Johannesburg-based private equity investor International Housing Solutions has received the first commitments for its second fund, IHS Fund II, totaling more than $63 million in equity. The commitments come from the International Finance Corporation (IFC) and the South Africa National Housing Finance Corporation (NHFC).
The fund, launched in December 2011, focuses on the development of affordable housing in South Africa and sub-Saharan Africa. Soula Proxenos, managing director at IHS, told PERE that the fund will target “gap housing,” a sector between government-issued housing and the traditional housing market, which is out of reach for the majority of South Africans.
IFC, a member of the World Bank Group, has committed $25 million to the fund. “Fund II offers an attractive opportunity for private investors to gain access to a fast-growing market with significant positive social impact,” said Saleem Karimjee, IFC senior manager for Southern Africa, in a statement. “IFC’s commitment will stimulate investment, growth and job creation in sub-Saharan Africa.”
NHFC committed $38 million in capital, saying it hopes the fund’s projects will ensure that South Africans have greater access to housing that is affordable and appropriate in terms of size and location.
IHS’s debut fund, the Southern Africa Workforce Housing Fund, closed on $230 million in equity in 2009. According to Proxenos, the first fund invested in 34 projects with 18 different developers and built 28,000 housing units. IHS plans to employ a similar strategy for its follow-up fund, but the firm will expand its South African focus to markets like Botswana, Ghana, Mauritius, Namibia, Zambia and others. The second fund plans to partly offset the 600,000 unit housing deficit for low- and middle-income housing in South Africa.
Proxenos said the fund hopes to attract both regional and international investors, but she acknowledges the different attitudes investors have to emerging markets. “North American and European investors understand this market as an asset class, but they don’t understand the region, whereas the converse is true for domestic investors in South Africa,” she explained. “They’re obviously very comfortable with the region and with the risk-adjusted returns, but they understand the asset class less.”
Although IHS initially stated in December that it hoped to raise $360 million for Fund II, Proxenos told PERE that the firm will let investor interest decide the fund’s size. She noted that IHS would like to complete fundraising within the next year, but it does not have a fixed timeframe in mind.
“With good wind and speed, we may be done within a year,” Proxenos said. “That will be determined by investor appetite.”