Transcript International Housing Solutions

International Housing
Solutions
City of Tshwane
September 2011
Residential investment-The Time is
Now
The market opportunity is huge
Residential Property is the missing “quarter
"of the SA property sector.
International Housing solutions is perhaps
an early example of institutional
investment in the SA Residential market
(albeit through a private equity structure).
There are a number of other institutional
backed entities building up portfolios.
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Property = Supply vs. Demand
Current market both within and outside SA sees very
little demand sector by sector.
At IHS we have focussed on what we believe to be the
only sector of the property market that currently has
more demand than supply and significantly so.
The investment market needs to begin to understand this
sector of the property market as an investment class
(which has begun).
The market needs to assist by making reliable and
transparent information available to analysts.(IPD)
This will bring “new” investor capital into the sector.
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South Africa Demand
There is a 650,000-housing-unit shortage in the affordable
market that grows by about 42,000 units per year
Demand far exceeds supply because:
Urbanization necessitates housing in .
Many housing structures and neighborhoods are seriously
substandard
Steady expansion of working-age population
Industries such as mining, infrastructure projects and tourism
require intensive worker housing
Lack of formal affordable rental opportunities closer to the
workplace.
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Every year for the foreseeable
future, South Africa needs tens
of thousands of units of
affordable workforce housing
near urban employment
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Workforce Housing - Opportunity
Supply in South Africa is limited because:
Private developers focus on high-end housing
Government concentrates on serving the neediest lowincome population
Historically, banks ‘redlined’, limiting the availability of
end- user finance for moderate-income households
We are bringing many experienced developers into our
market.
Banks have eased lending criteria in this market.
Perceptions of “risky assets” are slowly being changed.
There is an opportunity for institutions to invest
responsibly while assisting to close the housing gap.
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About IHS’s Existing Housing Fund
Name: South Africa Workforce Housing Fund
Size: approximately R1.9 billion
Investors: mostly North American but also Development
Bank of Southern Africa, Public Investment Corporation,
and Citi (SA)
Target: low- and moderate-income
Strategy: provide equity for affordable housing for rent
and for sale in and beyond South Africa’s borders .
First Close: 2008 – 10-year Fund
Expected Number of Affordable Housing Units: 50,000
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Investments to Date
25 deals with 16 developers
Investments committed to date will yield approximately
35,000 units
Fund expected to be fully invested by end of 2011, given
strength of current pipeline
62% took development and construction risk
85% in Gauteng (greater Johannesburg area)
50% purely for-sale; 50% rental to be followed by sectional
title sale when advantageous.
74% of equity invested in projects with average unit prices
below R500,000 (80% FSC compliant).
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Greatermans
• Investment approved May
2008
• Joint Venture with AFHCO, a
well-established developer
specialising in acquiring
inner-city office buildings
and converting them to
affordable residential; IHS
has veto on major decisions
• Acquisition of the former
Greatermans headquarters
building in Johannesburg
CBD , and conversion into
428 units plus supporting
retail opportunities
• Fund’s investment is R18.6m
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Greatermans
Investment Summary and Rationale
Partner is a very well established development and property
management firm, with about 5,000 units in central
Johannesburg
Conversion to 428 apartments.
Units range from studios to one- and two-bedrooms, and are
mostly small (25 m2)
Average rents start at R2,350 per month, which is very
affordable for Johannesburg centre city
Finishes and fittings are very durable and attractive
NO ARREARS
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Fleurhof
• Investment closed in
February 2009
Insert picture
• Joint Venture with
Calgro M3, a listed
developer specialising
in mixed income
residential
developments
• Originally planned for
6,467 units, the total
was increased at the
request of the
municipality to 9,468
units
• Fund’s investment is
R100m
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Fleurhof
Investment Summary and Rationale
The project is an infill development between the established areas of
Roodepoort and Soweto, two large suburban areas respectively located in
the west and south-west of the City of Johannesburg; good employment in
the area, good transport links.
Strong political support, as the development includes approximately 3,000
fully-subsidised homes
Includes provision for 7 crèches, 3 schools, 38 community gardens, play
areas and similar amenities, 5 business sites and 1 industrial site; the land
for most of these will be serviced and sold to commercial users.
Fund has purchased 200 units “turn Key” out of the development and will
rent them into the market.
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Jabulani
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Why has residential property struggled to emerge
as an attractive asset class to institutional
investors in SA
Unlike in the commercial sector there has in the past been a lack of large
transparent unlisted vehicles that are attractive to institutional investors.
Lack of objective and believable data (IPD).These returns are reported in
most other IPD jurisdictions and will hopefully be reported in SA in the short
term.
This has started to change with well managed and governed portfolios
emerging in the affordable housing and student accommodation sectors.
These portfolios show a history of good yields, very good capital growth,
LOW VACANCIES and LOW ARREARS.
Institutions have started investing in well managed housing funds such as
IHS.
Highly likely in the medium term that we see one or a grouping of these
entities list on the JSE.
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Contact Information
Rob Wesselo, Managing Partner
[email protected]
WWW: www.intlhousingsolutions.com
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