SPF to dispose of real estate as part of diversification strategy   By Laura Pillay |16 September 2021

Mr Houareau (centre) speaking during the press conference yesterday (Photo: Louis Toussaint)

The Seychelles Pension Fund is to dispose of eight of its 28 real estate properties, in a bid to diversify and rebalance its investment portfolio, towards becoming more sustainable in the long term.

The strategy follows the recommendations of the international audit authority to the institution, who in a 2018 report recommended that the fund, which is still in its infancy, reduce the real estate portfolio from 50 percent where it presently stands, and to diversify investments. This is with the aim of maximising returns and minimising risk exposure from certain asset classes in the domestic market.

Chairperson of the board of trustees of the Seychelles Pension Fund (SPF), Marc Houareau, officially made the announcement in a press conference held yesterday morning at the institution’s headquarters at the Caravelle House.  

He explained that with the increase in the lifespan of citizens, coupled with the economic implications of the Covid-19 pandemic, the fund is inching ever closer to ……………..inflection.

“As a young pension fund you do not have much money. In 2006 when it stated there was R550 million in net assets, we were paying only 362 pensioners at the time. Today, these assets are at R3.6 billion, and today, we have around 6,400 pensioners who we are paying monthly,” said Mr Houareau.

“In the past, it was okay, as we were not making payments to a lot of people. Today, the difference is that the pensions that we are collecting and what we are paying out, is almost level. We are nearly at the inflection point. Last year, we collected R450 million, and we paid out R401 million. So, we made a surplus of R49 million. What we are observing for this year is that we will collect R450 million, and we will pay out R450 million,” Mr Houareau explained.

Revenues have dropped significantly over the past couple of years, with the economic implications brought on by the pandemic. With government’s call to appease business owners of the financial burdens, the SPF launched into action, reducing rent at commercial properties by 15 to 25 percent. As such, properties failed to generate the return that the fund needs. By disposing of the properties, SPF can secure funds for further investment.

The properties are to be sold in phases, by tender procedures through the National Tender Board (NTB) for utmost transparency, Mr Houareau asserted. Four of eight real estate assets identified for sale are up for grabs in the first phase, namely, the Corail D’Or Apartments, a beachfront residential property located at North East Point, in addition to a vacant plot measuring 4,262m² located at Anse à la Mouche, both of which are situated on Mahé. The La Passe Pension House on La Digue is also up for grabs, along with the La Clementine Building located at Baie Ste Anne, Praslin.

As per the fund’s new policy, the objective is to reduce SPF’s exposure, and over investment in the real estate sector to 45 percent by 2022, and 35 percent by 2027.

“The money that we raise will come back to Pension Fund, and we will reinvest it either in projects such as Pirates Arms, and other projects that we believe are sustainable, as well as other investments that come up. If tomorrow another company goes public on the stock market, and we find that it will be beneficial to invest in such, we will if we have adequate funds. Finally, we need to have a cash reserve to use. It is the actuary who informs us how much money to keep in our accounts monthly,” Mr Houareau noted.

The reconstruction of the iconic Pirates Arms is among the short-term objectives for SPF, who intends its next investment to be the entertainment hub of Victoria. The project is to be tendered out soon.

As per chairman Houareau, the actuary in the 2018 report also proposed that additional measures are needed if the fund is to remain sustainable in the long-term.

“One of the key points that came out in the 2018 actuary report was the fact that the contributions being made today, which consist of 3 percent for employees and 3 percent for employer are not sustainable for the fund in the long-term. Therefore, they recommended that we move the goalpost from 3 percent to 4 percent and 5 percent. That has not happened and for us it is important. We have already had discussions with the Ministry of Finance, Economic Planning and Trade, and with State House as well, that it is imperative that we move the contribution from 3 percent to 5 percent as quickly as possible, for the sustainability of the fund,” he explained.

The report also clearly states that the retirement age be increased to 65 years old, a proposition which has been put forward to President Wavel Ramkalawan. SPF is pushing for government to tackle the decision at the soonest opportunity, in line with its ongoing strategy.