1. Overview of Private Equity in the Real Estate Market IRF Conference 20 August 2013

2. The Basics – A Generic PE Structure Private Equity Firm (General Partner or GP) Limited Partner or LP (Public Pension Funds, Corporate Pension Funds, Insurance Companies, High Net-Worth Individuals, Family Offices, Endowments, Foundations, Sovereign Wealth Funds) Private Equity Fund (generally an LLP) Investment Fund ownership of portfolio investments Ownership of the Fund Fund Investment & Management

3. Alignment between GP and LPs GPs and LPs are aligned as minimum watermark IRR for LPs needs to be achieved before GP participates in the carry Common carry split between LPs and GPs is 80/20, and the common base fee is 2%, hence the PE jargon of “2 and 20” A preferred return or watermark IRR is usually determined by the sector In African property, the watermark IRR ranges from 8 to 10%, depending on the type of real estate fund (income vs development) LPs are also starting to take positions in GPs

4. Private Equity in South Africa South Africa’s Pension Funds Act was reformed in 2011, with key amendments to Regulation 28 of the Act which sets out the allocation cap for various asset classes. South African pension funds can now invest up to 10% of their total assets in private equity subject to limitations (an increase from previous allocation caps of 2.5%) Over the last year total PE funds under management increased by 10% to over R126.4 billion, but pension funds are slow on the uptake. 1 As at 2012, it is estimated that despite considerable GEPF investments, less than 1% of South African pension fund assets under management (“AUM”) was invested in private equity. 2 1 South African Venture Capital Association 2 E. Pickworth (2012) “Pension fund ‘missing out on private equity”, Business Day (South Africa), 11 September 2012

5. Private Equity Concerns Allayed: Swensen and Markowitz Liquidity concern regarding PE is perhaps a red-herring in the context of pension funds. It is relevant only when issues of short-term solvency are to be considered. Is this a material consideration for pension funds, which have long-term liabilities and thus logically should also be adopting long-term investment strategies? Other asset classes are not in fact nearly so illiquid as they may at first appear. There is a thriving secondary market for private equity partnership interests. Property, certainly prime property in a prime location, is always saleable. Property, as an “alternative” asset pre-dates quoted equities as an investment by at least 2,000 years. Legally defined liquidity creates the ability to convert securities into cash at a moment's notice is naïve and unsound. Many investors on Black Monday were unable to sell even FTSE100 shares as the demand for dealing capacity simply overwhelmed the system. Trading in large blocks of listed equities is not as liquid as imagined. There is a tendency among trustees and consultants alike to regard “illiquid” and “alternative” assets as the same, and it seems followers of “alternative” assets might be compared to the original protestants who brought about the Reformation.

6. Private Equity Funds looking for a home GPs stockpiled with dry powder fuelling deal demand Source: Bain and Company

7. Funds on the road and capital split by fund type in 2012 Source: Bain and Company

8. PE versus other Asset Classes: Developed Markets Note: Data based on review of public pension funds in North America and Europe Source: Bain and Company Median returns for public pension funds by asset class, 10 year horizon IRR, June 2012

9. What Emerging Market Investors are saying…

10. LPs planning to begin or expand investment in Select Emerging Markets by Institution Type Investors in Private Equity Source: Emerging Markets Private Equity Association LP Survey 2013

11. Investors in Private Equity – Views on Africa The Attractiveness of Emerging Markets for GP Investment Over the Next 12 Months – LP Views Overall Ranking 201320122011 Sub-Saharan Africa157 Southeast Asia*242= Latin America (ex-Brazil)314 China432= Turkey576 Brazil621 Central and Eastern Europe7108 Russia/CIS8810 India965 Middle East and North Africa1099 *Classified as “Other Emerging Asia” in 2011 and 2012 Sub-Saharan Africa for the first time leads a new tier of Emerging Markets, for the first time, jumping from 5th place in 2012 Displaced BRICs as most attractive First time In the EMPEA survey’s nine-year history, none of the BRIC markets broke the top three.

12. Why we like Africa...

13. Large consumer market Home to more than 1 billion people 1 dot = 100,000 people Source: Market Decisions Fast growing economies, underpinned by domestic consumption CAGR in consumption of 11.4% over the next three years 1 Increased urbanisation, 47% of Africans will live in cities by 2025 1 Emerging middle class; 95% of the market currently informal; 20% of the market to be formal by 2030 2 1 United Nations Human Settlements Programme (UN-HABITAT) 2 BofA Merrill Lynch Global Research

14. Africa continues to rise FDI has grown considerably over the last decade FDI in SSA has grown to 5.6% of world FDI over the past five years South Africa invested over US$ 800 million in SSA during 2012 1 1 Real Capital Analytics

15. %y/y Sub-Saharan Africa real GDP growth Source: STANLIB Research

16. % of world GDP, PPP Sub-Saharan Africa percentage of World GDP Source: STANLIB Research

17. $ billion Private sector financial flows (net) to Sub-Saharan Africa Source: STANLIB Research

18. % of population, PPP adjusted Sub-Saharan Africa: % of people living on less than $1.25 per day Source: STANLIB Research

19. RISING STRIVER PROFILE -27 year old father of 2 -Thriving taxi business -Lives in city centre and has a car -Most of income on household needs + a new smartphone + drink after work RISING STRIVER PROFILE -27 year old father of 2 -Thriving taxi business -Lives in city centre and has a car -Most of income on household needs + a new smartphone + drink after work Aspirational consumer market

20. Growing consumer expenditure

21. African Property Fundamentals…

22. Massive retail shortage Lack of higher grade quality office space Deficiency of industrial space Increasing need for warehousing and logistics centres as retailers enter the markets Lack of good roads and public transportation creates demand for housing near work locations Property demand outweighs supply

23. Property fundamentals are strong An opportunity for further 3 million m 2 of retail in Lagos Source: BofA Merrill Lynch Global Research, IMF, Euromonitor, SACSC, CIA Factbook Johannesburg: 4,200,000m 2 formal retail & 3.6 million people Lagos: 42,000m 2 formal retail & 10.2 million people Citym² : people Johannesburg> 1 m² per capita Lagos0.005m² per capita Citym² : people Johannesburg>1m² per capita Lagos0.2m² per capita and if 1 person’s spending power in Johannesburg equals 4 people’s spending power in Lagos This represents an opportunity to develop up to 3,000,000m 2 of formal retail property in Lagos.

24. Formal retail undersupplied Source: STANLIB, BofA Merrill Lynch Global Research, IMF, Euromonitor, SACSC, CIA Factbook Demand outweighs supply making rentals expensive Economic growth and relative population supportive 50 million people in Nigeria live above the poverty line

25. Sound underlying drivers of return Source: Knight Frank, Africa Report 2013 STANLIB Research Average Regional retail rentals / m² Lagos$65Nairobi$31 Accra$45Johannesburg$45 Average High grade office rentals / m² Lagos $85Nairobi $15 Accra$40Johannesburg$20 Average yields are in the region of 11 – 14%; Targeted IRR’s (10 year) are between 20 – 25% Good risk-adjusted returns

26. Sell side analysts’ view for SHP SHP Nigeria Currently 5 stores with 18,000m 2 A further 4 stores by end 2013 or 12,000m 2 SHP believes 700 stores can open in Nigeria SHP has first mover advantage No central distribution yet Competition limited with 95% of the market still informal

27. Private Equity in Property Development: a different type of investment Spend time on the ground walking the streets Develop partnerships with long term local developers Entrench in the economic environment Long – term sustainable, responsible investing Take time to understand how things work

28. Recognise the Opportunities but also Recognise the Risks

29. Opportunities are bright, but challenges remain Africa clustered toward the bottom of global rankings The World Bank recognises progress made by African countries since its first listing in 2005 African countries have a long way to go

30. Long list of risks to be considered Buckets of Risk to Manage Country Political risk Bribery and corruption Bleak international perception Currency and Interest Rates Currency risk Rental payments in local currency Interest rate and tenor risk Operating Environment Lack of infrastructure Credibility of partners Lack of available debt funding Legal Environment Inefficient policies Tax risk Legal and contracting risks

31. Risks are real and have to be managed Exercise even greater caution to ensure you are protected Specifically related to Property: Land Tenure – need for local partnerships Ability to Execute – need for service provider partnerships Ease of distribution – need for retailer & investor/developer partnerships

32. We need to take action Perspective: Perspective: assuming a glass-half-full perspective that focuses first on opportunity, and only then on the risks that need to be managed Partnerships: Partnerships: investing in building strong collaborative partnerships across government, business and communities and with each other Planning: Planning: adopting careful long-term planning, and patience; persistence and flexibility in implementing those plans People: People: nurturing and developing Africa's human talent: arguably the continent’s greatest resource Embracing Africa’s diversity unlocks opportunities Source ERNST & YOUNG Business in Africa Survey

33. STANLIB Africa Direct Property Development Fund (“SADPDF”)

34. The Fund 1. Scope Stage of developmentGreenfield, brownfield, land acquisition, early development phase Geographic focusSub Sahara Africa (excluding CMA), with a key focus on Nigeria, Ghana, Kenya, and Uganda Property segmentRetail (60%-80%) and other commercial assets (20%-40%) Project involvementLand acquisition, concept design/management, project management (construction), portfolio management (leasing, maintenance) 2. Role and Nature of Investments Size range of investment$15 - $ 30 million Where in capital structureLand owner (10-25%) / Fund equity (25-40%) / quasi equity (10-15%) / Senior debt (50-65%) Targeted return profile22-25% IRR (nominal gross) Hurdle rate / Preferred return10% IRR Level of controlVaried, but select reserved matters for Fund at shareholder level Maximum deal sizeNo more than 33% of the total Fund capital ($50 million) PartnershipsLocal institutions (land access), SA retailers, private equity funds (e.g. Actis) 3. Fund scale and Structure Size$150 million (4-6 projects) Duration4 year investment period, 4 year harvesting period (with a two year extension option) DomicileMauritius Co-investment allowedAllowed for select investors Minimum ticket size$5 million Fees charged1.5% (25% discount charged to usual rate)

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