2. Introduction Adowa Infrastructure Fund Managers (AIFM)
A private equity fund manager
Specializing in SRI oriented investments in infrastructure and related businesses located in Sub-Saharan Africa
“Our ethos advocates equity and debt financing of projects for the benefit of the community.”

3. Student housing challenge
Demand side
Shortage in available housing
Accommodation available for 20% of University enrolled students (Excluding other higher education institutions)
Global average is 50%
Shortage amounts to >R100bn
Opportunities extend into Sub-Saharan Africa

4. Student housing challenge
Majority significantly below the global average of 50%

5. Student housing challenge
Supply Side
The economics of the industry are challenging
Fiscus can’t support the required investment
Traditional funding institutions have little appetite (although there is a growing interest)
Most tertiary institutions are dependent on government subsidies
Bulk of learners are indigent
of students housed in residences, 71% received some form of financial aid

6. Student housing solution
Pooled capital; investment management
The challenge has significant capital requirements
Government alone cannot provide the capital
Private sector pooled capital solutions have a role to play
The challenge presents investment opportunity for long-term investors

7. Student housing solution
Adowa Infrastructure Fund
A closed-ended infrastructure fund focused on developing high quality student accommodation opportunities in Sub-Saharan Africa
The fund will provide financing for the acquisition and development of student accommodation properties
The aim is to provide a pooled-capital vehicle that
Addresses the identified challenges in this sector
Creates an investment asset class for social impact driven investors

8. Student housing solution
Adowa provides a solution beneficial to all key stakeholders
Government
Students
Tertiary institutions
INVESTORS

9. Student housing solution
GOVERNMENT
Pooled capital vehicles address the significant challenge identified by Government
Identified required levels of accommodation coverage
Current coverage – 1 bed per 5 registered students
Short term target – 1 bed per 2 registered students
Long term target – 1 bed per 1.25 registered students
Capital investment of >R100bn is too much for the state alone
The significant capital requirements offer an opportunity for private sector to assist; full support would be offered to investors who can fulfil the need

10. Student housing solution
UNIVERSITIES
Private sector involvement has high social impact on universities and students
Accommodation creates an enabling educational environment
Private sector solution allows university to direct more funds towards curriculum development
The Build-Own-Transfer model creates capital for the institution for the future
A private solution allows institutions to focus on curriculum development

11. Student housing solution
University funding model
Significant portion of government subsidies are allocated for teaching inputs (e.g. Curriculum provided)
Universities are ranked based on
Student numbers – Full-Time Equivalent (FTE) Enrollments
Courses offered, ranked based on categories (see Table below)

12. Student housing solution
Tertiary input funding weights
Hard-skilled curricula receive higher weighting
Socially impactful curricula receive high weighting

13. Student housing solution
Teaching input scores
Historically disadvantaged institutions need the most boost

14. Student housing solution
Student housing provision has high social impact points
Results of private sector solution
Impact
Housing creates an enabling environment
Living on-campus housing during a student’s 1st year increases the chances they’ll finish college by 12%
MORE GRADUATES
BETTER GRADUATES
INCREASED SKILLS LEVELS
Universities focus on curriculum development
Teaching inputs – i.e. Courses offered – have the biggest weighting for allocation of funds
MORE COURSES
BETTER QUALITY COURSES
DIVERSITY OF COURSES
HIGH
HIGH

15. Student housing solution
INVESTORS
Student accommodation is a viable asset class
Significant demand in the South African context
bed shortage plus future requirements approximates a R100bn Capital requirement to 2030
Maintenance backlog increases this further
Globally, student accommodation is a unique asset class attracting yield seekers
The concession model allows for improving long term yields
Funding models from the US can be adopted
E.g. Student revenue housing bonds
Student accommodation presents a good asset class for yield seeking investors

16. Student housing solution
The world student housing sector reached $7.2bn investments in 2013
Source: Savills World Research, Spotlight: World Student Housing 2014

17. Student housing solution
US listed student housing REITS*
Yields compare favourably to US 10yr bond yields currently around 2.38%
*Note: Campus Crest Communities, a third listed student housing REIT has decreased significantly since its listing in 2004, with a CAGR of (7%).
Source: Google finance and company websites

18. Adowa’s approach Infrastructure Equity Fund
Equity investment into student housing projects
Procures projects from tertiary institutions and independent property developers
Equity funding of construction and development costs
Procures lease agreements with tertiary institutions
15-20 year investment horizon
Hurdle rate: 15% IRR over the investment horizon
Exit strategy: Transfer of building for free to institution at the end of the lease

19. Fund business model
Operating structure:

20. Example based on budget for Stellenbosch Tygerberg
Fund business model
Fund assets: CAPEX
Construction costs are estimated at ~R per unit
Technology improvements in building materials in methods will reduce this cost
Example based on budget for Stellenbosch Tygerberg

21. Fund business model Innovative Building Technologies (IBT)
Adowa aims to focus on IBT development so as to reduce the per-bed construction costs
The fund has partnered with a property developer pioneering IBT in Southern Africa
Technology improvements in building materials in methods will reduce capital costs and construction times
Costs – up to 13% reduction
Time – up to 40% reduction in construction time
Waste – almost 0% of construction waste

22. Financial model

23. Financial model
EQUITY IRR ~16%

24. Adowa’s investment strategy overview
FUND INVESTMENT STRATEGY AND CRITERIA
Fund size
R3bn
Fund term
15 years
Commitment period
8 years
Geographies
Sub-Sahara Africa
Sectors
Student & Social housing
Development stage
Greenfields and selective acquisitions
Investment size
R50m and above
Control
Development execution, property management, exit
Leverage
Typically 60-70% of development costs
Development partners
Associated development platforms or independent providers
Currency risk
US$ leases (where counterparty is outside of South Africa)
Concession
20 – 30 year leases
Fund manager
Adowa Infrastructure Fund Managers
Exit
Transfer of properties to tertiary institution

25. Thank you Sisa Rafuza Adowa Infrastructure Fund Managers
Third Floor, Block B Park Lane
Cnr. Park and Alexandra Road
Pinelands
7405
Tel
Cell