep.
Liberia
Togo

0 2 4 6 8 10 12 14 16
Source: IMF

6
© Ecobank Research | Economic Dynamics in SSA’s Real Estate Sector | September 2017
 Income levels to rise, boosting consumer sectors
• Consumer market is developing - Per capita GDP at PPP to rise steadily (besides
Equatorial Guinea), boosting consumer sectors
• But to still lag behind resource-intensive markets such as China and India

Per Capita Income, at Purchasing Power Parity, US$

30,000 60,000 Gabon

China

25,000 50,000 India

Cabo Verde
20,000 40,000
Republic of Congo

Angola
15,000 30,000
Nigeria

10,000 20,000 Ghana

Côte d'Ivoire

5,000 10,000 Zambia

Kenya
0 0
Equatorial Guinea (rhs)
2014 2015 2016 2017f 2018f 2019f 2020f 2021f 2022f

Source: IMF
7

© Ecobank Research | Economic Dynamics in SSA’s Real Estate Sector | September 2017
 East African countries dominate banks’ lending to real estate

Banks’ lending to real estate and construction sector (percent of total loans), 2010-16

40

35

30

25

20

15

10

0
2010 2011 2012 2013 2014 2015 2016

Rwanda Uganda Kenya Ghana Nigeria Tanzania Zambia Zimbabwe UEMOA

8
Source: Ecobank Research

© Ecobank Research | Economic Dynamics in SSA’s Real Estate Sector | September 2017
 Real estate investment example yields
Estimated
Reported
Date Property Location Sector Seller Buyer price (US$
yield
million)
Actis/RMB Hyprop (75%)/
Q4 2015 Ikeja City Lagos, Nigeria Retail 91 >8.00%
Westport/Paragon Attacq (25%)
Two Rivers Development Centrum Aviation Corporation of
Q2 2015 Nairobi, Kenya Mixed Use 70 N/A
(39% stake) Industry China
East Park Mall, Acacia Office
Lusaka &
Q4 2015 Park & Jacaranda Mall (50% Retail/ Office Casilli Group SA Corporate 49.6 8.68%
Ndola, Zambia
stakes)
Wings Oando Development
Q2 2015 Lagos, Nigeria Office RMB Westport Pivotal 49 N?A
(37.1% stake)
Office Sociedade De
Maputo, Delta (now Mara
Q3 2016 Vodacom Building Office Construçoes 46 6.63%
Mozambique Delta)
Catemba
Cosmopolitan Mall (50%
Q4 2016 Lusaka, Zambia Retail Rockcastle Mara Delta 37.1 7.75%
stake)
Bagatelle – Mall of Mauritius Bagatelle,
Q4 2015 Retail Atterbury Ascencia 28.9 7.00%
(34.9% stake) Mauritius
Makuba Mall & Kafubu Mall Kitwe & Ndola, Delta (now Mara
Q4 2015 Retail Rockcastle 21.6 7.75%
(50% stakes) Zambia Delta)
Greenspan Mall Stanlib Kenya
Q4 2015 Greenspan Mall Nairobi, Kenya Mixed Use 20 8.10%
Limited Fahari I-REIT
Ebene, Delta (now Mara
Q1 2016 Barclays House Office Jade Group 13.4 8.30%
Mauritius Delta)

Source: Knight Frank

© Ecobank Research | Economic Dynamics in SSA’s Real Estate Sector | September 2017
 Thank you

© Ecobank Research | Economic Dynamics in SSA’s Real Estate Sector | September 2017
 Tuesday 12th September 2017

Global Real Estate Trends, Africa

and Opportunities for 2017/2018
Sabina Kalyan, Global Chief Economist and Head of EMEA Strategy & Market, CBRE
Global Investors
James Green, Partner, K&L Gates LLP, London
Gaimin Nonyane, Head of Economic Research, Ecobank
Adri Kerciku, Investment Consultant, M3 Capital Partners (UK) LLP
Mike Phillips, UK Editor, Bisnow
Nathalie Villette, Group Head, Global Corporates, Ecobank
© Copyright 2017 by K&L Gates LLP. All rights reserved.