Inner-city trust bemoans the lack of property funding for black developers
Correction: July 23, 2018
An earlier version of this article rendered TUHF Ltd as Trust for Urban Housing Finance.
Inner-city property funder TUHF Ltd is lamenting the lack of funds available for black entrepreneurs looking to enter the property sector, saying this is a lost opportunity.
Since the company launched in 2003, TUHF has raised close to R5bn for entrepreneurs, 65% of which were black. TUHF’s loan book has grown on average at 13% a year for six years, and is sitting at about R2.5bn.
"No development finance institutions have programmes or budgets in place and they will not allocate money to empower black property practitioners at an entry level and beyond," says TUHF’s CEO Paul Jackson. The only money TUHF has managed to raise from the government is R75m from the Jobs Fund — which took three years to acquire.
Jackson says that in 2007 TUHF created the Intuthuko Equity Fund to help the previously disadvantaged get deposits and other initial funding needed to launch housing and other property projects worth R30m or less, thereby helping redevelop Johannesburg’s inner-city and alleviate housing problems.
These people would also go through induction programmes and receive operations support. "Empowerment funding for black property practitioners needs to be a government programme. It’s a public good. We have approached every development finance institution in the country and received no support," Jackson says.
Rory Mackey, CEO of SA Corporate Real Estate, a diversified listed property group that owns numerous buildings in Johannesburg, says he got funding for two buildings from French development finance institute, Agence Française de Développement, and that there was scope for such institutes to fund housing developments in SA. "Empowerment funding from development finance institutes will go a long way in the inner-city to promote entrepreneurs and improve livelihoods."
TUHF’s core business is to raise bridging and mortgage finance from capital markets for its clients. It raises these funds via asset managers, including Futuregrowth, Sanlam, Stanlib, the Public Investment Corporation, Ashburton and Mergence. TUHF normally raises about 70% of the finance needed for each project and the client raises the balance from banks. TUHF’s clients tend to be small to large clients who develop between four and 4,000 units.
"These include UTF or Jozi housing, that own flats and shops, on the large side — and many smaller clients, around the few-hundred-unit [property], down to people who own one or two buildings," said Jackson.
Jackson says there are often potential entrepreneurs and low earners who have been turned down for private funding by banks. They usually approach TUHF wanting to build multi-unit developments where they recognise demand. Such entrepreneurs need to have funding made available to them.
"These are people who may want to build 30 or 50 units. They can tell where these developments would work and understand how to tenant them, but they don’t necessarily have experience in residential property. If SA is serious about empowerment and about including more people in the country’s real estate market, this is where empowerment must happen," says Jackson.
TUHF has helped finance projects in Gauteng, including in Arcadia, Bertrams, Hillbrow, Joubert Park, Rosettenville, Springs CBD, Vanderbijlpark CBD and Yeoville. It is also involved in projects in Western Cape suburbs, including Observatory, Salt River, Woodstock and Brooklyn; and is active in the Eastern Cape, Free State and KwaZulu-Natal.
Over a number of years it has financed 14 of the buildings in the Maboneng Precinct. Says Jackson, "Many of these were then sectionalised and sold with only six remaining as rental stock or to be constructed."