Shelter Afrique Financing Affordable Housing For Africa AUHF Durban - - PDF document

Shelter Afrique Financing Affordable Housing For Africa AUHF Durban 2015

Kevin Kihara Head of Strategy October 26th 2015

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Focus on Affordability

Contents

“The Purpose” “What We Do” Supporting Housing The State of Housing in Africa Our Products Our Projects and Investment Thesis Our Performance

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There is a tremendous need for affordable housing across the continent that resonates with SHAF’s founding mandate, its purpose and capability

… and serves as the raison d'être for the creation of SHAF

▪ Article 4 of SHAF’s charter states that its

purpose is to “promote financing in housing and urban development”, via:

– Mobilization of capital – Equity participation – Joint ventures – Raising funds variable equity – Research – Any other relevant activities

The dire need for affordable housing across the continent is colossal… The number of persons moving into African cities every 24 hours The Housing deficit in Nigeria per annum Africa’s population expected to double between now and 2050 Percentage of the urban population living in informal settlements across Sub Saharan Africa

Source: World Bank; IFC; UN Habitat Picture: Kibera: the largest informal settlement in Nairobi, Kenya 4

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Housing Deficits are Skyrocketing: Projections to 2030 in Nairobi

SOURCE: Team analysis

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SHAF’s Vision Is Grounded In A Few Core Principles-Relevance and Impact

Maximise the impact

• f your

funds

▪ Funds disbursed by SHAF significantly increase supply

and/or generate IMPACT in the affordable housing market (e.g., through new technologies, job creation):

– SHAF targets segments of the value chain that will

have a meaningful impact on housing provision

– SHAF provides sufficient oversight to ensure

investments are executed as planned and translate into quality affordable housing Focus on affordable housing

▪ SHAF invests when there is a RELEVANCE between the

investment and the development of affordable housing at scale Attract additional funding

▪ SHAF seeks to “CROWD-IN” other funds: from

governments, other DFIs and the private sector- to maximize the impact of its investments

SOURCE: Team analysis 6

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SHAF’s vision is to become a relevant leader with impact in affordable housing across Africa

SOURCE: Team analysis

Expert on best practice government policies and processes to support affordable housing “Go-to Lender” for affordable housing projects and investor in projects with significant social impact Expert in innovative private- public partnerships (PPPs) to unlock and develop land Knowledge repository for new and innovative technologies to reduce costs

• f housing

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Realizing this vision requires addressing a number of Africa’s affordable housing challenges

Problem 1:

▪ Low cost projects often

do not attract buyers due to the lack of a mortgage market Solution:

▪ SHAF provides

banks with LoCs and a pipeline of quality projects OUR ROLE Problem 2:

▪ Local governments

lack supportive housing policy and have bureaucratic processes Solution:

▪ SHAF acts as

policy advocate to provide research on successful policies and standardized processes Problem 3:

▪ New, potentially cost-reducing technologies

are not used because they are unproven Solution:

▪ SHAF actively pilots new technologies

in its projects Problem 5:

▪ Idle government land is not being

used for housing Solution:

▪ SHAF orchestrates PPPs to unlock

land and bring in quality developers Government Policy Demand Supply Finance Problem 4:

▪ Developers lack

knowledge of criteria for successful affordable housing Solution:

▪ SHAF educates

developers on guidelines for affordable housing best practices (e.g., locations, materials)

SOURCE: Team analysis 8

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By playing this multifaceted role, SHAF intends to have a significant impact across the continent

• ver the next 5 years

SOURCE: Team analysis

~$1bn

in 2020 Grow Portfolio to

~45K

Affordable homes Build

~30K

Mortgages Provide

~30K

jobs Create

100

Direct Loans to developers Disburse

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Lines of Credit to banks Disburse For 100+ Housing projects across Africa Act as a catalyst

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Focus on Affordability

Contents

“The Purpose” “What We Do” Supporting Housing The State of Housing in Africa Our Products Our Projects and Investment Thesis Our Performance

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%, 100%=USD 285M SHAF assets by product type SHAF Net Loans and Advances USD M

SHAF has grown its portfolio 25% annually, with a current book of $285M, split ~50/50 between project finance and lines of credit

SOURCE: SHAF Finance; Annual Report

285 217 195 145 101 89 +25% p.a. 2015 YTD 14 13 12 11 2010 2 51 47

Project Finance Debt JVs & Equity nvestments LoCs

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SHAF currently has ~80 loans across 21 countries with need for additional capital across the Board

SOURCE: Annual report; SHAF finance

• No. of

loans Share capital in SHAF, % of total Share of outstanding loans, %, 100% = $247m 1 1 1 1 1 2 2 2 2 3 4 5 5 6 7 10 13 15 18 Cameroon ~0 Benin Burundi Gambia ~0 Malawi Mauritania DRC Nigeria Mozambique Zambia Togo Uganda Senegal Cote d’Ivoire Madagascar Mali Kenya Ghana Tanzania Rwanda Zimbabwe 1 1 4 1 1 2 2 3 1 4 1 12 1 1 10 1 11 24 7 6 6 2 4 4 6 4 1 2 2 2 2 3 2 1 2 1 1 1

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Value of Investment, USD M

SHAF currently has 7 equity investments worth a total of ~USD 12M with intentions to grow this 10 fold in the next 5 years

SOURCE: SHAF Annual Report 3.0 3.02 0.9 1.0 1.3 1.4 1.5

Joint Venture Equity Investment Committed, not yet disbursed

XX% Equity Share 1 SHAF committed USD 5M to PAHF but as of yet has only disbursed USD 1.3M 2 Expected to increase to USD 5M Banque de L’Habitat du Burkina Faso (BHBF) Pan African Housing Fund (PAHF)1 Everest Park Project Joint Venture Caisse Régionale de Refinancement Hypothécaire(CRRH) Tanzania Mortgage Refinance Company (TMRC) Rugarama, City of Kigali

▪

BHBF is a USD 9M bank created to support the development of the housing and mortgage sectors

▪

A 50/50 5-year JV with Everest Limited to develop, construct and sell property on a site in Nairobi, Kenya

▪

The Pan African Housing Fund (PAHF) is a ~USD 42M private equity fund to promote housing in Africa Description

▪

CRRH is a USD 8.3M regional mortgage-refinancing fund in Togo to support long-term loans by mortgage lenders

▪

TMRC is a USD 6.5M Mortgage Liquidity Facility to make loans more affordable in Tanzania

▪

A PPP JV with Development Bank of Rwanda to develop 2,700 affordable housing units 50% 15% 12% 11% 15% 50% Nigeria Mortgage Refinance Company (NMRC)

▪

NMRC is a ~USD 300M wholesale financial institution to refinance mortgages in Nigeria <15% Total 12.1 SHAF is also in negotiations in a number of additional projects e.g., Bukerere (Uganda), Lafarge (Nigeria), Shauri Moyo (Kenya)

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SOURCE: Team analysis

To achieve this Competitive Advantage, SHAF is seeking to establish local presence through

• ffices with a regional mandate across Africa

Phase 1: 2016-2017 Cement presence in Nigeria, deploy 2 regional country representatives (RCRs) for Francophone (Cote d’Ivoire) and Southern Africa (Zambia)

North Africa East Africa Southern Africa West Africa

2016 2 RCRs How it would work

▪ In initial phase a “skeleton team”

• f 1-2 individuals would be

based in-country with a regional mandate to understand the market and develop a SHAF presence

▪ They would be responsible to

develop an “affordable housing toolkit” with key information on the housing sector to understand the needs of the industry and inform the country-specific product offering

▪ SHAF could continue to expand

its local presence through additional RCRs once it has solidified its presence in these initial countries Phase 2: 2018-2020 Once sufficient pipeline and deal flow is established, build the Francophone and Southern Africa offices

North Africa East Africa Southern Africa West Africa Central Africa Central Africa

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Cote d'Ivoire Nigeria Kenya Democratic Republic

• f the

Congo Zambia

SHAF has looked across a number of deep dive countries to better understand the challenges to affordable housing

Key Affordable Housing issues:

▪ Expensive land near economic

activity

▪ Underdeveloped financial market

Zambia Nigeria Key Affordable Housing issues:

▪ Onerous long lease

processes

▪ Cost of land in city can

be ~3x above average

▪ Underdeveloped

mortgage market Kenya Key Affordable Housing issues:

▪ Expensive financing ▪ Expensive land near

economic activity and social infrastructure Democratic Republic

• f Congo

Cote d'Ivoire Key Affordable Housing issues:

▪ Short tenors in financing ▪ Limited government

capacity to execute affordable housing goals Key Affordable Housing issues:

▪ Limited legal framework ▪ Underdeveloped

financial market

SOURCE: CAHF; World Bank; Interviews

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Focus on Affordability

Contents

“The Purpose” “What We Do” Supporting Housing The State of Housing in Africa Our Products Our Projects Our Performance

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Today SHAF offers a spectrum of potential products to address the challenges present across its member states

“Enabler” “Implementer” 6 Market Development: Products focused on convening and influencing stakeholders

▪ Urban Planning/Development Research ▪ Policy advocacy ▪ Developer education/ Open houses ▪ Hosting conferences

Description

▪ Provides full service

turnkey operations in affordable housing – from developing the strategy through to execution

▪ Provides equity,

either directly or through a partner, to fund innovative projects

▪ Provider of lines of

credit to local banks to support affordable housing mortgage and developer financing

▪ Provides loans

and advisory services to developers to grow developer financing

• f quality projects

▪ Orchestrate

innovative transactions involving governments and developers to unlock land

▪ Project Developers ▪ Private Equity Funds ▪ O&M Companies

Target Clients

▪ Government agencies ▪ Local Banks ▪ Mortgage institutions ▪ Project Developers ▪ National

Governments

▪ Cities ▪ Project Developers

Sample Customers

▪ City of Antananarivo

(Madagascar)

▪ Pan-African Housing

Fund

▪ Heritage Bank

(Nigeria)

▪ Oakpark

Developers (Kenya)

▪ City of Lusaka

(Zambia) Affordable Housing Partnership Equity Investment Focused Financial Intermediation Value-Added Direct Loans Orchestration of Innovative PPPs 1 2 4 3 5

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Two Key Products: Lines of Credit and Project Finance Loans

FOCUSED FINANCIAL INTERMEDIATION

Product Description

▪ Lines of credit (LoC) to banks targeting

affordable housing mortgage and project finance, with the objective of:

– Reducing the cost of finance to end users

and developers

– Increase the tenor of loans available in the

market

▪ Value added services to further enhance

market development

– Technical assistance to banks to set up or

improve mortgage lending products (e.g.., providing uniform underwriting standards)

– Providing banks with a pipeline of quality

projects for mortgage lending and developer finance

Lines of Credit

▪ Project finance loans to developers for

affordable housing projects which will

– Reduce finance to developers – Increase payback period ▪ Value added services to optimize

marketability of projects for affordable segment

– Market specific guidance on how to

improve the affordability (e.g.., location of affordable land, quality contractors)

– Introduction of new technologies to

reduce costs (e.g.., construction materials processes)

Product Description

Project Finance

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Going Forward Shelter Afrique is Focusing 3 Key Enablers to Reach Its Full Potential and To Be The Driver of the Housing Agenda in Africa

▪ SHAF is presently making a number of

• rganizational changes, including:

– Increasing staffing levels for the larger portfolio – Developing new capabilities – Developing new roles and groups

Alignment of the

• rganization to the

“new SHAF” C

▪ SHAF will improve its business development and

financial analysis capabilities to better assess potential projects and improve asset quality

▪ SHAF will actively engage in project monitoring

to ensure projects are proceeding as planned Improving its core business development and project monitoring capabilities B Increasing its capital base

▪ SHAF will seek to attract significantly more

capital, both debt and equity, to fund future growth

▪ The Engagement with our member states, the

AUHF and its members is important to this effort A

SOURCE: Team analysis; Interviews

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Focus on Affordability

Contents

“The Purpose” “What We Do” Supporting Housing The State of Housing in Africa Our Products Our Projects and Our Investment Thesis Our Performance

Sebel Invest, Dakar, Senegal

Everest Park, Mombasa Road, Nairobi Kenya Komarock 5A, Eastlands, Nairobi

Komarock 5A- Solar Street Light and Solar Powered Boundary Electric Fencing Devinco Apartments Kinshasa, Democratic Republic of Congo

Rehoboth Properties, Accra Ghana Karibu Homes-Athi River Nairobi

Karibu Homes-Athi River Nairobi Karibu Homes-Athi River Nairobi

Karibu Homes-Marching Housing Pricing Against Properly Researched Household Incomes

All#figures#unless#stated#KES Number'of'urban'households 238,750 238,750 238,750 238,750 238,750 238,750 238,750 238,750 238,750 238,750 Urban'population'deciles 0<10% 10<20% 20<30% 30<40% 40<50% 50<60% 60<70% 70<80% 80<90% 90<100% Avg'monthly'household'income 12,401 21,097 26,857 33,017 39,976 47,914 55,966 67,690 91,643 255,005 Borrowing'capacity 33% 33% 33% 33% 33% 33% 33% 33% 33% 33% Mthly'mortgage'repayment 4,092 6,962 8,863 10,896 13,192 15,812 18,469 22,338 30,242 84,152 Urban'Households Maximum'affordable'loan 329,300 559,900 712,700 876,200 1,060,900 1,271,600 1,485,200 1,796,400 2,432,000 7,239,705 Loan'to'value 80% 80% 80% 80% 80% 80% 80% 80% 80% 80% Downpayment 82,325 139,975 178,175 219,050 265,225 317,900 371,300 449,100 608,000 1,809,926 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% Home'value'buyer'could'afford 411,625 699,875 890,875 1,095,250 1,326,125 1,589,500 1,856,500 2,245,500 3,040,000 9,049,631 KH'home'type Athi'1 Athi'1 Athi'1 Athi'1 Athi'1 Athi'1 Athi'1 Athi'1 Athi'2 Tana'3 KH'selling'price 1,521,000 1,521,000 1,521,000 1,521,000 1,521,000 1,521,000 1,521,000 1,521,000 2,438,000 5,130,000 Affordable? no no no no no yes yes yes yes yes Karibu Homes’ Core Market Market currently being served

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To differentiate itself going forward, SHAF is focusing on what can make it truly unique as an

• ptimal channel for housing development in Africa

SOURCE: Team Analysis

By combining these strength’s across the different parts of the value chain, SHAF will develop a unique competitive advantage What can make SHAF unique from

• ther players

▪ Privileged access to land given

strong relationships with governments and ministers of housing Land

▪ Strong developer and contractor

relationships based on over 30 years

• f experience

Development construction

▪ Strong relationships with banks to

promote innovative financing products Finance

▪ Expert knowledge of best practice government

policies and processes to support affordable housing

▪ Strong Sovereign and Pan-African Shareholders

Shareholders

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In the next 5 years Shelter Afrique will establish a Market Development group that assist the AUHF and its members

AU

OUR ROLE Technical advisory Examples Description Research specialist

▪ Maintain database of information

from internal and external research institutions e.g., CAHF and AUHF

▪ Coordinate research on

affordable housing sector External relations

▪ Host a roundtable on innovative

construction materials in DRC

▪ Plan and convene events (e.g.,

conferences, round tables)

▪ Develop rental housing as a theme

that can be interworked across SHAF publications, conferences etc.

▪ Develop SHAF communications

strategy & share with regional business teams Partnerships

▪ Partner with Lafarge to introduce

new low cost cement into its projects

▪ Manage partnerships with

governments, civil society

• rganizations and the private

sector

▪ Advising the Uganda ministry of

housing on how to standardize building codes

▪ Provide technical advisory to

private and public sector

• rganizations on scalable

affordable housing strategies PRODUCT DEEP DIVE: ADDITIONAL SERVICES

▪ Provide grants for technical and

vocational training

▪ Manage SHAF Trust fund

AUHF and Shelter Afrique: Anchoring Affordable Housing in Africa