OVERVIEW

01

THE PROVISION OF MUCH NEEDED HOUSING

At the lower end of the affordable scale, South Africa desperately needs housing stock. THH provides a comprehensive strategy from where opportunities in this market segment can be explored. To gain access to capital is key in our quest to aggressively build a large portfolio. The THH portfolio of rental stock makes a meaningful impact in the affordable housing industry in South Africa. Ultimately people caught in a desperate spiral of poverty, benefit from this initiative. Housing in the affordable sector provides an initial foothold from where a respectable future can be accessed. The THH initiative provides for a lucrative business model in the context of social upliftment.

Different asset classes can effectively contribute to one REIT. Any form of rental accommodation could contribute income to a specific REIT. However, the market will expect a focused approach from us. For this reason we will initially focus on Social Housing and Inner City developments. When necessary we can later add other similar asset classes, e.g. Student Accommodation and Rentals at Mines.

SOCIAL HOUSING

The Housing Hub has thoroughly researched the Social Housing Regulatory Authority (SHRA) Social Housing initiative taken by the SA Government in order to facilitate the development of social housing in the rental market. A Social Housing Grant (RCG – Restructuring Capital Grant) is available and could be implemented to facilitate the provision of apartments. There is a rent ceiling on these apartments so as to pass the benefit of the grant on to the tenant and thus the target market is restricted to tenant with the income bracket of between R1,500 and R15,000 per month.

With the cap on the rentals we are still able to achieve a gross rental of R2,900 and a net rental around R2,100 per unit every month.

At the moment, management issues (specifically issues related to corruption) prevent the rollout of much needed Social Housing projects in South Africa. The SHRA model, RCG and supporting legislation is well thought out and could contribute towards the supply of Social Housing in South Africa if applied and implemented properly.

Our SHRA initiative will benefit from cross-subsidisation and funding from our non-subsidised projects and private sector funding initiatives. In this way The Housing Hub will make a meaningful contribution with the supply of Social Housing in South Africa aimed at the provision of much needed basic houses for the lower income groups.

INNER CITY REJUVENATION

From all over Southern Africa and Africa, young people find their way to major cities in South Africa. At present, the demand for residential accommodation in these cities by far outstrips supply. Over the past 20 years, in particular since 1994, Inner City areas in South Africa changed to become residential destinations. An Inner City revival process is well underway in most cities. The Johannesburg Inner City is at a beginning stage of revival.

The Inner City of Johannesburg now provides a lucrative opportunity. Literally hundreds of buildings are available to be converted into rental accommodation. This coincides with a steep increase in demand for rental accommodation. Young people come to Johannesburg and need safe and convenient accommodation at affordable prices. Young people typically want to socialize in areas crowded with nightclubs, restaurants, gyms, etc.

Johannesburg is recognized as a world-class city and provides all the required attributes satisfying a young and vibrant market. The city is changing to become a very trendy African city, alive with music, merchants, brand names, etc. – all contributing to a buzz which young people find accommodating and socially acceptable. Inner city rentals are currently priced between R2,500 and R4,000 per tenant per month.

At The Housing Hub, Inner City Rentals currently forms our core focus. Recently we negotiated for and secured at least 14 large office buildings that can be converted into rental units. This portfolio allows for 143 177m2 of lettable space and a total of 7 649 tenants. A R1,4 billion value is conservatively calculated when an 8,5% (eight comma five percent) Yield Rate is considered. We specifically benchmark ourselves with the JSE listed IndluPlace, which has a current Yield Rate of 8,06% (eight comma zero six percent).

STUDENT ACCOMMODATION

With the influx of students coming into the cities from the outlying areas in South Africa and from Africa in order to seek quality education, there is a huge shortage of beds to house the respective students. Recent statistics illustrate that there is a shortage of 500,000 beds at universities and colleges around South Africa. Large universities throughout South Africa are booming. Demographics are changing fast with the largest portion of the entire population in their thirties and younger. The ‘big name’ universities are particularly high in demand. Degrees from these institutions allow young entrants to the workplace to earn better salaries and to get better jobs. A result of all of this is that student counts at larger universities exponentially increased and that demand in student accommodation today by far outstrips supply.

There has been a surge in the student accommodation market over the past few years, yet the backlog continues to increase and thus the market is ripe for new entrants and THH aims to be a large contender in the respective market.