Housing scheme will succeed – GIPF
The institution says that it won't make the same mistakes as in the past.
22 February 2019 | Infrastructure
The Government Institutions Pension Fund (GIPF) of Namibia is confident that its investment into housing will succeed.
To date, the GIPF has invested N$1.38 billion into housing infrastructure projects, N$600 million into financing for affordable housing and N$779 million in financing for residential housing for all income groups.
Following its ill-fated N$600 million investment into the Development Capital Portfolio, the fund is prepared not to make the same mistakes as it did in the past.
Its general manager for investments, Conville Britz, said that the fund had worked out a mitigation plan to ensure that losses owing from its investments would not happen. He explained 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 pro-perty specialists. These mandates dictate broad investment guidelines pertaining to investment restrictions; required risk and return profile; value addition strategies and risk management,” Britz said.
“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 is monitored throughout the life of these mandates. “These mandates run for 10-year periods, providing for sufficient time to add value to projects and exit them profitably,” Britz said.
In instances were investments in pro-perty do not fare well, fund managers' performance shares 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 explained.
He said that 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.
When asked whether the GIPF still had an appetite to invest 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 10-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 said.