International Housing Solutions (IHS) - a joint venture between MuniMae of the US and top Irish property group Eurocape - is working with both banks and local property developers to implement new financial solutions for building affordable housing. Along with its extensive experience in this arena, particularly in the US and UK, the company is also bringing much-needed international capital for investment.
IHS is focusing on financing the construction of homes for households earning between R2,500 and R7,500 a month. This income bracket is often described as the “missing middle”, as families within this income range earn too much to qualify for government-funded housing, but also find that adequate housing is too expensive, either for purchase or rental.
IHS recently won a bid from the US Overseas Private Investment Corporation (OPIC) to create a US$300 million leveraged fund to finance affordable housing projects in South Africa and Jordan. Up to US$225 million from this fund, coupled with project-based debt, could be made available to finance over US$1.0 billion (approximately R7.2 billion) worth of housing development for low- and middle-income households in South Africa.
“Historically in South Africa developers have had difficulties in obtaining finance to make large-scale affordable housing developments viable – for both themselves and home buyers,” explains Elize Stroebel, IHS Director for South Africa. “This has acted as a big impediment to the private sector getting involved in affordable housing.
“However, in countries like the US and UK they have bridged this gap by involving equity investors, amongst other solutions, and this is what we are doing in South Africa. We are committing our own capital, as well as that of international investors like OPIC, to help finance affordable housing projects in the form of equity,” she elaborates.
“The equity allows developers to obtain larger loans from the banks at a reduced borrowing cost, which in turn allows them to build bigger developments (more homes) without having to phase them in or conduct large pre-sales. As the developers achieve more scale in their projects, they are able to pass the lower costs on to families, in the form of lower rentals and selling prices.”
Stroebel says IHS is already partnering with developers and banks in several exciting greenfields developments and inner-city rejuvenation projects involving thousands of affordable homes. The group is proving to be a valuable partner because of its global experience in the sector and its understanding of what it takes to make these investments work.
“We believe there are many opportunities in which we can help to accelerate the supply of affordable homes for both purchase and rental. We are dedicated to helping bridge the housing gap that exists in SA – there are some 2.4 million homes that still need to be built over the next few years,” Stroebel concludes.
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About MuniMae:
US-based MuniMae and its subsidiaries arrange debt and equity financing for developers and owners of real estate and clean energy projects. The Company also provides investment management and advisory services for institutional investors. Assets under management exceed $18 billion including investments in over 3,000 multifamily properties, containing more than 320,000 units in 49 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands.
Through its affiliate, MMA Financial, Inc., the Company manages nearly $8.0 billion of tax credit equity investments in affordable housing projects in the United States. In addition to syndicating tax credit equity investments, MMA Financial offers a broad range of debt financing products for developers of affordable housing projects.
About Howard Eurocape:
Howard Eurocape Limited is a Dublin-based property investment and development company. It is one of the major development groups in Ireland and the UK. Its associate in South Africa, Eurocape Holdings (Pty) Ltd, has expanded rapidly in the last few years to become a leading player in the South African market.
Chairman of IHS and Howard Eurocape, Frank Gormley, has a strong affinity for South Africa and has already committed billions to help rejuvenate the historical and cultural heart of Cape Town. He has been particularly active in inner-city regeneration initiatives, and last year launched the St. Patrick’s Trust to provide seed capital and support for entrepreneurs and community initiatives in the townships.
Howard Eurocape offers a wide variety of secure prime investment and development opportunities to both the local and international markets. They specialise in joint ventures, working in partnership with a wide range of national and international companies, local governments and individuals. They also offer equity participation to South African and European investors, providing managed competitive returns on funds committed.
For further information on OPIC and its current initiatives in emerging markets (including SA).
