IN­VEST­ING IN UR­BAN RE­GEN­ER­A­TION

Finweek English Edition - - IN DEPTH -

Hav­ing fi­nanced over R4bn in in­ner-city res­i­den­tial rental prop­erty de­vel­op­ment in its 13 years of ex­is­tence, in­vestors look­ing to buy into the up­grad­ing of the Johannesburg in­ner city have fre­quently found their will­ing rands di­rected to­wards the JSE-listed Trust for Ur­ban Hous­ing Fi­nance (TUHF).

The trust pro­vides fi­nance for in­ner-city mixed-use de­vel­op­ments of which the largest com­po­nent is res­i­den­tial, up to the value of R50m. Work­ing with projects that range from small semi-de­tached houses to multi-unit build­ings, TUHF fo­cuses on fund­ing de­vel­op­ment in run-down ar­eas of the city, and cur­rently holds a loan book of over 20 000 res­i­den­tial units.

“Dur­ing the year, dis­burse­ments and ap­provals ex­ceeded our tar­gets, with dis­burse­ments at R519m (15% above tar­get) and ap­provals at R800m (33% above tar­get), how­ever, we ex­pe­ri­enced a par­tic­u­larly high pre­pay­ment rate. Early pre­pay­ments con­sti­tuted ap­prox­i­mately R388m,” TUHF co-founder and CEO Paul Jack­son com­mented at the trust’s 2016 an­nual re­sults pre­sen­ta­tion.

The group last year an­nounced a de­ci­sion to is­sue cor­po­rate bonds into the debt cap­i­tal mar­ket, with the Do­mes­tic Medium-Term Note (DMTN) Pro­gramme ex­pected to see debt in­stru­ments be­ing avail­able to in­vestors to the value of R1bn.

This will be re­leased to the mar­ket over the next three years in tranches of R350m.

Speak­ing to the JSE Mag­a­zine, Jack­son said at the time that the pro­gramme aimed to test the ap­petite of in­sti­tu­tional fun­ders for a unique form of mort­gage-backed se­cu­rity.

“The ad­van­tage of a DMTN pro­gramme is that it of­fers as­set man­agers a listed and in­vest­ment­grade rated debt in­stru­ment, which should ap­peal es­pe­cially to those with man­dates that do not ex­tend to un­listed debt,” he com­mented.

“We ex­pect the DMTN pro­gramme to ex­pand our debt cap­i­tal sources – mov­ing to new fi­nanc­ing struc­tures, now that we have both the track record and the ca­pac­ity to of­fer it con­fi­dently. We hope this credit-en­hanced pool of as­sets will at­tract more com­pe­ti­tion for pric­ing and as­sets to re­duce our cost of debt, re­sult­ing in a more com­pet­i­tive of­fer­ing to TUHF clients,” the pub­li­ca­tion quoted him as say­ing.

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