IHS in Opic-backed housing investment worth up to a potential R7.2 billion

International Housing Solutions (IHS) has won a tender from the US Overseas Private Investment Corporation (OPIC) to commit US$100 million in funding towards a larger investment pool of up to a potential US$1.0 billion (R7.2 billion) that will finance housing for low- and middle-income households in Africa and the Middle East. A significant portion of the investments will target South Africa.

IHS is a joint venture between MuniMae of the US and top Irish property group Howard Eurocape. Cathal Conaty, CEO of IHS, and Frank Gormley, Chairman of Howard Eurocape, are prominent Irish investors in the company.

Having recently opened its Africa head office in Rosebank, Johannesburg, IHS is using its extensive experience in financing affordable housing to bring foreign capital and expertise to South Africa to boost the supply of urgently needed quality, yet affordable, housing.

OPIC, meanwhile, is the US government-sponsored agency that supports US private investment in emerging markets. It provides funding (from large structured finance transactions to small business loans), political risk insurance and other assistance to companies that, in turn, help promote the further economic development of developing countries.  

Against stiff competition from a large number of applicants worldwide, IHS has won an OPIC tender that will see OPIC commit US$100 million in debt to the affordable housing effort. IHS will raise additional equity capital from third-party international and SA investors and contribute its own funds as well. The OPIC and other funding can then be leveraged (at the project level) up to a potential maximum of 70%, providing a total potential commitment of up to US$1.0 billion (R7.2 billion) to fund the construction of affordable housing, much of it in South Africa.  

"We are very excited to have won such a competitive tender and to be able to bring such large amounts of foreign investment into South Africa," says Soula Proxenos, IHS Managing Director UK and Africa. "Both OPIC and IHS are committed to making a difference in developing countries around the world, and this amount of capital is a major step toward really making an impact.

"Some of the funds will be used to support affordable housing projects in other countries in sub-Saharan Africa and the Middle East, but we expect a very substantial share to go to South Africa," she explains. "IHS has already been speaking to several international institutional capital providers who are keen to participate. We have been introducing them to the South African market - there seems to be no end to the current wave of interest in investment in SA.  

"Our US partner MuniMae has a long track record of successfully raising third-party capital for affordable housing projects nationally - the company is a leading provider of debt and equity financing for affordable housing in the US. So we are very confident of raising additional capital."

IHS Director, South Africa, Elize Stroebel says IHS has identified several housing projects nationwide which are attractive investment targets. Some of these are focused on inner-city regeneration, particularly in Johannesburg, as well as on building up a stock of affordable rental housing.

"We believe there are many opportunities in which we can accelerate the current pace of regeneration of South Africas cities," she notes. "We have been working on several deals that are in the approval process, and will be announcing them once they have been finalised.

"We can be a valuable partner in any local project because of our expertise in affordable housing and our understanding of what it takes to make these investments work. OPIC backing will help to lower our overall cost of funds. At the same time, however, we will not be providing finance directly to families, in the form of mortgages we will always work through local financial institutions to help families meet their housing needs," Stroebel stresses.

Concludes Proxenos: "We are dedicated to helping bridge the housing gap that exists in SA - there are some 2.4 million homes that still need to be built over the next few years, the latest National Treasury study shows. As with our business in the US, we want to reinforce the idea that doing good can also make for good business."