US fund’s R1.3bn housing boost

9 May 2008

USA-based International Housing Solutions (IHS) has raised some US$175-million (about R1.3-billion) in capital from institutional investors for its newly launched South Africa Workforce Housing Fund.

In a statement this week, Municipal Mortgage & Equity – commonly known in America as MuniMae – said that its affiliate, the IHS, would use the fund to invest in rental and for-sale housing for low and moderate-income families in the country.

IHS provides innovative financial solutions, including debt and equity, to owners and developers of affordable housing projects, opening its Africa head office in Rosebank, Johannesburg, in 2007.

MuniMae is widely recognized as a leader in US affordable housing finance, with over $12-billion of affordable housing investments under management for institutional investors.

The company also expects several additional investors to commit further capital to the SA Fund, increasing its size to $240-million (about R1.8-billion), enough to fund the construction of an estimated 30 000 homes, and help meet the large and growing demand for housing in South Africa.

“We began IHS in order to bring our expertise in financing affordable housing projects to countries around the world,” said MuniMae CEO Michael Falcone. “We now have top-notch teams of investment professionals in South Africa and the UK bringing MuniMae expertise to housing in those markets.”

Spurring development

South African property developers had found it difficult to raise capital for large-scale affordable housing developments, IHS SA country director Elize Stroebel told Property24 this week, adding that IHS helped developers finance affordable housing projects in the form of equity.

“The equity allows developers to obtain larger loans from the banks at a reduced borrowing cost, which in turn allows them to build bigger developments without having to phase them in or conduct large pre-sales,” she told the website.

“As the developers achieve more scale in their projects, they are able to pass the lower costs on to middle income families, in the form of lower rentals and selling prices which in the current South African economic climate is a huge benefit to these families.”

The $175-million of capital commitments includes $95-million from a North American pension fund and a US foundation endowment, as well as up to $80-million committed in participating debt from the US Overseas Private Investment Corporation, a US government-sponsored agency that supports American investments in emerging markets.

The company believes the fund will help leverage returns for fund investors while spurring economic and housing development in South Africa.

“Our international activities have become increasingly important, as the credit market disruption has impacted fund raising ability for US projects,” said Falcone. “We believe our success in raising this fund demonstrates the confidence these capital partners have in MuniMae.”

SAinfo reporter

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