Shelter Afrique Financing Affordable Housing For Africa AUHF Durban 2015 Kevin Kihara Head of Strategy October 26 th 2015 Contents The State of Housing in Africa “The Purpose” Our Performance “ What We Do” Supporting Our Products Housing Focus on Our Projects and Investment Thesis Affordability | 2
There is a tremendous need for affordable housing across the continent that resonates with SHAF’s founding mandate, its purpose and capability The dire need for affordable housing … and serves as the raison d'être for the across the continent is colossal … creation of SHAF ▪ Article 4 of SHAF’s charter states that its Africa’s population expected to double between now and purpose is to “ promote financing in 2050 housing and urban development” , via: – Mobilization of capital – Equity participation The number of persons – Joint ventures moving into African cities every 24 hours – Raising funds variable equity – Research – Any other relevant activities Percentage of the urban population living in informal settlements across Sub Saharan Africa The Housing deficit in Nigeria per annum | 3 Source: World Bank; IFC; UN Habitat Picture: Kibera: the largest informal settlement in Nairobi, Kenya Housing Deficits are Skyrocketing: Projections to 2030 in Nairobi | SOURCE: Team analysis 4
SHAF’s Vision Is Grounded In A Few Core Principles-Relevance and Impact ▪ SHAF invests when there is a RELEVANCE between the Focus on investment and the development of affordable housing at affordable scale housing ▪ Funds disbursed by SHAF significantly increase supply and/or generate IMPACT in the affordable housing market (e.g., through new technologies, job creation): Maximise – SHAF targets segments of the value chain that will the impact have a meaningful impact on housing provision of your – SHAF provides sufficient oversight to ensure funds investments are executed as planned and translate into quality affordable housing ▪ SHAF seeks to “CROWD-IN” other funds: from Attract governments, other DFIs and the private sector- to maximize additional the impact of its investments funding | SOURCE: Team analysis 5 SHAF’s vision is to become a relevant leader with impact in affordable housing across Africa Expert on best practice “Go-to Lender” for affordable government policies and housing projects and investor processes to support in projects with significant affordable housing social impact Knowledge repository for Expert in innovative private- new and innovative public partnerships (PPPs) technologies to reduce costs to unlock and develop land of housing | SOURCE: Team analysis 6
Realizing this vision requires addressing a number of Africa’s affordable housing challenges OUR ROLE Problem 1: Problem 3: ▪ Low cost projects often ▪ New, potentially cost-reducing technologies do not attract buyers are not used because they are unproven due to the lack of a Solution: ▪ SHAF actively pilots new technologies mortgage market Finance Solution: in its projects ▪ SHAF provides Problem 4: banks with LoCs and ▪ Developers lack a pipeline of quality knowledge of criteria for projects successful affordable Demand Supply housing Problem 2: Solution: ▪ Local governments ▪ SHAF educates lack supportive developers on guidelines housing policy and for affordable housing have bureaucratic best practices (e.g., processes locations, materials) Solution: Government Policy ▪ SHAF acts as Problem 5: ▪ Idle government land is not being policy advocate to provide research on used for housing successful policies Solution: ▪ SHAF orchestrates PPPs to unlock and standardized processes land and bring in quality developers | SOURCE: Team analysis 7 By playing this multifaceted role, SHAF intends to have a significant impact across the continent over the next 5 years Act as a catalyst Build For 100+ ~45K Housing projects Affordable across Africa homes Grow Disburse Create Portfolio to 50 ~30K ~$1bn Lines of Credit in 2020 jobs to banks Disburse Provide 100 ~30K Direct Loans Mortgages to developers | SOURCE: Team analysis 8
Contents The State of Housing in Africa “The Purpose” Our Performance “ What We Do” Supporting Our Products Housing Focus on Our Projects and Investment Thesis Affordability | 9 SHAF has grown its portfolio 25% annually, with a current book of $285M, split ~50/50 between project finance and lines of credit SHAF assets SHAF Net Loans and Advances by product type USD M %, 100%=USD 285M Project Finance Debt LoCs 285 JVs & Equity nvestments 217 +25% p.a. 195 2 145 101 89 47 51 2010 11 12 13 14 2015 YTD | SOURCE: SHAF Finance; Annual Report 10
SHAF currently has ~80 loans across 21 countries with need for additional capital across the Board Share of outstanding loans, %, No. of Share capital in SHAF, 100% = $247m loans % of total 18 11 Kenya 24 15 7 0 Zimbabwe Rwanda 13 6 1 10 6 10 Ghana Tanzania 7 2 1 6 1 Mauritania 4 5 12 Nigeria 4 5 1 DRC 6 Zambia 4 4 4 3 Mozambique 1 2 1 Malawi 2 2 3 Cote d’Ivoire 2 Senegal 2 2 2 2 2 Mali 2 1 1 Uganda 3 1 1 Madagascar 2 1 0 Togo 1 1 4 Cameroon 2 Gambia 1 1 1 0 Burundi ~0 1 1 Benin ~0 1 | SOURCE: Annual report; SHAF finance 11 SHAF currently has 7 equity investments worth a total of ~USD 12M with intentions to grow this 10 fold in the next 5 years Joint Venture Equity Investment Committed, not yet disbursed Value of Investment, USD M Description ▪ A 50/50 5-year JV with Everest Limited to develop, construct and sell property on a Everest Park Project site in Nairobi, Kenya 1.5 50% Joint Venture ▪ BHBF is a USD 9M bank created to support the development of the housing and Banque de L’Habitat du mortgage sectors 1.4 15% Burkina Faso (BHBF) ▪ The Pan African Housing Fund (PAHF) is a ~USD 42M private equity fund to Pan African Housing promote housing in Africa 1.3 12% Fund (PAHF) 1 ▪ TMRC is a USD 6.5M Mortgage Liquidity Facility to make loans more affordable in Tanzania Mortgage Tanzania Refinance Company 1.0 15% (TMRC) ▪ CRRH is a USD 8.3M regional mortgage-refinancing fund in Togo to support Caisse Régionale de Refinancement 0.9 11% long-term loans by mortgage lenders Hypothécaire(CRRH) ▪ A PPP JV with Development Bank of Rwanda to develop 2,700 affordable housing 3.0 2 50% Rugarama, City of Kigali units ▪ NMRC is a ~USD 300M wholesale financial institution to refinance mortgages in Nigeria Mortgage 3.0 <15% Nigeria Refinance Company XX% (NMRC) Equity Total 12.1 Share SHAF is also in negotiations in a number of additional projects e.g., Bukerere (Uganda), Lafarge (Nigeria), Shauri Moyo (Kenya) 1 SHAF committed USD 5M to PAHF but as of yet has only disbursed USD 1.3M 2 Expected to increase to USD 5M | 12 SOURCE: SHAF Annual Report
To achieve this Competitive Advantage, SHAF is seeking to establish local presence through offices with a regional mandate across Africa Phase 1: 2016-2017 Phase 2: 2018-2020 How it would work ▪ In initial phase a “skeleton team” Cement presence in Nigeria, deploy 2 regional country of 1-2 individuals would be Once sufficient pipeline and deal representatives (RCRs) for flow is established, build the based in-country with a regional Francophone (Cote d’Ivoire) and Francophone and Southern mandate to understand the Southern Africa (Zambia) Africa offices market and develop a SHAF presence North Africa Southern Africa North Africa Southern Africa ▪ They would be responsible to East Africa West Africa East Africa West Africa develop an “affordable housing Central Africa Central Africa 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 2016 its local presence through additional RCRs once it has 2 RCRs solidified its presence in these initial countries | SOURCE: Team analysis 13 SHAF has looked across a number of deep dive countries to better understand the challenges to affordable housing Cote d'Ivoire Nigeria Key Affordable Housing Key Affordable Housing issues: issues: ▪ Short tenors in financing ▪ Onerous long lease ▪ Limited government processes Nigeria capacity to execute ▪ Cost of land in city can affordable housing goals Cote d'Ivoire be ~3x above average Democratic Kenya Republic ▪ Underdeveloped of the Congo mortgage market Democratic Republic Zambia of Congo Key Affordable Housing Kenya issues: Key Affordable ▪ Limited legal framework Housing issues: ▪ Underdeveloped ▪ Expensive financing Zambia financial market ▪ Expensive land near Key Affordable Housing issues: economic activity and ▪ Expensive land near economic social infrastructure activity ▪ Underdeveloped financial market | SOURCE: CAHF; World Bank; Interviews 14
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