TUHF CEO Paul Jackson says the housing financier is achieving strong returns in Johannesburg’s inner city, about 13 years after its formation.
"Initially it was very difficult to fund projects in the inner city. We needed to borrow from commercial banks to lend to entrepreneurial people in the city. But they wouldn’t lend to us because they viewed the city as risky and dangerous. Years on, we have had various successes in the inner city, especially with multihousing projects valued below R5m," he said.
He said that while some listed property companies were involved in inner city residential developments, their sizable projects only accounted for about a third of the inner-city work.
"We and other private groups and individuals are involved in the 70% of what’s going on in the inner city."
He said TUHF had financed more than R4bn in inner city residential rental property since its formation and its loan book held more than 20,000 residential units.
TUHF expects to achieve a return of equity of about 16% in 2018 and 18% in 2019
TUHF initially struggled for funding from traditional banks. But it recently gained support from the Public Investment Corporation, Futuregrowth, Stanlib and Sanlam. Jackson said there was a lot of potential in the inner city. "About 13 years back I would have said to someone if they spend R15,000 on a flat in the inner city, they were doing well. A piece of R3,000 would have suggested they were overpaying. Now in 2018 if you spend R200,000 on a flat, that’s good and R250,000 is on the high side."
TUHF expects to achieve a return of equity of about 16% in 2018 and 18% in 2019. It invests in projects at yields of 13% and above. Jackson said his team had managed security costs and other challenges along the way.
This is while some large property funds have had to spend heavily on security in recent months, which has damped inner city returns.