Private and confidential
Women In Property Conference
27 August 2016
Introduction
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Property investment is a long term wealth creation plan (not a get rich-quick scheme)
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The key benefits / attractions to investors in property typically include the following:
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Direct property (as an asset class) is less volatile and offers relative stability
Financial security (long-term)
Property can be leveraged for liquidity
Secure asset class (tangible value)
Commercial property provides contractual predictable rental income
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The provision of affordable housing is a national priority which government, through various initiatives, is trying to address. This presents
a great opportunity for property entrepreneurs / developers
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One of the biggest challenges for any property entrepreneur is raising capital
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A property investor can raise capital from two primary sources:
– Senior debt finance
– Equity finance
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Lenders of the senior debt finance (e.g. TUHF) usually request between 10% - 20% of equity finance
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Gauteng Partnership Fund
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The Gauteng Partnership Fund (GPF) was established by the Gauteng Department of Housing to address funding challenges in the
affordable housing sector
The GPF assists by the following:
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Providing public funding as equity cushion to investors
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Risk sharing and co-funding with prospective funders
GPF products include: Student Accommodation, Rental Housing Fund, Social Housing Fund, Strategic Partnerships
Types of projects:
– Inner-city residential refurbishments
– Conversion of offices to residential units
– Greenfield developments
GPF also runs the Entrepreneur Empowerment Property Fund (EEPF), an incubator programme designed to promote participation of
previously disadvantaged owned companies in the affordable rental property market
Typical funding terms:
Exposure:
GPF investment of up to 20% or 30% of the total project costs
Investment Term:
15 - 20 years depending on project cash flows and company BEE levels.
Pricing:
Minimum of Johannesburg Interbank Agreed Rate (JIBAR) plus a margin.
Instrument:
Subordinated debt
Security:
Mortgage Bond
May require personal sureties
Contribution:
Minimum 10% of project cost depending on project cash flows and company BEE levels
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National Empowerment Fund
• The National Empowerment Fund (NEF) is a Development Finance Institution (DFI) whose mandate is to promote black economic
participation through the provision of financial support
• They have introduced a New Property Product that has a focus in affordable housing but also commercial properties with a development
impact
Size of investment
• R5m – R75m
Types of projects
• Residential: Affordable housing schemes
• Leisure: hotels
• Commercial: demonstrate development impact
Instruments
• Senior Debt
• Mezzanine Debt
• Equity
Black shareholding
Minimum of 50.1%
Term of investments
• Up to 10 years on senior debt
• Up to 15 years on mezzanine debt and equity
Operational involvement
Participation by BEE sponsor:
- Development process
- Property management within 3 year period
Enterprise Development
- Creation of opportunities for black participants
- Minimum spend of 51% of expenditure to be sourced from majority black owned
businesses
Contribution
- No minimum contribution – target of 10% but reviewed on a deal by deal basis
- NEF to take equity in the project
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Business Partners – Joint Venture Fund
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Business Partners are specialist risk finance company that provides customised financial solutions, sectoral knowledge,
mentorship, business premises and other added-value services for formal small and medium enterprises
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Business Partners launched two property funds:
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a R250m Joint Venture Property Fund for investors to buy multi-tenanted commercial, industrial or retail property
A R200m Property Fund that provides 100% finance to SME’s in owner occupied properties
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The transaction value for the Joint Venture Property Fund must be between R2m and R120m
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They provide equity and senior debt finance (or a combination of both)
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Key Criteria:
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Property Investments in sustainable areas offering good growth and/or return on investment, preferably in metropolitan areas
Multi tenanted industrial, retail or commercial properties
Property investor that either plays an active role
Properties that requires re-configuration or upgrade
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Alternative Equity
Crowd Funding
• Crowdfunding is a method of raising capital through the collective effort of friends, family and individual investors by tapping into the
collective efforts of a large pool of individuals
• Crowdfunded buy-to-let has ignited interest among investors who want a slice of the property market but lack the capital to create their
own portfolio
• Crowdfunding opens up the market to everyone so they can invest in property for a much-reduced commitment.
• It allows people to diversify across asset types and geographic areas, helping to spread risk and, hopefully, increase returns
Investors
Investors
Investors
Investors advance equity
Property
manager
Property Management
Property Co
Bank Funding
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THANK YOU
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