Foreign inflows for affordable housing

Posted On Friday, 15 August 2014 08:15 Published by
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Foreign investment into International Housing Solutions' second private equity fund which will create over 20 000 new homes in a major boost to affordable housing in SA .

Soula Proxenos

The Board of Directors of the Overseas Private Investment Corporation (OPIC), the U.S. Government's Development Finance Institution, has approved $80 million in financing for International Housing Solutions Fund II, the private equity fund that provides high quality, affordable housing units to families across sub-Sahara Africa.

IHS Fund II follows the success of the fund manager's first fund, the SA Workforce Housing Fund, which has enabled the development of more than 28 000 housing units with a combined value of more than R8.6 billion ($803 million).

Soula Proxenos, Managing Partner at IHS says "It is encouraging that there is such strong interest in the region and this asset class from both local and international investors.

"IHS is particularly pleased that the second fund's strategy will incorporate a strong 'green' component especially as this was previously regarded as beyond the scope of affordable developments.

"We believe we are breaking new ground and hope our approach will become a model of how to effectively use green building technology in the gap housing sector without the financially prohibitive aspects. Affordability is always one of the deciding factors with regards to new developments.

"Our goal is to use our capital, expertise, and influence to help eliminate poverty and promote shared prosperity. We believe the inclusion of the incubation of green tech in future developments will lead to a new approach to affordable housing construction on a global scale.

"Our first fund, the SA Workforce Housing Fund, proved that we could make affordable residential real-estate attractive to global institutional investors by delivering good returns. We aim to do this again in our second fund. For IHS, good business has always meant doing well financially while making a positive social impact," she said.

She said the second fund which has a target capitalisation of approximately R3-billion ($280 million) will invest in multi-unit and stand-alone housing developments in South Africa, Ghana, Botswana, Namibia and Mauritius.

"Across these countries, significant numbers of existing housing are in need of replacement or modernization. Demand for housing in these markets far outpace supply particularly for the middle of the affordable housing segment.

"Government programs often focus on the poorest segments of the population while most private-sector builders are drawn to the luxury end of the market, creating what's known as a "missing middle". Fund II places a specific focus on this overlooked segment in the Sub-Saharan Africa housing market."

Brooks Preston, OPIC's Vice President for Investment Funds says "Sub-Saharan Africa has been a priority region for OPIC.

"Our goal is to find investment managers with good commercial acumen that can deliver development impact and profits in tandem. IHS is an excellent case of a private equity manager that is achieving both goals by building and selling affordable housing for the rising middle class. IHS delivers near term economic growth, community development, and attractive returns."

International Housing Solutions is the global private equity firm at the forefront of affordable housing development in South Africa. It partners with financial institutions, real estate developers and local government authorities to provide equity finance for housing projects.

Launched in 2006, its SA Workforce Housing Fund received capital injections from North American and Southern African organisations, including Citibank, the Development Bank of SA, the Public Investment Corporation on behalf of the Government Employees Pension Fund (GEPF) and the Overseas Private Investment Corporation (OPIC).

OPIC is the U.S. Government's development finance institution. It mobilizes private capital to help solve critical development challenges and in doing so, advances U.S. foreign policy. Because OPIC works with the U.S. private sector, it helps U.S. businesses gain footholds in emerging markets, catalysing revenues, jobs and growth opportunities both at home and abroad.

OPIC achieves its mission by providing investors with financing, guarantees, political risk insurance, and support for private equity investment funds. Established as an agency of the U.S. Government in 1971, OPIC operates on a self-sustaining basis at no net cost to American taxpayers. OPIC services are available for new and expanding business enterprises in more than 150 countries worldwide.

To date, OPIC has supported more than $200 billion of investment in over 4,000 projects, generated an estimated $76 billion in U.S. exports and supported more than 278,000 American jobs.

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