The Motor Vehicle Accident Fund, one the country’s biggest institutional investors, is expanding its property footprint, eyeing one of money-spinning shopping malls.
In a deal currently being scrutinised by the Competition Authority, MVAF seeks to acquire 24.85 percent shareholding in Feune PTY Ltd from Exrod Pty Ltd. If the proposed acquisition goes through, MVAF will join other big institutional investors which are in charge of billions of pula.
Feune, the company that MVAF is buying in, is a variable rate loan stock company established solely for the purpose of the development and leasing of Airport Junction Mall in Gaborone. The shares in Feune are held by the biggest names in the local financial services sector: Botswana Insurance Fund Management, Botswana Public Officers Pension Fund and Eris/Exrod.
Established in 2012, Airport Junction has proved to be a lucrative business for its shareholders more so that the 41 445m┬▓ mall is currently undergoing an extension where 30 shops and 488 parking areas will be added to the already existing 74 tenants, boosting it to 51 145m┬▓ with two retail floors, 104 stores and 2378 parking bays.
MVAF in 2017 had about P3.8 billion in assets, with about P3.7 billion or 95 percent invested marketable securities, properties and other assets. The state owned entity which provides universal compensation to people affected by road accidents, has since 2015 seen its operating surplus declining on the back of increased liabilities.
Furthermore, local equities have been the worst performing asset class in the last two years, putting downward pressure on capital gains and dividend income. In the 12 months ending December 2017, local equities’ performance was down by 5.8 percent, on the back of another 11.3 percent drop in 2016.
The steady returns and the nature of real estate make property investments attractive as an alternative to equities, which offer high returns but can be volatile, as such real estate acts as a buffer for longer periods.
