Housing Impact Fund

Posted On Thursday, 28 July 2011 02:00 Published by eProp Commercial Property News
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Old Mutual’s investment for urban renewal catalyst

Rojie KistenOld Mutual Investment Group head of sales Rojie Kisten says funds invest in all forms of housing-related investment, including physical development, the ownership of rental properties and end-user finance

Some time this year Old Mutual will be looking to raise funds for a second version of its housing income fund. Its first fund, called the Housing Impact Fund for SA (Hifsa) was able to raise R9bn. Of this 55% was invested by the Old Mutual Life Assurance Company of SA (Omlacsa), the co- investors were the giant public investors, the Development Bank of SA, the Eskom pension fund and the Public Investment Corp .

But with last week’s launch of the Code for Responsible Investment in SA (Crisa) a product such as a Housing Impact Fund should be in far greater demand from a wider pool of pension funds.

Old Mutual Investment Group head of sales Rojie Kisten says funds invest in all forms of housing-related investment, including physical development, the ownership of rental properties and end-user finance. The Old Mutual Alternative Investments Boutique manages the fund. It draws on the skills of 24 investment professionals.

There is a diversified income stream as Hifsa lends money to developers for projects, as well as taking an equity stake in the project. It has 70000 houses either built or under construction.

And 60% of the funds invested are for the building of homes for families with low incomes. These are homes that are affordable to households earning R15000/month or less. The balance of this investment is spent on the construction of properties for households earning between R15000 and R30000.

Hifsa, and no doubt any new fund with a similar mandate, requires a four-year commitment period in which no distributions are paid out. After that, all cash, minus fees and expenses, is passed through to shareholders.

Fund manager Christine Glover says the fund has a huge target market, as 64% of the SA population earn less than R3500/month and cannot gain access to a new house except through a 100% government subsidy. At the current rate that government is building houses, it will take 10 years to clear the 2,3m house backlog, even excluding new entrants to the housing market.

But even less is being done to improve the backlog for those who earn in the R3500- R9080/ month range as few have access to government subsidies. It could take 30 years to clear the backlog, says Glover.

Hifsa has two partners that provide bonds for low-income people. Izwe advances unsecured personal loans, particularly home improvement loans. Mayibuye advances secured loans for fixed property, as well as unsecured loans, focusing on clients with the best credit records.

Hifsa’s most high-profile property development is Savanna City in the south of Johannesburg, around the Stretford Station, which has 18000 housing units, including 12 schools, a large retail centre and two neighbourhood centres. It is a joint venture with construction company Basil Read.

Hifsa always works in joint ventures on its developments. Another company, Space Development SPV, aims to deliver 26000 new units in a joint venture with Renprop and Probuild. Houses are already on sale in Randfontein, Evaton and Kimberley.

Through Mettle Property Solutions, Hifsa supports independent developers who build new houses. Houses built as part of this venture are for sale in Nelspruit and work is already under way in Cape Town.

The fund also has a joint venture with Rand Leases to build seven new housing projects with 12000 units in the West Rand, Krugersdorp, Germiston and Alberton. Investments includes Real People Urban Properties, which has rental accommodation in Gauteng, Port Elizabeth and East London. Ultimately, the units will be sold as sectional title properties. Another investment, Circlevest, rehabilitates buildings for rental accommodation for low-income families in inner-city areas of Gauteng. South Point offers student accommodation to disadvantaged people, predominantly in Braamfontein but also has properties close to the universities in Cape Town, Durban and Bloemfontein. It is the largest single investment, taking up almost R700m of the fund’s capital.

Mortgage Capital has R370m to spend acquiring repossessed properties, which it will sell on.

Glover believes the fund plays a catalytic role in improving whole suburbs, by making the best use of good urban spaces.

She says the shareholders in Hifsa all recognise that there is no liquidity in the product and intend to remain invested for the full 15-year duration of the fund. It is the only fund of its kind in SA, and it is able to make long-term investments as it does not have to look over its shoulder. The return is limited to a possible cash plus 4%, steady but unexciting, though the social impact may more than make up for that.

Last modified on Wednesday, 15 January 2014 12:19
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