Inner-city housing solutions
TUHF founding member Nano Makwela talks urban regeneration, rentals and the human side of financing small property entrepreneurs
e often hear that urban regeneration is a South African solution for vacant office buildings in cities and, similarly, that entrepreneurship is the answer to a stagnant economy. An organisation called TUHF has matched these two elements together.
TUHF is a national on-lending financial services provider that
Wgives financial access to those applicants who demonstrate the potential and integrity to take on the purchase, conversion or refurbishment of inner city buildings.
In its 16 years of operation, TUHF has financed more than R4bn in inner city residential rental property. Its current loan book includes more than 30,000 residential units, now valued at R3.1bn. TUHF also assists
hundreds of successful property entrepreneurs in operating sustainable residential rental businesses, providing affordable, decent inner city accommodation.
The TUHF Johannesburg head office, where the bulk of its property portfolio operates, employs about 45 people in financial, legal and operations aspects. The organisasion has branches in Durban, Cape Town, Bloemfontein, Port Elizabeth and East London.
Questions to founding TUHF member and senior portfolio manager Nano Makwela.
Explain your model based on providing housing and rental stock. People move from rural areas to, say, Johannesburg. They want a place to stay, their own space. So we fund clients to buy properties and refurbish them for rental purposes.
During the early days TUHF offered bridging finance to tenants who formed a cooperative to buy properties in Johannesburg’s inner city. Many decided to take ownership of these buildings as they were unhappy with the conditions of buildings they were living in as landlords managed them poorly.
Back then, a housing subsidy was available through the Department of Housing, but turnaround times on applications were an issue, which is where TUHF stepped in.
At the time, the
TUHF bridging finance did not address urban regeneration, which is why the TUHF business model had to change.
Today, TUHF is committed to providing access to finance for small and medium enterprises (SMEs), creating spatial and economic integration, urban regeneration and fiscal impact in the areas that we operate in.
How does it change cities for the good?
TUHF enhances the vitality of our urban neighbourhoods through investing in urban regeneration — transforming derelict buildings into asset classes that provide people with a better way of life. Creating socioeconomic activities involves developing places where people want to live, work and play. Through proactive participation in the urban areas we operate in, we support jobs, skills development and true transformation — changing the face of ownership and economic growth.
We are the only commercial property financing company in SA to provide empowerment equity finance to previously disadvantaged individuals. Our Intuthuko Equity Fund has enabled us to make a meaningful contribution towards urban land reform.
Explain TUHF’s focus on massive small.
Urban densification requires the scale of hundreds of thousands of units to be derived from small projects, on a mixed-use and mixedincome basis. This is what we refer to as massive small. We empower smaller entrepreneurs to be catalysts of this urban development.
As an SME financier, our mandate is to finance property entrepreneurs to provide affordable and low-income housing; transforming property ownership and therefore actively contributing to urban land reform. We aim to create efficient cities through urban densification that help generate economic activity in urban areas.
How does an SME qualify for financing?
We describe ourselves as a character-based lending institution. An entrepreneur likely to meet our lending criteria has the following characteristics: openminded and willing to take advice; self-disciplined to manage cash flows the property generates; have integrity in terms of property management and in ensuring the building is compliant (by law) and be committed to being an entrepreneur. All TUHF clients are expected to maintain their buildings according to our standards, keeping them compliant, clean and sustainable.
In addition, we provide training and mentorship through the TUHF Entrepreneurship Property Programme available to our clients. It promotes knowledge expansion in property, the industry and the exchange of ideas between entrepreneurs. It is facilitated in partnership with the University of
Cape Town.
Where does the funding originate?
Our main business involves raising finance from capital markets for our clients, the property entrepreneurs. We raise these funds through our shareholders. Our primary shareholder is Futuregrowth. Others include the National Housing Finance Corporation and asset managers such as Sanlam, Stanlib, the Public Investment Corporation and Mergence. TUHF normally raises about 80% of the finance for each project.
Why is the modern era of demolish and rebuild not sustainable?
New builds are capital intensive as there are a number of paid professionals working on a project at any given time, from start to finish — architects, engineers, construction staff and project managers. New builds are generally unaffordable for entry-level clients; these would be considered more appealing for established property entrepreneurs with deep pockets. Our purpose is to create an enabling environment for emerging property entrepreneurs.
Property fit is a very important part of the criteria in our lending process, as it not only deals with urban development but effective urban management postproject completion. We ensure that the nature and size of the project an entrepreneur invests in is matched to the client’s talents and experience.
Where can your new development or redevelopment projects be found?
We have branches operating in every major city, including the Western Cape, Free State, Eastern Cape and KwaZulu-Natal.
Specific Gauteng neighbourhoods where TUHF has helped finance a number of projects include Bertrams, Hillbrow, Joubert Park, Rosettenville, Yeoville, Springs and Vanderbijlpark CBD. Over a number of years, we were involved in some developments within the Maboneng Precinct.
We have funded projects in Cape Town in Observatory, Salt River, Woodstock and Brooklyn with commercial success and development impact core drivers.
Offices are moving from urban centres. Is redeveloping “downtown” relevant in 2019?
Yes. TUHF saw a gap 16 years ago in inner city Johannesburg for redeveloping “downtown” freehold and sectional title buildings as accommodation via on
“There is still high demand for rental stock in urban areas due to urban density — TUHF has a lifelong job to try to meet this demand”
lending financial services. There is still high demand for rental stock in urban areas due to urban density — TUHF has a lifelong job to try to meet this demand. Commercial banks and lending institutions don’t understand development finance like we do. This is why, through our products and services, we have remained relevant in the market.
At TUHF we are passionate about spotting and unearthing potential. In declining areas, we see thriving property markets. In run-down buildings, we see the potential for families to live in a safe and secure environment. In people, we see the entrepreneurial capability to create well-run businesses, providing employment and multiplying our economy. * Nano Makwela holds an MSc in Development Studies from Leeds University in the UK.