Kasada Capital Management bets on growth of co-working space in Africa

By Xolisa Phillip, in Johannesburg
Posted on Tuesday, 19 July 2022 10:32

Justin Irabor, Co-founder of the Angels Among Us crowdfunding site speaks to Reuters during an interview in his office amid the spread of coronavirus disease (COVID-19) in Lagos, Nigeria April 23, 2020. Picture taken April 23, 2020. REUTERS/Temilade Adelaja

In June 2022, real estate private equity firm Kasada Capital Management and co-working space company WOJO signed an exclusive master franchise agreement to introduce the latter’s concept of co-working spaces to Africa.

The deal gives Kasada clients access to facilities, such as private offices, meeting and conference rooms, and co-working spaces combined with normal hotel services.

“This is a worldwide trend,” says managing partner and CEO at Kasada, Olivier Granet. “This is going to be even more important in Africa, where there are large corporates looking at establishing regional offices.”

“Some of these corporates have a limited number of employees and want to ensure … [the employees] have security,” says Granet. “We are focused on, and target, entrepreneurs, which is a dynamic market in Africa due to the sheer numbers of entrepreneurs.”

An important success factor is the density of the network. When travellers visit Abidjan, Cape Town, Dakar, Johannesburg, Lagos, and Nairobi “they will find an offer that will respond well to their needs”, he says.

In phase one of the investment platform’s co-working spaces plan, the firm will test the concept and develop it in a Kasada hotel. “We will then expand this to other Accor hotels. We have the capacity and the flexibility to answer to the market needs,” Granet says.

Big ambitions

In addition to the WOJO agreement, between January 2021 and June 2022, Kasada:

  • Acquired from AccorInvest a portfolio of hotels in Cameroon, Ivory Coast, and Senegal comprising 1,602 rooms and focused on servicing intra-regional business travel.
  • Announced the acquisition of the 414-key (lodging units) Safari Hotels and Conference Centre in Windhoek, Namibia.
  • Made known its acquisition of the 120-key Cape Grace Hotel in Cape Town, South Africa, its first foray into the country.
  • Acquired the Umubano Hotel in Kigali, Rwanda, from the Rwandan government.
    Agreed to acquire Southern Sun’s 75% stake in Southern Sun Ikoyi in Lagos, Nigeria.

“In May 2020, we put together a platform to be the solution provider in terms of African hospitality, a sector heavily fragmented and where capital was missing,” Damiba says.

“We went about to originate transactions across the continent. We met with owners and stakeholders. As we met, and as the evolution of our platform continued, we started becoming the [go-to] investor in the market,” says David Damiba, managing partner and chief investment officer at Kasada.

“You are seeing the result of that interaction [with owners, stakeholders],” Damiba says. “[Kasada is] … able to [act as a] counterparty, to provide solutions, and to buy from willing sellers. We will continue to do that.”

“The owners sell with comfort knowing that their asset will be with an institutional platform. In some cases, it’s like giving away an asset that one cherishes, but the fact that we have financial firepower and expertise helps,” says Damiba.

Strategic partnerships and new opportunities

A year ago, Kasada and the IFC announced a partnership in which the World Bank Group entity will extend $160m of debt funding to the real estate investor.

The IFC, in collaboration with Proparco, acting as a parallel lender, granted Kasada an initial $80m long-term senior loan package to finance the AccorInvest portfolio acquisition of the hotels in Cameroon, Ivory Coast, and Senegal.

The senior loan package “provides capital expenditure to refurbish and improve the properties while helping to achieve higher operating efficiencies and meeting ESG [environment, social, and governance] goals”, according to a statement by the IFC, Kasada and Proparco.

The guarantees will provide coverage against the risks of transfer restriction, expropriation, and war and civil disturbance

In January 2022, the Multilateral Investment Guarantee Agency (MIGA) issued a master contract to Kasada to provide guarantees of up to $270m of the platform’s equity investments in 10 countries for 15 years.

“The guarantees will provide coverage against the risks of transfer restriction, expropriation, and war and civil disturbance,” the parties said at the time of the announcement.

“The IFC and MIGA partnerships are strategic for us,” says Damiba. “The IFC partnership was born at the height of the pandemic. The IFC identified Kasada as a large, well-backed, well-capitalised real estate private equity platform that would be able to deploy capital in sub-Saharan Africa.

“ESG is important to the IFC transaction. ESG is also part of what we wanted to do. There is a meeting of the minds as well in terms of Kasada ambitions and IFC requirements,” he says.

“All our buildings have EDGE [Excellence in Design for Greater Efficiencies] certification, which is also part of the IFC,” Granet says. “We have commitments in terms of training our teams on food waste management.”

Kasada’s initial strategy was to focus on greenfield projects. However, Covid-19 forced a pivot towards brownfield initiatives. “We still see tremendous value in creating products that might be missing – and that’s what we’re doing. Our ambition will straddle between greenfield and brownfield,” says Damiba.

Tying this all together is Kasada’s belief in the potential of the African hospitality market. “If you are in the right position, and have the right product to address this potential, you find a level of performance which is quite encouraging,” says Garnet.

Betting on hospitality

Kasada Capital Management was founded in 2018 and is backed by the Qatar Investment Authority, the sovereign wealth fund of Qatar, and Accor, the French hospitality group.

A year after its formation, Kasada closed the Kasada Hospitality Fund, its maiden fund registered in Mauritius, with equity commitments of more than $500m.

Between May 2020 and May 2022, Kasada partnered with Accor to bring the WOJO co-working space concept to the continent.

The real estate investor has also amassed hotels in eight countries with a combined 3,000 keys in major cities, including Cape Town, Kigali and Lagos. “That means around 2,000 employees,” Granet says.

The strategy is to be in most corners of the continent

Furthermore, Kasada has concluded multimillion-dollar partnerships with the World Bank Group’s International Finance Corporation (IFC) and Multilateral Investment Guarantee Agency (MIGA) for debt financing and macro-risk cover, respectively.

“When we announced $500m equity, … [with] the initial tagline $1bn of key investments in sub-Saharan Africa, people were surprised, looking at the international [hotel] brands’ earnings in sub-Saharan Africa, which are quite limited,” he says. “It didn’t look very realistic.”

However, “the strategy is to be in most corners of the continent”, Damiba says.

Understand Africa's tomorrow... today

We believe that Africa is poorly represented, and badly under-estimated. Beyond the vast opportunity manifest in African markets, we highlight people who make a difference; leaders turning the tide, youth driving change, and an indefatigable business community. That is what we believe will change the continent, and that is what we report on. With hard-hitting investigations, innovative analysis and deep dives into countries and sectors, The Africa Report delivers the insight you need.

View subscription options