SA Affordable Housing March - April 2019 // Issue: 75 - Page 34

FINANCE MATTERS Urban densification requires the sale of hundreds of thousands of units which to be derived from small projects, on a mixed-use and mixed-income basis. However, getting ‘massive-small’ off the ground requires the right support and an enabling environment. Land reform needs more empowerment funding for emerging black entrepreneurs, who are making the most contribution to housing in urban areas. TUHF established the Intuthuko Equity Fund in 2007 that provides support to emerging inner city property entrepreneurs, and for the past 10 years has raised R30-million to R50-million a year to the fund. But for there to be a real economic impact, a certain level of density needs to be accomplished. There needs to be integration between government and other public and private sector institutions in improving city performance. TUHF, for one, has contributed immensely to affordable housing and urban development. We have financed over 34 000 units, with a loan book valued at R3-billion servicing every major city in South Africa. This is our specialisation, and we will continue to support ‘ordinary South Africans, doing extraordinary things’. REGULATIONS GOVERNING THE MASSIVE SMALL APPROACH Massive small should take place with the property development framework already in place. We believe that people should be at the heart of urban development and future-thinking local governments will share that sentiment. Obstacles need to be removed for people to get projects approved. Cities have the potential to succeed and develop into real urban places that people can be proud of. When we all contribute in developing our cities, this is massive small. People are becoming more pro-active about improving their cities. The role of government is to break down complex policies, to create trusted frameworks for collaboration and should also provide access to economic opportunities, which will stimulate economic development. IMPLEMENTING A SUCCESSFUL SOLUTION TUHF’s core business involves raising bridging and mortgage finance from capital markets for our clients. We raise these funds through asset managers such as Futuregrowth, Sanlam, the Public Investment Corporation and Mergence, among others. We usually raise about 80% of the finance needed for each project. Quite often, the majority of individuals who approach us for funding are potential entrepreneurs and low-income earners, who have been turned down for private funding by commercial banks. They want to build multi-unit developments where they have recognised demand. These are the kind of individuals that need the funding and encouragement. Our funding approach is based on empowering previously disadvantaged individuals to provide affordable residential units that are sustainable; creating decent living spaces in our communities. CURRENT PROJECTS IN SOUTH AFRICA Apart from what we do at TUHF, there are a number of inner-city players who are doing very good work, and making a meaningful contribution to development in urban areas. They are made up of small and large private companies and REITs. 32 MARCH - APRIL 2019 Some of the organisations include Jozi Housing, Take Shape Property Management, Respublica and Southpoint, which provide decent and affordable accommodation in inner-city areas and have helped to turn them around. However, urban development needs to be viewed as the sum of the collective. Ordinary South Africans in their role of private developers, are harnessing opportunities in their streets and neighbourhoods – whether its five units to 20 units per individual. The collective effort of every role-player makes a massive small difference. MANAGING DELIVERY AND QUALITY Our company manages the construction phase through support provided to clients by our portfolio managers. Becoming a property entrepreneur requires a lot of discipline. Even though no formal real estate experience is necessary, the individual needs to display characteristics of success, which we measure as their commitment to developing a project that will generate them great returns. TUHF is a character-based lending institution. A successful property entrepreneur displays the following characteristics: • Entrepreneurial qualities; • Open minded and willing to take advice; • Self-discipline – manages the cash flows of the property in the interest that will benefit the property, instead of using the cash inflow for personal use; • Integrity – do the ‘right thing’ in terms of property management, ensuring the property is compliant and safe for the tenants; • Keep your tenants happy by keeping the property clean and well maintained; • Demonstrates ability and willingness to pay on time; • Commitment – doing everything in their power to ensure the success of the deal; • Up-to-date regarding utilities; and • A landlord who is directly involved in the property management even if there is an external service provider. In addition, we expect all our clients to maintain their buildings according to the established TUHF standards. Therefore, property fit is a very important assessment which ensures the size and nature of the project matches the client’s talents and experience. SOCIO-ECONOMIC BENEFITS OF INVOLVEMENT We invest in urban regeneration to transform derelict buildings into asset classes that enhance the vitality of urban neighbourhoods, providing people with a better way of life. Creating positive socio-economic outcomes involves developing places where people want to live, work and play. Through pro-active participation in the communities we operate in, particularly the inner city in the case of TUHF, we support jobs, skills development, true transformation – changing the complexion of ownership and economic growth. MORE ABOUT TUHF TUHF has helped finance various projects in Gauteng, Western Cape, Free State and KwaZulu-Natal. The company has grown consistently over the past 15 years and commercial success and development impact remain its core drivers heading into the new financial year.