PROPERTY: Cape Company Rounds Up Foreign Opportunities
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Following the relaxation of South Africa’s foreign direct investment (FDI) policies early last year, allowing local companies an annual offshore asset investment of R50 million, Cape-based investment company Vestco has structured an opportunity for SA companies in the property sector to invest in selected international properties.
The initiative is being driven by the head of Vestco, Hendrik Olivier, whose commercial property investment division has expanded to include a foreign operation, Qumulus, which promotes offshore commercial opportunities. Vestco/Qumulus has just successfully facilitated a transaction in Germany for Swartland Properties, a subsidiary of the largest local manufacturer of wooden doors and frames, the Swartland group. The property is a commercial building in Berlin, with a blue chip, long-term retail tenant.
‘Up to the time of the amendment in legislation, it was notoriously difficult - if not impossible - for South African companies to invest directly in property offshore,’ says Olivier, who is also a qualified attorney with a background in institutional and private asset management. ‘The chances of success were slim, unless the ownership was primarily for purposes such as setting up a manufacturing subsidiary, or where increased goods or service exports from South Africa would result.
‘Historically, even the major property owners such as life assurance groups, asset managers and listed property companies or funds were only allowed to manage offshore properties, and not own them.’
Previously, all requests for foreign investments by companies had to be referred to the South African Reserve Bank (SARB) and approvals were ultimately dependant on their being able to demonstrate and substantiate, in detail, ‘quantifiable benefits to South Africa’. Rental income and dividends were not viewed as adequate reasons for approval.
‘As part of the more enlightened legislation, the Reserve Bank has delegated the approval function to ‘authorised dealers’ - banks with full foreign exchange licences -and has instructed them to ask only for an outline of the benefits to South Africa, as opposed to detailing and quantifying the benefits, when they evaluate FDI requests up to R50 million.
‘This relaxation in policy has opened the door for companies in the property owning and developing sector, as well as for companies with significant property holdings as part of their group – as long as the property interest is a company activity specified in the financial statements.’
To qualify for approval, a minimum of 10% interest must be held, and the offshore subsidiary or branch must be in the same line of business as the SA company.
Olivier stresses that Qumulus provides a multi-disciplinary service and is backed by sound knowledge and networks to ensure that not only are prime property or business opportunities sourced, but also co-ordinated, and the deal successfully negotiated.
The Qumulus service, he says, includes understanding the objective of the client, sourcing and analysing appropriate opportunities, structuring the transaction and funding requirements, as well as advising on legislation peculiar to the transaction and location.
‘Qumulus leverages the strength of its network in South Africa and abroad and this, combined with an ability to offer an integrated and relevant service, provides our clients with opportunities that are fundamentally solid and focused on meeting both international growth and their expansion objectives,’ he says.
Geographically, opportunities exist in the UK and Europe but opportunities can be sourced anywhere according to the clients’ preference. Typical commercial property includes retail shopping centres, office blocks, industrial sites, hotels and apartment blocks. ‘We also offer development opportunities with or without international developers as business partner,’ he says.
The allowed R50m per annum investment means a property in the region of
R150m can be acquired by financing the transaction that will be structured and negotiated by Qumulus with a reputable financial institution.
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