Southern African firm plans $100m on Dubai property picks

Dubai

Having picked up its first property in Dubai, the Botswana-headquartered Turnstar Holdings confirmed plans to channel up to $100 million (Dh367 million (into realty assets over a five to 10-year period.

“That’s a conservative estimate — we want to be careful picking up assets since this is our first exposure outside of Africa,” said Ghulaam Abdoola, Managing Director at the listed company, which has exposures in shopping centres and townships in Botswana and Tanzania.

“Turnstar itself does not do greenfield projects, as our business model eschews taking construction or tenancy risks. When a building is ready, we buy into the income stream and future value gains.

“And since we only do completed properties, we are not chasing double-digit gains. As such, double-digit returns are very difficult when buying ready-made properties. But if there is slight value growth, that would add value for us.”

The first asset it picked up was a boutique office building in the Majan cluster of Dubailand, and acquired from Global Capital Partners. Talks are on to secure a further two assets in the latter’s portfolio, including a mid-rise residential building. Dubai South plot options could also be on the buyer’s radar.

According to Sameer Lakhani, Managing Director of Global Capital Partners, “Our focus has always been on the mid-tier sector, and despite media reports to the contrary, the market’s experiencing a steady increase in demand from both end users and investors alike.

“We believe the areas of high interest will be along the corridor that leads up to the Expo 2020. Opportunities abound for customised solutions to corporate tenants as well as attractive yields to investors.”

For Abdoola personally, a Dubai exposure is not something new. His family business under the GH Group umbrella has an office at DMCC for trading in rough diamonds, thus leveraging on Botswana’s status as one of the premier suppliers of the stones. There are also other trading interests the GH Group manages through Dubai.

But with Turnstar, the plan is to stay focused on real estate investment options. On whether it will be raising new funds for the planned exposures, Abdoola said: “We can raise funds for the company; we do have options to issue paper in the market, even a rights issue. All sorts of instruments to raise capital. “The issue is not funds. It’s finding the right property to bring to the portfolio — you need only borrow funds if you can use the funds properly.”

Unlike some of the other non-UAE funds that have been active of late in the local realty market, Turnstar — which is setting up an office in Jebel Ali Free Zone — is unlikely to go for industrial realty or vanity high-rise developments. Instead, the focus will exclusively target mid-tier, optimally priced assets.

“A leased portfolio is the way to generate income for shareholders,” said Abdoola. “We don’t want to remit any of the investments we make — just the dividends.

“There’re lots of funds available in southern Africa — we don’t have foreign exchange problem. Turnstar has spent $100 million in Tanzania on a township. Our move outside of the Continent relates to geography and currency hedging.” (As of end 2016, nearly 49 per cent of the Group’s total rental income came in US dollars.) On why it won’t consider pushing into South African realty, he said: “Because there’s such volatility on their currency, and that’s always going to cause problems in generating sustained returns. It’s best to get into overseas jurisdictions where a currency situation poses less of a risk.

“The other overseas option would be something in the UK — it’s always good to get some investments in done in the pound currency. And no, the Brexit and the pound’s decline are not factors. We take longer term options and not based on currency moves.”