Capital Markets Insights

Platform of the Month - Realty Africa

Company Name: Realty Africa

Sector: Real Estate Development
Location: Sub-Saharan Africa

1.Can you introduce your investment platform?

Realty Africa is a Property Crowdfunding Company specialist in the Sub-Saharan area. On our platform ( ) we facilitate Real Estate investments to local as well as international investors. Via our platform we can give them access to opportunities that were not available before except for a few well informed investors that are deeply engaged in African business. On the other hand, we not only see the investors as our customers but also have a very strong focus on the developers.

From the start, we took the concept of investing in Africa very seriously and wanted to develop a new approach towards fiduciary responsibility and investor security in the crowdfunding space. It took longer to setup than we anticipated, but for investors, we can offer great investment opportunities in Real Estate which are fully securitized and well suited for retail, professional as well as institutional investors.  We thoroughly vet all investments with the help of our service provider Deloitte and we stay involved to manage and monitor the investor interests until the end. We perform site visits and use drip financing to protect the investors. Large investors are welcome to perform their own due diligence as well, even before the project lands on the platform. This way investments in African Real Estate become accessible to all qualified investors. Also the investors that don’t have the means to find informed investments on their own.

At the same time, we want to really empower the local landowners, developers and architects in Sub-Saharan Africa. We developed a total service portfolio which we will launch in stages. These will support the local professionals and enable their businesses. Qualified projects have access to international funding on our crowdfunding platform.  We are also soon launching our RA Connect platform where the landowner can meet developers and architects to achieve common interests and create joint ventures and more services will follow. This way we can help local entrepreneurs to start venture and create an income from their land.

We believe that this platform is very necessary, because we strongly believe in the future of the African Real Estate markets. From an investment perspective and more importantly from the Impact that these developments have on the local community. We have a large variety of projects in the pipeline which includes Social Housing, Student Housing, Eco Lodges but also middle-income housing and luxury apartments. Africa has a long history with crowdfunding. Whole communities would pull funds for creating a building. For instance, the University of Botswana was largely “crowdfunded”. This process of financing not only facilitates the funding but also creates a feeling of mutual ownership and care for the longer term. We are enabling the African community to take this concept to the next level to get access to the international retail and professional investment community. With our additional services, we support the local developers already in the pre-finance stage. These services will also deepen our knowledge of the local markets, which is to the benefit of all our customers.

2.How did you came up with the idea to start an online investment platform? Was there an “ah-ha” moment?

The founders all have a strong connection with Sub-Saharan Africa, as well as a strong background in investments, banking and IT. Traveling around and talking to people we found that people on hand are struggling in many places and on the other hand the most fantastic buildings are being built with finishes that are even unheard of in Europe.

Many people are rich and poor at the same time. This sounds like a paradox. Many people are very rich in assets like land, but don’t have the means or knowledge to develop this land. And even if they are able to develop a project, many people don’t have access to an investor network for funding. Going to the bank is also not always an option.

That is why we came to develop the total Realty Africa Value Proposition. The investment platform is our first offering that we have built to solve the problem of getting access to an international investor network.

3.What’s different about your platform than others in the space?

Different to some of the other platforms, we establish local presence in all market where we want to be active. With our local teams and with the help of our service providers, we have a lot of knowledge of the local African markets. We also work with established local service providers. We don’t believe in doing everything in-house.

Many investors regard investing in Africa as very risky and scary. That is why we developed our Realty Africa ECO System ( ) with a strong focus on Due Diligence. We asked Deloitte to be our service provider. We also developed additional services which are vital in creating a stable company base and to support the core business of empowering the local people and of finding interesting, trustworthy and transparent investment opportunities.

Realty Africa is the first multi-currency platform offering full secured investments with direct recourse to the asset for our investors. These investments cannot be regarded as full equity or debt, but are a kind of hybrid with excellent double digit returns. We stay with the project for the whole duration and make sure that returns are distributed. We believe that our investments are suited to local as well as international investors and work hard to create a balanced combination between retail and institutional investors.

We have special attention to a select group being the Global Diaspora Community, those living abroad outside their country of origin. We also offer an interesting service, complementary to our crowdfunding business.  With our network, we can not only provide investment opportunities in their home country, but we can also support an ambition to build a house back home. With the same structure we use to check on development projects for our investors, we can check on the quality of your build and make sure that only money is paid when the work is performed. We call this Diaspora Construction ( ).

4. Do you have any milestones you would like to share with us? Or any other interesting news about your platform?

Realty Africa is a new company and It took us two years to setup the whole structure and to battle local perceptions. As a new business, we have to take good care of our reputation. Reputation is very important in Africa and therefore, we can’t rush the due diligence process and asked one of the Big Four to be our service provider. Also, we are actively expanding our local teams to gain even more knowledge. In parallel, we are also actively seeking for large investors or institutions that love Africa and that want to work together with us to open up this market and possibly underwrite some of the projects. The opportunities are endless and the double-digit returns provide an excellent opportunity compared to the current savings rates in Western Europe or the USA.

It was a real milestone to go live in February this year and we are open for business in several places including South Africa, Botswana, Zimbabwe, Mauritius, Kenia and Ghana. Currently we have 85 registered developers and our pipeline is filled with interesting projects like a state of the art Eco Lodge in Victory Falls, a gated community in Botswana, a shopping mall in South Africa and an apartment complex in Ghana. We expect the first projects to be online in the next couple of months.

5. How do you see the industry evolving within the next 24 months?

We believe that it is a misconception that crowdfunding is only for small amounts and non-professional investors. Crowdfunding is a way of democratising investments. In our view it is ideal for investors who would like to have more control. You can select the project that you like instead of a mandate to a fund manager. At the same time, investing in real estate in Sub-Saharan Africa is also an ideal way for professional investors to spread risk in an investment class with higher yield and which is maybe outside of your expertise. Investors who prefer Impact investments can participate in Social Housing or Eco lodge projects.  So property crowdfunding in Sub-Saharan Africa offers many opportunities to all kind of investors. When the pipeline grows, we are looking for partners to establish a managed fund or REIT of African Real Estate.

At the same time, crowdfunding is being scrutinized and has strong focus from many regulatory bodies globally. More than four years down the line it starts sinking in that also investing in crowdfunding has inherent risks. The recent failures of companies like the Coolest Cooler where new entrepreneurs managed to attract 13 million in funding on Kickstarter or Rebus in the UK which was qualified "the biggest failure to date of a UK crowdfunded company" by the Financial Times.

People come to realize that crowdfunding is just like real investments and should be treated accordingly. Therefore, Fiduciary responsibility is key.  While setting up our crowdfunding company, many experienced investors complained that crowdfunding feels like a hit and run strategy. The crowdfunding company earns a fee upon a successful campaign and then runs to the next one, leaving the investors with problems when they occur. Also, many platforms still advocate that due diligence is the responsibility of the investor.

We believe that for the crowdfunding sector to survive, the fiduciary responsibility should be taken very seriously. That is why we are very focused on providing a good ECO System and we stay with the investment. The crowd is powerless when the platform is not there to support the investors all the way to the end.

6. Tell us a little about the founders?

Realty Africa is established by Patrick Chella and Erik van Eeten, two seasoned professionals from the Netherlands and has a diverse team of people with a lot of banking, investment and IT expertise. Patrick Chella spent his youth in Zimbabwe before moving to the Netherlands to study and work in the Investment and Banking Sector.

Erik van Eeten started his career at IBM as a Business consultant and transferred to the Investment and Banking Industry. Realty Africa has a lot of expertise in the local markets with one co-founder born and raised in Zimbabwe as well as through the benefit of local teams which we establish in each country. Erik van Eeten imparts his expertise about Realty Africa and the opportunities of investing in Sub-Saharan Real Estate projects via their platform.