Inkunzi Student Accommodation Fund (ISAF) Ithubalethu is aiming to counter the shortage of affordable student accommodation, while enabling access to the property market for the general public, and delivering returns to investors, ISAF Ithubalethu CEO Owen Nkomo outlined on Monday, during a briefing in Alexandra, Johannesburg.
ISAF Ithubalethu is a student housing fund that enables public investors to invest in real estate through the specialised product of student accommodation and become players in the country’s commercial real estate space.
It is the country’s first direct access fund focused solely on student accommodation, noted Nkomo.
It is targeting the “man on the street” for investments, thereby allowing access to citizens and fulfilling its aim of increasing the number of black South African property investors.
ISAF Ithubalethu is aiming to develop student accommodation across South Africa and in sub-Saharan Africa in the future.
Its strategy is to raise capital and then pursue development projects.
Its first step will be an initial public offering (IPO) to raise up to R250-million for investment into student accommodation throughout the country.
The minimum investment is R5 000 per individual, with no maximum limit.
The fund is targeting tenanted assets where income returns will between 8.5% and 10%. It is aiming to deliver built asset returns of a minimum of 12% on the completion of assets.
It is targeting the development of 20 000 beds over a 15-year period.
The IPO offer opened on December 14, 2018, and will close on April 13.
It is being done through a prospectus approved by the Companies Intellectual Property Commissions.
The initial investment will be locked in for five years, for management to grow the fund, create a record and deliver consistent returns to initial investors.
Nkomo noted that ISAF Ithubalethu has appointed Investec as its Cash Management partner through the capital raise period.
ISAF Ithubalethu’s strategy is that of a special purpose acquisition company (Spac), whereby it will first raise cash, and only once capital is raised, will it enter into transaction legalities.
However, Nkomo estimates when the initial R250-million is raised, the company can feasibly look at developing three assets.
While currently focused on raising capital, the fund has noted the potential for developments in Polokwane, Mafikeng, Durban, Cape Town, and near the University of the Witwatersrand.
The company’s strategy will be to develop purpose-built student accommodation – rather than buying a completed asset – that affords students all the amenities they require, over and above rooms, such as social and study areas, but that is still reasonably priced.
Moreover, it will be focusing on wherever there is a gap in the market, not merely the bigger educational institutions.
Nkomo emphasised the importance of the fund, owing to the prevalent problem of appropriate, affordable student funding in the country, and region.
In South Africa alone, about 250 000 beds are required for student housing, according to a report by the Department of Higher Education and Training. This increases threefold if Technical and Vocational Education and Training Colleges are included.
Moreover, government intends to increase tertiary student enrolments by 2030 to 1.6-million, which will further increase the student accommodation need and shortfall.
By outlining the company’s plans in Alexandra, Nkomo was able to illustrate effectively the reality of this issue – many students live far away from universities and have to spend hours travelling to and from universities.
Moreover, at their accommodation, they have to contend with inappropriate facilities and an environment that is not conducive to their studying requirements, owing to the close proximity to neighbours and loud distractions, for example.
Nkomo also noted the importance of the fund having a good corporate governance, as this will ensure that investors’ cash is protected.
In this vein, ISAF Ithubalethu has an independent nonexecutive management board constituting five qualitied, experienced members.
A separate investment committee will focus on vetting investment proposals submitted by the executive team before consideration by the board.
Notably, he highlighted the formal approval by the board of a four-year rotation of external auditors.
Investors will be able to keep abreast of developments through a dedicated call centre, the company’s website and social media.