Futuregrowth, RMB in finance package

Posted On Thursday, 06 May 2004 02:00 Published by
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Futuregrowth Asset Management and Rand Merchant Bank (RMB) have developed a R450 million financing package in agreement with the City of Cape Town for an integrated development in the township of Khayelitsha which will include 1,500 new middle-market homes.

Futuregrowth Asset Management and Rand Merchant Bank (RMB) have developed a R450 million financing package in agreement with the City of Cape Town for an integrated development in the township of Khayelitsha which will include 1,500 new middle-market homes.

Unveiling the partnership, Futuregrowth said the new development in the Central Business District (CBD) of Khayelitsha will combine a traditional business development with residential housing, retail and public services, and becomes the first development of its kind in a South African township.

The Public Private Partnership (PPP) is funding a retail shopping centre of 20,000 square meters, an office block for the municipality, a service station and 1,500 houses priced in the range of 75,000 to 150,000 rand.

Marketing begins in September with the first 200 houses due to be built before the end of the year.

Futuregrowth is the developer of the commercial component. The retail development, anticipated to cost approximately R80 million, is due to open in June 2005 with building commencing June 2004. Long-term funding commitments of up to R300 million are being underwritten by sister company Rand Merchant Bank (RMB). Added to this is R100 million of government funding, from local, national and provincial sources.

Already funded in the first phase of the Khayelitsha CBD are a Magistrate's Court - opened in April 2003 - government offices for Social Welfare

(completed) and Home Affairs, due to be completed September 2004, and a bus and taxi rank.

Also being completed in the first phase is a R25 million multi-purpose centre developed with overseas and provincial funding which provides facilities for cinema, recreation, conferences and office facilities for NGOs.

The new funding partnership is the first in which finance has been unlocked to develop residential capital in a former township, according to Wayne van der Vent, director of Futuregrowth and head of development funds.

"Until now there was no finance available for the kind of homes that could be sold on as an asset. Since 1994 we have seen a lot of low cost housing going up. This will be the first development of its kind in terms of middle market housing with a finance package in place for the end buyer."

Van der Vent said that the partnership, which recognised the Khayelitsha Community Trust as a development company, was allying government infrastructure with commercial infrastructure and that the properties and income from them would benefit the Khayelitsha community.

"This is a broad-based empowerment venture through a trust and its objectives are to add value to that community. For many people in Khayelitsha, the quality of life has not changed much in the last 10 years.

Through infrastructure funding we can achieve sustainable change, improving the quality of life for a range of people instead of just one or two."

He believes that innovative funding needs to come to the fore in South Africa. "PPPs allow for delivery because they bring in the expertise and skills of the private sector - this is something government cannot do on its own."

A total of 73 hectares has been set aside for the commercial and housing development in the vicinity of Khayelitsha Railway Station, on land purchased by the Trust from the City of Cape Town. Approximately the size of central Cape Town, the development includes the formation of security villages with CCTV networks.

Futuregrowth and the Khayelitsha Community Trust are planning a township lifestyle centre with landscaped housing near recreation and community facilities. Current sports facilities in the area include an Olympic size swimming pool and cricket oval.

Van der Vent believes that the sizeable cash flows, jobs and skills resulting from the integrated development will make a significant impact on the community. Cashflow from the development in the first 20 years will fund RMB's long-term commitment of R300 million, following which the income will accrue to the Trust.

"We are creating a self-sustaining community, different from how developments have been done in the past," said Van der Vent. "Until now home-owners in this area could not sell their homes as prospective buyers could not access finance for a purchase. Ownership is now vested in the community."

I-Net Bridge 04 May 2004

Publisher: Business Day
Source: Inet Bridge

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