International Housing Solutions City of Tshwane September 2011

1. International Housing SolutionsCity of Tshwane September 2011

2. Residential investment-The Time is Now • The market opportunity is huge • Residential Property is the missing “quarter "of the SA property sector. • International Housing solutions is perhaps an early example of institutional investment in the SA Residential market (albeit through a private equity structure). • There are a number of other institutional backed entities building up portfolios.

3. Property = Supply vs. Demand • Current market both within and outside SA sees very little demand sector by sector. • At IHS we have focussed on what we believe to be the only sector of the property market that currently has more demand than supply and significantly so. • The investment market needs to begin to understand this sector of the property market as an investment class (which has begun). • The market needs to assist by making reliable and transparent information available to analysts.(IPD) • This will bring “new” investor capital into the sector.

4. South Africa Demand • There is a 650,000-housing-unit shortage in the affordable market that grows by about 42,000 units per year • Demand far exceeds supply because: • Urbanization necessitates housing in . • Many housing structures and neighborhoods are seriously substandard • Steady expansion of working-age population • Industries such as mining, infrastructure projects and tourism require intensive worker housing • Lack of formal affordable rental opportunities closer to the workplace.

5. Every year for the foreseeable future, South Africa needs tens of thousands of units of affordable workforce housing near urban employment

6. Workforce Housing - Opportunity • Supply in South Africa is limited because:  • Private developers focus on high-end housing • Government concentrates on serving the neediest low-income population • Historically, banks ‘redlined’, limiting the availability of end- user finance for moderate-income households •  We are bringing many experienced developers into our market. • Banks have eased lending criteria in this market. • Perceptions of “risky assets” are slowly being changed. • There is an opportunity for institutions to invest responsibly while assisting to close the housing gap.

7. About IHS’s Existing Housing Fund • Name: South Africa Workforce Housing Fund • Size: approximately R1.9 billion • Investors: mostly North American but also Development Bank of Southern Africa, Public Investment Corporation, and Citi (SA) • Target: low- and moderate-income • Strategy: provide equity for affordable housing for rent and for sale in and beyond South Africa’s borders . • First Close: 2008 – 10-year Fund • Expected Number of Affordable Housing Units: 50,000

8. Investments to Date • 25 deals with 16 developers • Investments committed to date will yield approximately 35,000 units • Fund expected to be fully invested by end of 2011, given strength of current pipeline • 62% took development and construction risk • 85% in Gauteng (greater Johannesburg area) • 50% purely for-sale; 50% rental to be followed by sectional title sale when advantageous. • 74% of equity invested in projects with average unit prices below R500,000 (80% FSC compliant).

9. Greatermans • Investment approved May 2008 • Joint Venture with AFHCO, a well-established developer specialising in acquiring inner-city office buildings and converting them to affordable residential; IHS has veto on major decisions • Acquisition of the former Greatermans headquarters building in Johannesburg CBD , and conversion into 428 units plus supporting retail opportunities • Fund’s investment is R18.6m

10. Greatermans Investment Summary and Rationale • Partner is a very well established development and property management firm, with about 5,000 units in central Johannesburg • Conversion to 428 apartments. • Units range from studios to one- and two-bedrooms, and are mostly small (25 m2) • Average rents start at R2,350 per month, which is very affordable for Johannesburg centre city • Finishes and fittings are very durable and attractive • NO ARREARS

11. Fleurhof • Investment closed in February 2009 • Joint Venture with Calgro M3, a listed developer specialising in mixed income residential developments • Originally planned for 6,467 units, the total was increased at the request of the municipality to 9,468 units • Fund’s investment is R100m Insert picture

12. Fleurhof Investment Summary and Rationale • The project is an infill development between the established areas of Roodepoort and Soweto, two large suburban areas respectively located in the west and south-west of the City of Johannesburg; good employment in the area, good transport links. • Strong political support, as the development includes approximately 3,000 fully-subsidised homes • Includes provision for 7 crèches, 3 schools, 38 community gardens, play areas and similar amenities, 5 business sites and 1 industrial site; the land for most of these will be serviced and sold to commercial users. • Fund has purchased 200 units “turn Key” out of the development and will rent them into the market.

13. Jabulani

14. Why has residential property struggled to emerge as an attractive asset class to institutional investors in SA • Unlike in the commercial sector there has in the past been a lack of large transparent unlisted vehicles that are attractive to institutional investors. • Lack of objective and believable data (IPD).These returns are reported in most other IPD jurisdictions and will hopefully be reported in SA in the short term. • This has started to change with well managed and governed portfolios emerging in the affordable housing and student accommodation sectors. • These portfolios show a history of good yields, very good capital growth, LOW VACANCIES and LOW ARREARS. • Institutions have started investing in well managed housing funds such as IHS. • Highly likely in the medium term that we see one or a grouping of these entities list on the JSE.

15. Contact Information Rob Wesselo, Managing Partner RWesselo@IHSInvestments.co.za WWW: www.intlhousingsolutions.com