TBY talks to Robin Miller, Managing Director of Real Estate Investments Zambia (REIZ), on the company's evolution, challenges acquiring capital, and the balance between commercial and retail properties.

Robin Miller
Robin Miller completed a BSc in Accounting and International Finance from the International Centre for Accounting Research at Lancaster University (UK). In the UK, he worked at Coopers and Lybrand, as well as the Virgin Group of Companies. Upon his return to Zambia, he took up the position of Managing Director at City Investments Limited, as well as that of Managing Director of Farmers House. He has also been a member of the Board of the Zambian Wildlife Authority, Chairman of The Post newspaper, a member of the government of the Republic of Zambia/EU Trade Enterprise Support Facility, and was the founding Chairman of the Tourism Council of Zambia. Robin is a trustee of the David Shepherd Wildlife Fund/Game Rangers International.

How did Real Estate Investments Zambia (REIZ) evolve from a cooperative to a leading real estate investment company?

We have quite an interesting history, which goes back to the 1920s, which is old for this part of the world. The origins of this company were as a cooperative mainly for commercial farmers to consolidate their farming activities and by using the railway for the delivery of crops from around Zambia to Lusaka. Like many cooperatives over the years, it changed its look several times. It retained its position as a cooperative until 1981, when a limited liability company was formed called Farmers House, to which all of the real estate of the cooperative was transferred. The cooperative owners became shareholders of the new company on a one-for-one share basis. From that time on, the company was solely a real estate investment vehicle.

How has REIZ addressed the challenges of available capital?

For many years, high borrowing rates for the kwacha made property development unaffordable. So when we joined the capital markets, it helped us deal with the challenges of available capital. We have been highly active in the capital markets since then, and we were recognized at the 20th anniversary of the LuSE as the company that has issued the most instruments on the exchange. In 1999, we issued the first LuSE-listed corporate bond and raised $1 million. That corporate bond was convertible, and it actually was converted into equity by all the bondholders. In 2000, we raised $1.98 million via a preference share right issue, which was priced at an 8% coupon and paid in the US dollar. We used both of these instruments to develop our Central Park project. This development on Cairo Road demonstrated a commitment to, and an upgrade of, our assets. Still, one of our development criteria is if we cannot finish a project, we do not start it. In 2003, we raised Zambia's first bank loan of $2.6 million specifically to develop the LuSE building. This was the first ever property development loan in this country secured on the asset itself. It was difficult to get that loan, but it established us as developers who deliver. The next interesting instrument was the issue of a $10 million rights issue for the development of the Celtel/Zain/Airtel Head Office. Through those previous instruments we were able to encourage institutional investment in the company. As a result our list of major shareholders includes almost every major institution in the country, from the National Pension Scheme Authority (NAPSA), Saturnia Regna Pension Trust Fund through the Bank of Zambia pension fund, the Kwacha Pension Trust Fund.

What is your current balance between commercial and retail properties?

In terms of the assets, Arcades mall is about 45%. Actual retail is a little higher than that, meaning we are about 50:50 between retail and commercial properties. The area we do not have and that is in its nascent stages in Zambia generally is in industrial property. Even in the Western world, if you were a major brewer or bank you owned your own brewery or head office. Increasingly, a brewery will not own its own brewery, but a property investment company will own it, as long as the brewer can control the production of beer. So that is changing worldwide, where slowly companies do not necessarily own their own fixed assets. The banking sector is interesting, especially following the “sub-prime" crash, where banks are increasingly being assessed on return on capital employed. If you are sitting in, and own half of Wall Street, that capital is locked up and you are not getting a return on that capital. Increasingly banks are di-vesting in property assets releasing that capital to focus on their core business.