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Shelter Afrique Financing Affordable Housing For Africa AUHF Durban 2015
Kevin Kihara Head of Strategy October 26th 2015
2 |
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
3 |
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 |
Housing Deficits are Skyrocketing: Projections to 2030 in Nairobi
SOURCE: Team analysis
5 |
SHAF’s Vision Is Grounded In A Few Core Principles-Relevance and Impact
Maximise the impact of 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 |
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 of housing
7 |
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 |
By playing this multifaceted role, SHAF intends to have a significant impact across the continent over 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
50 Lines of Credit
to banks
Disburse
For 100+ Housing projects
across Africa
Act as a catalyst
9 |
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
10 |
%, 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
217195
145
10189
+25% p.a.
2015 YTD
14 13 12 11 2010
2
51 47
Project Finance Debt
JVs & Equity nvestments
LoCs
11 |
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
111112222345567
1013
1518
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
101
4011223
1
41
1211
101
01124
7 6 6 2 4 4 6 4 1 2 2 2 2 3 2 1 2 1 1 1
12 |
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)
13 | SOURCE: Team analysis
To achieve this Competitive Advantage, SHAF is seeking to establish local presence through offices 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” of 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
14 |
Cote d'Ivoire
Nigeria
Kenya Democratic Republic of 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 of 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
15 |
Focus on Affordability
Contents
“The Purpose”
“What We Do”
Supporting Housing
The State of Housing in Africa
Our Products
Our Projects
Our Performance
16 |
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 of 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
17 |
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
18 |
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 organizational changes, including: – Increasing staffing levels for the larger portfolio – Developing new capabilities – Developing new roles and groups
Alignment of the organization 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
19 |
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 238,750 238,750 238,750 238,750 238,750 238,750 238,750 238,750 238,750 238,750Urban'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 7,239,705Loan'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 1,809,92620% 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'3KH'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 5,130,000Affordable? no no no no no yes yes yes yes yes
Karibu Homes’ Core Market
Market currently being served
30 |
To differentiate itself going forward, SHAF is focusing on what can make it truly unique as an optimal 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 other 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 of 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
31 |
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 organizations and the private sector
▪ Advising the Uganda ministry of housing on how to standardize building codes
▪ Provide technical advisory to private and public sector organizations 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