Housing in Southern Africa July 2016

inner city

investors

Paul Jackson

number of countries looking for the best operating model for TUHF. Hav- ing accessed various operating prin- ciples and procedures he finally took a leaf out of ShoreBank, a Chicago based mortgage financier funding mom and pop stores. ”We owe them a lot, since we have retained a lot of what made them successful. Mary Houghton of ShoreBank grappled with development impact.” She said, ‘no money, no mission and get slo- gans that encapsulate the company’. “We started as a ‘not for profit’ Sec- tion 21 company, but we were actu- ally a company not for loss. We were paranoid about breaking ever since December 2004, and have been a profitable, hard-nosed commercially run company since then. We worry about the bottom line and returns for our shareholders,” says Jackson. TUHF’s businessmodel was toborrow from the debt capital markets, lend to lots of people, whether on or off balance sheet or corporate bonds, secure investments, find deals and, if they were too big for TUHF, do joint finance. We would do the work and take a fee for it. We essentially trade in debt capital. TUHF was open for business with financing from the NHFC and other Development Finance Institutions, , and looking forward to relationships with ShoreBank, ICHUT, and board members Cas Coovadia, Taffy Adler,

do inner cities,” explains Jackson. “We buy debt as cheaply as possible, add on 3,5% and take the risk, and hopefully give a return to investors. You have to understand, you could live downtown for nothing in derelict and hi-jacked buildings, where land- lords provided no services. Into that market comes TUHF, and the muscle behind it, which was prepared to risk effectively R60 million in those days and ICHUT’s R11 million in equity.” Jackson has worked in downtown Braamfontein since 1996, and what had dawned on the TUHF team was that the city was not just about crime and grime. There was an economy. “It’s really about what you see. When we saw what landlords were provid- ing we realised that if we offered decent accommodation and good service, we could become a national organisation.” Jackson quotes TUHF Board member Taffy Adler, former CEO of the Housing Development Agency and the Johannesburg Hous- ing Company, who once said, ‘We have to get impact through scale’. As long as we stayed in the market we wanted to be big. Our board was always unequivocal about the fact that we wanted the business to grow through scale. We set up a really well run businesswith a national presence and we wanted to be independent. The second thing, says Jackson, was the funding model. He visited a

Jill Strelitz and Cedric de Beer from Nurcha – all the usual suspects. The impact of access to finance, urban land reform and scale of hous- ing supply saw the NHFC make loans totalling R330 million. “We maxed out with them, I guess,” says Jackson. TUHF has only been constrained by its ability to borrow and to date had lent a total of R4,3 billion to inner city property entrepreneurs. However, to attract funding from various commercial banks, asset managers, and international govern- ment funded agencies, TUHF had to change from a Not for Profit to a public company. Debt financiers are uncomfortable lending to a NGO. TUHF’s main shareholders include NHFC, PIC and Futuregrowth. TUHF established a commercial arm, TUHF Ltd. Essentially TUHF NPC sold its loan book to TUHF Ltd and sought shareholding from NHFC and others. “In June 2012, we brought on board new strategic shareholders who had attributes such as capital patient, a developmentmandate and debt financing capabilities.” Hence the shareholding was put together and TUHF has grown the book to R2,3 billion. “In total we have lent over R4 billion, financed 360 entrepreneurs and 34 500 units. We

Continued ▶▶▶

11