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26 Jan
2015

The Student Accommodation Fund (SAF)


The Student Accommodation Fund (SAF)

Gauteng Partnership Background

Introduction

The Gauteng Partnership Fund (GPF) was founded by The Gauteng Department of Housing in 2002 as a mechanism for mitigating risk faced by private sector funding institutions in financing affordable housing developments in the province. The GPF funding model introduces a public risk capital strategy that assumes a first lost position. The GPF funding instrument therefore has a character of equity but in a form of a subordinated debt. The GPF plays a facilitation and funding coordination role between government and private sector. We translate government needs into a financial language that investors can understand. We ensure the level of financial risk sharing is balanced or appropriate for housing projects across all public and private investors.

Background

Research shows that the student accommodation market bucked the economic downturn. In the past few years South Africa’s Student accommodation market has emerge as a key asset class. This sector has attracted growing interest from investors, developers and private operators countrywide.

Student numbers have climbed significantly in recent years. The swift development of South Africa’s middle class, rapid urbanisation and the influx of approximately 72 000 foreign students, mainly from Africa, have left tertiary institutions unable to house all their students. Recent figures from the education department show that student housing in residences currently provides for approximately 100 000 students, but the student population is 530 000. This means that, on average, fewer than 20% of students will find accommodation on campus.

The lack of funding for tertiary institutions has created lucrative opportunities for a small number of niche developers and private property companies. They are taking advantage of the opportunity presented by the high demand and low supply in the student accommodation market. Due to the serious shortage of residence accommodation for university students in South Africa, the private sector is a potentially key role player in the provision of student housing. International research indicates that the majority of university students are accommodated in private student housing. Students’ living conditions play a significant role in their overall performance.

The private sector is a significant contributor and stakeholder in the provision of accommodation to university students in South Africa, as is the case internationally. The recently released Department of Higher Education and Training (DHET) report on the review of the provision of student housing at South African universities confirms that the tertiary institutions have delivered minimal new stock of student accommodation. The reasons thereof vary from the lack of funding to the fact that the provision of student accommodation is not regarded as the core function of the university and therefore not prioritised.

GPF’s Intervention

GPF’s role is seen as strategic as GPF fulfils the role of government with regard to interaction with the private sector and furthermore GPF’s existing primary mandate is to promote rental housing.

GPF deems it prudent to intervene in the student accommodation because:

  • Student accommodation is a sub sector of rental housing and within the domain of GPF’s mandate
  • Students compete for accommodation with GPF’s target market any way
  • The overwhelming demand for student accommodation inevitably leads to abuse
  • GPF’s financial intervention can lead to reduced rentals if the weighted average cost of funding is reduced
  • GPF can facilitate SMME and BEE companies into the sector in line with governments mandate
  • GPF can facilitate well managed and quality accommodation to students

GPF’s primary intervention will be in keeping with our core function of providing funding to the sector. Thus GPF will engage in an extensive marketing campaign to create awareness of GPF’s additional focus. GPF’s secondary intervention is to liaise with the various stakeholders, like the Department of Education and Higher Learning institutions, and facilitate the delivery of student accommodation on their behalf.

Investment Guidelines for Student Accomodation

The Student Accommodation Fund will fund projects that meet the following investment guidelines:

  • Project must be located within 5 km distance to the targeted tertiary institution
  • Transport must be provided by the project promoter for any projects further than 2km or alternative public transport must be demonstrated to exist to cater for the students
  • Priority will be given to projects located in existing student accommodation hubs
  • Project must have a minimum of 15 units or 50 beds
  • The project must have a social amenities for the students
  • Loan to value must not exceed 100%
  • 10% Minimum equity contribution
  • Loan term 15 years
  • Vacancy levels are expected to spike in December and January
  • The repayment of the loan can be structured over 10 months for a single year
  • Rentals charged must be comparable to market related and must include water and electricity
  • The project must be self-sustaining post construction
  • Projects with alternative building methods may be considered upon approval by the GPF board of trustees
  • Single rooms should be no smaller than 9m2, and double rooms should be no smaller than 14m2.
  • Rooms should be furnished and fitted as per the specifications detailed in the Minimum Standards for Student Housing room specification manual.
  • Shower and lavatory cubicles shall be designed in such a way that individual privacy is provided (i.e., no communal showers or toilets).
  • Large common/meeting room – 1m2 per student resident.
  • Smaller TV/meeting room – 0.5m2 per student resident.
  • Cooking inside student rooms shall not be permitted. Suitable food storage, preparation and kitchen space shall be provided.
  • Wireless and/or fibre optic cable internet access is required in all student rooms and social spaces.
  • Students sharing rooms should have their own lockable closets.
  • Rooms should be equipped with a single bed, cupboard, study desk, chair and a bookshelf.
  • No more than five students must share a bath or shower and toilet.

For more information please contact Shiraaz Lorgat on 011 6856600 or email: shiraazl@gpf.org.za.

Please visit our website: www.gpf.org.za

 

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