GIPF confident housing scheme will succeed
01 February 2019 | Infrastructure
The Government Institutions Pension Fund is confident that its investment in housing will succeed.
The GIPF has invested N$1.38 billion in housing projects, N$600 million in financing for affordable housing and N$779 million in financing housing for all income groups.
Following its ill-fated N$600 million investment in the Development Capital Portfolio, the fund is determined not to repeat its earlier mistakes.
Its general manager for investments, Conville Britz, says the fund has worked out a mitigation plan to minimise losses.
He explains that the GIPF did not directly invest in housing projects but did it through property specialists.
“All our residential property exposure is held through mandates awarded to property specialists. These mandates dictate broad investment guidelines pertaining to investment restrictions, required risk and return profile, value addition strategies and risk management,” Britz says.
“All transactions come with conditions precedent to ensure the mitigation of risks; these typically encompass certain formalities, due diligence and pre-sales levels.”
According to him, performance indicators are set for fund managers to achieve, which are monitored throughout the life of these mandates. “These mandates run for ten-year periods, providing for sufficient time to add value to projects and exit them profitably,” he says. In instances were investments in property do not fare well, fund managers' performance share would also decrease.
“In the event that after such a rigorous process a particular residential development does not yield results within the timeframe of the mandate, it would result in the overall residential portfolio within a given mandate not returning the profits required, reducing the extent to which the fund manager can share in performance fees,” Britz explains.
“Such a development could either be sold at a discount as a distressed sale or then be carried over into a direct portfolio in the GIPF name to allow it time for any market corrections. It is rather unlikely for a residential development to perform so poorly that we don't recoup the cost of our investment,” Britz said.
Asked whether the GIPF envisaged investing in more housing projects, Britz said a total of N$600 million had been set aside for fund managers.
“GIPF awarded affordable housing mandates to the tune of N$600 million during 2018; these are running for a ten-year period. These affordable housing mandates are open for funding new developments that meet the criteria of affordability by households with a minimum joint income of N$30 000 which would translate to residential units amounting to a maximum of N$900 000 inclusive of land,” Britz says.