terms of reference operational due diligence ac/10/2018 · calls for an in depth due diligence to...

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TERMS OF REFERENCE

OPERATIONAL DUE DILIGENCE

AC/10/2018

________________________________________________________________

Request for Proposal (RFP) to undertake a Due Diligence exercise on the following:

Airmid Investment Trust, Alleyroads Holdings (Pty) Ltd, and Alleyroads Assets (Pty) Ltd.

________________________________________________________________

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TABLE OF CONTENTS

1. INTRODUCTION..............................................................................................................................................3

2. BACKGROUND INFORMATION ON NHFC ...................................................................................................7

3. SCOPE OF WORK ..........................................................................................................................................7

4. APPOINTMENT, COMMENCEMENT AND DURATION OF ASSIGNMENT .................................................9

5. TECHNICAL PROPOSAL ...............................................................................................................................9

6. FINANCIAL PROPOSAL ................................................................................................................................9

7. COMMERCIAL OBLIGATIONS ................................................................................................................... 10

8. BID EVALUATION CRITERIA ..................................................................................................................... 10

9. RULES OF BIDDING .................................................................................................................................... 12

10. DOCUMENTS TO BE SUBMITTED ............................................................................................................. 13

11. COPIES ......................................................................................................................................................... 13

12. SUBMISSION ADDRESS ............................................................................................................................. 13

13. SUBMISSION DATE .................................................................................................................................... 13

14. CONTACT PERSON .................................................................................................................................... 14

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1. INTRODUCTION

The National Housing Finance Corporation Soc Limited (NHFC) wishes to appoint a

service provider to carry out a Financial, Governance and Operational due diligence

on Airmid Investment Trust, Alleyroads Holdings (Pty) Ltd and Alleyroads Assets

(Pty) Ltd. All these entities are within the same group; Airmid Investment Trust is

100% shareholder of Alleyroads Holdings (Pty) Ltd, and Alleyroads Holdings (Pty)

Ltd is a 100% shareholder of Alleyroads Assets (Pty) Ltd, which owns various

subsidiaries that are funded by the NHFC.

The NHFC has approved facilities of over R200 million to the various subsidiaries

directly owned by Alleyroad Assets (Pty) Ltd namely BCHC Res Dev (Pty) Ltd R52.0

million, Barra Dunes R27.4 million, Bridge City Housing Consortium (Pty) Ltd R48

million, and 432 Albert Street (Pty) Ltd R72.0 million to develop affordable housing

units across South Africa.

In addition to the above facilities of over R200 million, the NHFC is currently

appraising applications for an additional R100 million to subsidiaries of Alleyroad

Assets (Pty)_ Ltd, namely, Meyerton Heights (Pty) Ltd R37.0 million, Hoewe 15

Droeg Landbouhoewes (Pty) Ltd R29.0 million and an additional loan to 432 Albert

Street (Pty) Ltd R40.0 million. According to the policies of the NHFC, an application

for funding where the total facility requested or availed is more than R100 million

calls for an in depth due diligence to determine the strength of the operational,

governance and financial capacity of the client. The due diligence should focus on

the ability to service existing NHFC loans of R200 million and potential loans in

excess of R90 million.

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Below is the group structure:

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2. BACKGROUND INFORMATION ON NHFC

The National Housing Finance Corporation Soc Ltd was established in 1996 by the Department of Human Settlements (NDOHS) as a development Finance Institution with the principal mandate of broadening and deepening access to affordable finance for the low–middle income South African Households. The NHFC is a state owned entity (development finance institution) that primarily provides wholesale financing to social housing institutions, non-banking retail intermediaries and privately owned property investors and developers. NHFC loans & advances are typically provided over the long term to institutional clients and normally secured with a first covering mortgage bond. Most loans are 15 to 20 years. The target market of the NHFC is households earning a monthly income between R3 500 – R22 000. This will include properties in the R350 000 to R650 000 price band. The GAP/affordable housing market must be distinguished from the low cost market which comprises of households earning less than R3500/month and whose properties (known as RDP houses) are fully subsided by the South African Government. The NHFC achieves its mandate through the provision of wholesale finance through one of the following three housing finance options for households:

Rental Housing – where finance is provided to social housing institutions (not-for-profit, Section 10 companies) and private property investors investing in the rental housing market;

Home ownership through Mortgage Loan Finance – which is achieved through the indirect provision of mortgage bonds in partnership with banks and non-banking retail intermediaries.

3. SCOPE OF WORK

3.1 Purpose of the Assignment

To conduct a financial, governance and operational review at Airmid Investment Trust, Alleyroads Holdings (Pty) Ltd, Alleyroads Assets (Pty) Ltd and its subsidiaries, to clarify the capacity to meet strategic objectives, including but not limited to:

Financial analysis

o business model, and its anticipated growth;

o Gearing capacity - Detailed analysis of liabilities: current, short-term and

long term and guarantees against their present value;

o Liquidity/cash flows to service current (R200 Million) and new loans applied

for (R100 Million) and any other debt it may have;

o Solvency with a focus on the strength of the net asset value;

o Changes in the assets in last three years and/or its reclassification;

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o Sustainability taking into account the gearing levels and stress test

vulnerability to general performance of the economy (with special emphasis

on affordable housing market), strategic objectives, credit risk and interest

rates fluctuations etc;

o Adequacy and soundness of financial reporting;

o Recommendations.

Governance

o Adequacy and Effectiveness;

o Management capacity;

o Risks related to existing governance structures;

o Existing litigation matters;

o Recommendations.

Operational Capacity

o People;

o Processes / Systems – adequacy ;

o Management information

o Adequacy of the controls, systems and oversight of the outsourced property

services function and the adequacy of the capacity of the service provider/s

and the quality of reporting on all properties under management;

o Recommendations.

3.2 Assignment Objectives

To establish whether the entities (“Airmid Investment Trust, Alleyroads Holdings

(Pty) Ltd, and Alleyroads Assets (Pty) Ltd”) has adequate financial, governance

and operational capacity, to handle the current business and anticipated growth

and risks associated with such growth;

To establish sustainability and on-going viability of the entities.

3.3 Assignment Deliverables and Reporting

The service provider is required to give factual findings detailed reports (soft and hard copies) and recommendations to the NHFC on all the items listed under 2.1.1 of the scope of work.

3.4 Key Competencies of service provider

Adequate demonstrable experience in performing a Financial, Governance and

Operational Due Diligence, demonstrable experience of conducting a due

diligence on companies similar to Alleyroads in property development will be an

added advantage;

Capacity/ resources (with requisite qualifications and experience) to execute the

assignment;

Have carried out several similar exercises elsewhere (proof of reference

required);

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Will be able to operate from 26th November 2018.

NB: Proposals should also indicate areas of importance pertinent to the process.

4. APPOINTMENT, COMMENCEMENT AND DURATION OF ASSIGNMENT The service provider will be expected to commence work on the 26th November 2018 and the assignment must be completed by the 31st January 2019. Three hard copies of the response to tender and an electronic copy must be submitted in a sealed envelope, duly addressed.

4.1 Proposal Cost

Respondents shall bear all costs incurred in the process of responding to the RFP and in any subsequent negotiation.

5. TECHNICAL PROPOSAL The Technical Proposal must include the following:

5.1 Introduction

Outline of the proposal and summary of key aspects of the proposal.

5.2 Company Profile

Appropriate information about the company; Full and comprehensive description of similar work undertaken in the past 3

years; List of current clients and references; Composition of team; and Abridged CV of each member of the team (qualifications, experience, expertise

etc).

5.3 Understanding of Requirements

The Service Provider is to demonstrate their understanding and interpretation of the terms of reference.

5.4 Execution Plan

The Service Provider is to provide the proposed methodology and approach to be used in keeping with the scope of the work to achieve the purpose and objectives.

6. FINANCIAL PROPOSAL The Financial Proposal must follow the following framework:

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6.1 Total price for the project, inclusive of vat; 6.2 Project Cost Calculation (itemized), derived from the work content; 6.3 No payment will be made if there is outstanding information.

7. COMMERCIAL OBLIGATIONS

7.1 Contracting

The contract in respect of the assignment will be signed between the Service Provider and NHFC.

7.2 Material Rights

The product of the due diligence exercise will be confidential information which will be the property of the NHFC and no disclosure of information to other parties.

8. BID EVALUATION CRITERIA The proposal will be evaluated in terms of the Preferential Procurement Policy Framework Act 2000 and the Preferential Procurement Regulation of 2017

The evaluation of bid responses will be conducted in three (3) phases as reflected below. 8.1 Phase 1: Eligibility/Pre-qualification criteria

Bidders will be evaluated according to pre-qualification requirements which include the submission of mandatory information or documentation. Bidders that fail to meet the pre-qualification requirements of the bid will not be considered further for evaluation.

The bidder must meet the following pre-qualification requirements: a) The bidder must be registered with the Independent Regulatory Board for Auditors

(IBRA) and must provide confirmation of registration on IRBA letterhead. b) Bidders are required to submit a copy of valid tax clearance certificate (TCC) and

their unique personal identification number (pin) issued by SARS to enable the NHFC to view the bidders tax status.

c) The firm must be registered on the National Treasury central supplier database (CSD) at the time of submitting the proposal.

d) Bidders must submit proof of Company Registration e) Submission of the following Signed and Completed Standard Bid Documents

(SBD) Forms:

SBD 1: Invitation to Bid

Pricing Schedule

SBD 4: Declaration of Interest

SBD 6.1Preference Points Claim Form in terms of preferential procurement

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SBD 7.2 Contract Form – Rendering of Services

SBD 8: Declaration of Bidder’s Past SCM Practices

SBD 9: Certificate of Independent Bid Determination

General Conditions of Contract (GCC) Failure to comply with the above pre-qualification requirements will lead to the disqualification of the bid. 8.2 Phase 2: Technical/ functional evaluation

The minimum qualifying score for functionality is 70% (70 points). All bids that fail to achieve the minimum qualifying score on functionality shall not be considered for further evaluation on Price and BEE.

Category Criteria Weighting

1

Experience and Expertise of Key personnel:

Experience and skills mix of the service provider’s team in terms of the

stated requirements of the assignment.

- 5 years general experience in performing financial, governance and

operational due diligence

- 5 years general experience in housing, property development, property

or housing market and target segments

30

2

Stability and Track Record:

5 years track record in performing audit services with emphasis on

financial, governance and operation due diligence

30

3

Approach and Methodology:

Understanding the assignment, proposed methodology and approach,

level of clarity in proposal, targets, clear timelines and engagement

strategy

40

TOTAL 100

8.3 Phase 3: Price and BBBEE evaluation

All bids that achieve the minimum qualifying score of 70% (70 points) for Functionality, (acceptable bids) will be evaluated further in terms of the 80/20 preference point system with price comprising 80% of the weighting and BEE 20%. The preference point’s claim is in terms of the Preferential Procurement Regulations 2017. Bidders must submit a comprehensive and detailed line-item (VAT-inclusive) budget as well as proposed hours and rates of personnel involved with reference to different levels of proposed resources to be utilised and an estimate of recoverable expenses.

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9. RULES OF BIDDING

9.1 NHFC reserves the right to amend or cancel this Request for Quotation (RFQ) at any given point in time using its sole discretion;

9.2 Tax clearance certificates dated within six months of the closing date of this bid must be submitted by those tendering for the business;

9.3 The NHFC is not bound to accept any of the proposals submitted, and reserves the right to call for best and final offers from the short-listed bidders before final selection;

9.4 The NHFC reserves the right to call for interviews with short-listed bidder before final selection;

9.5 The NHFC reserves the right to negotiate price with the preferred bidder;

9.6 An eligible bidder, if requested, must be prepared to present evidence of experience, ability, and financial standing necessary to satisfactorily meet the requirements set forth or implied in this proposal;

9.7 NHFC reserves the right to award a contract in part, to reject any and all quotations in whole or in part, to waive technical defects, irregularities and omissions, at its sole discretion; and

9.8 Late submissions will not be considered.

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10. DOCUMENTS TO BE SUBMITTED

10.1 Company profile and proposals;

10.2 Original valid tax clearance certificate;

10.3 Copies of any shareholders agreement;

10.4 ID copies of shareholder/directors;

10.5 A copy of the current Memorandum and Articles of Association of the company or constitutional documents of the company;

10.6 BBBEE Credentials Certified copy of Valid BEE Certificate or Affidavit;

10.7 VAT registration evidence;

10.8 Declaration of interest; and

10.9 Declaration statement

11. COPIES

Two hard copies must be submitted in a sealed envelope, duly addressed.

12. SUBMISSION ADDRESS

The proposal should be endorsed with the words “RFQ №. AC/10/2018” and hand

delivered to:

National Housing Finance Corporation SOC LTD The Isle of Houghton Old Trafford 3, 1st Floor 11 Boundary Road Houghton Johannesburg Attention: Ms. Pumza Nsukwini

13. SUBMISSION DATE

Proposals must reach the NHFC by 11h00 am, Monday 19th November 2018.

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14. CONTACT PERSON

The contact person for information pertaining to this Request for Quotation is Ms. Pumza Nsukwini, telephone number 011-644 9800, fax number 011 – 484 0204 and e-mail: [email protected].

mailto:[email protected]