In the largest real estate debt transaction in Sub-Saharan Africa (excluding South Africa) and the first cross-collateralised and multi-jurisdictional portfolio real estate financing deal on the continent, Lango Real Estate Limited (formerly Growthpoint Investec African Properties Limited) has completed a full restructure of its underlying property debt in a portfolio financing transaction worth over US$300 million.
The market-leading transaction, jointly provided by Standard Bank and RMB with Standard Bank acting as the sole mandated lead arranger, not only simplifies Lango’s debt management activities and is accretive to performance, but also arguably affirms Lango’s status as a leader in the African commercial real estate market. The innovative refinancing initiative aims to significantly reduce Lango’s cost of debt, substantially extend its debt maturity profile and harmonise various covenants across its portfolio.
Launched in 2018, Lango was jointly established by South Africa’s largest primary JSE-listed REIT, Growthpoint Properties Limited, and global investment manager Ninety One (previously Investec Asset Management), listed on both the LSE and JSE. Growthpoint also has a 16% shareholding in Lango, alongside other notable South African and international institutional investors.
Lango has an established track record in concluding successful and accretive transactions (such as the RMB Westport property portfolio), having successfully deployed its total equity raised to date, and achieved further significant growth. It has aggregated a high-quality portfolio of commercial real estate assets to attain meaningful scale and relevance in the sector by concluding the largest portfolio acquisition in the continent (excluding South Africa).
Lango focuses on prime income-generating office, industrial and retail assets in select African ‘gateway’ cities, and the portfolio currently includes 11 assets spread across four countries: Ghana, Zambia, Nigeria and Angola. Assets include landmark properties such as the Standard Bank (Stanbic) head office in Ghana, Standard Chartered Head Office in Ghana, Manda Hill Shopping Centre in Zambia, and The Wings, an A-grade office complex in Victoria Island, Lagos.
Thomas Reilly, Managing Director of Lango, says, “Management has strategically focused on optimising Lango’s capital structure, and has achieved this through an innovative funding structure whereby individual asset-based debt packages have effectively been converted into a broad portfolio- based debt structure, on far more competitive terms. This debt restructuring initiative is ultimately aimed at enhancing Lango’s distributable income and will lead to significant operational efficiencies for the business. Prioritising Lango’s distributions to shareholders remains central to our strategic focus, and building a sound track record in this regard is critical ahead of a planned IPO process which is targeted to take place in the next few years.”
The portfolio financing structure jointly structured by Standard Bank and RMB allows for more seamless loan administration compared to typical single-asset finance structures. As the portfolio grows, existing lenders can expand their funding on an expedited basis, and additional lenders can also be introduced relatively seamlessly, if needed. The value in this facilitation is significant. Given Lango’s operations in multiple jurisdictions, it simplifies the inevitable associated legal and regulatory complexities. In addition, the scalability and flexibility of the structure facilitate the banks’ ability to support Lango in its growth trajectory whilst simultaneously allowing Lango additional time to focus on its core property business.
Niyi Adeleye, Head of Real Estate Finance for Africa Regions at Standard Bank, says, “Institutional investors continue to focus on real estate in Africa, with this transaction showing new and innovative capital following investment trends. While market volatility can create uncertainty, investments such as these reinforce and highlight the underlying strength and longevity of the markets and the industry .”
Adeleye adds, “COVID-19 has highlighted the fact that commercial real estate infrastructure remains crucial in Africa. It is an enabler of economic growth and meaningful social impact, and as such, transactions such as these are aligned to Standard Bank’s purpose – driving Africa’s growth. Africa’s commercial property market, which requires patient capital, has a long runway ahead given the shortage of quality assets in many markets.” Lango’s strategy is an entry point for sophisticated investor capital to flow into the real estate sector in Africa and to invest in the key ‘gateway’ cities on which it focuses.
Standard Bank is the sole mandated lead arranger and co-lender and was selected as the sole transactional banker to all entities involved in the Lango transaction – currently over 23 legal entities and growing. Standard Bank also implemented joint hedging solutions with RMB, thereby mitigating Lango’s exposure to possible rising interest rates in future. This was a complex deal as assets had to be cross-collateralised into one structure spanning five jurisdictions, and it involved numerous borrowers and teams.
Reinhard Winsauer, Head of Real Estate Investment Banking’s Rest of Africa strategy at RMB, says, “The successful conclusion of the debt restructure as well as RMB’s equity investment into Lango is testament to RMB’s dedication to both real estate as an asset class, and to Africa as a key investment destination for the bank.”
RMB have been intrinsically involved in the development of some of Lango’s properties through the RMB Westport initiative. Seeing the assets mature and form part of Lango’s premium property portfolio has been particularly encouraging. Our ability to partner with our clients through challenging macroeconomic times and to provide sound advice and structuring solutions was evidenced in the culmination of this landmark deal.
In addition to being co-structurer, hedge provider and lender alongside Standard Bank in this transaction, RMB has been able to extend the partnership with Lango to include an equity investment into the company.
Reilly concludes, “The growth and scale that Lango has achieved, supported by our funding partners in this transaction, enhances Lango’s ability to further entrench and capitalise on its position as a dominant player in the African real estate market, and creates a funding platform to facilitate considerable future growth.”
ABOUT LANGO REAL ESTATE:
Lango is a private real estate company focused on generating compelling and sustainable investor returns through the acquisition of prime income generating commercial real estate assets in key gateway cities across the African continent. Originally jointly established between Ninety One (previously Investec Asset Management) and Growthpoint Properties, Lango commenced operations in March 2018. The business has since demonstrated significant growth, emerging as a leader in the asset class in Africa, with assets on its balance sheet in excess of $600million* and spread across four countries. Lango ultimately aims to catalyse the capital market for real estate as an asset class in Africa and intends to list on a recognised stock exchange over the medium term. *As at end December 2020.
ABOUT STANDARD BANK:
Standard Bank Group is the largest African bank by assets, operating in 20 African countries and 5 global financial centres. Headquartered in Johannesburg, South Africa, we are listed on the Johannesburg Stock Exchange, with share code SBK, and the Namibian Stock Exchange, share code SNB.
Standard Bank has a 158-year history in South Africa and started building a franchise outside southern Africa in the early 1990s.
Our strategic position, which enables us to connect Africa to other select emerging markets as well as pools of capital in developed markets, and our balanced portfolio of businesses, provide significant opportunities for growth.
The group has over 50 000 employees, more than 1100 branches and over 6500 ATMs on the African continent, which enable it to deliver a complete range of services across personal and business banking, corporate and investment banking and wealth management.
Headline earnings for 2020 were R15.9 billion and total assets were R2.5 trillion (about USD170 billion). Standard Bank’s market capitalisation as of 31 December 2020 was R209.4 billion (USD14 billion).
The group’s largest shareholder is the Industrial and Commercial Bank of China (ICBC), the world’s largest bank, with a 20.1% shareholding. In addition, Standard Bank Group and ICBC share a strategic partnership that facilitates trade and deal flow between Africa, China and select emerging markets.
For further information, go to Standard Bank
Rand Merchant Bank (RMB) is a leading African Corporate and Investment Bank and part of one of the largest financial services groups (by market capitalisation) in Africa – FirstRand Bank Limited. We offer our clients innovative, value-added advisory, funding, trading, corporate banking and principal investing solutions.
At RMB we are passionate about solving problems for our clients by asking the hard questions. We challenge accepted thinking. We analyse and seek solutions beyond the obvious. We are innovative in our thinking and turn challenges into opportunities, while delivering on Traditional values. Innovative ideas. Our ability to think differently, our collaborative spirit, our client-centric solutions and our belief that great minds don’t always have to think alike, is what sets us apart.
As the Corporate and Investment arm of FirstRand Bank Limited (which is wholly owned by FirstRand Limited), we have access to a network of retail banks in 25 African countries, including representative offices and branches in the UK, India and China.
For more information please visit: www.rmb.co.za