Welcome to the

UDZ TAX INCENTIVE CONFERENCE

Day 219 Aug 05

PROPERTY DEVELOPMENT IN JOHANNESBURG INNER CITY

- IMPLICATION FOR BEE COMPANIES / CONSORTIUM

Presented by Hatla Ntene

19th August 2005

DEVELOPMENT ORGANISATION STRUCTURE

PROFESSIONAL TEAM CONTRACTORS

DEVCO DEVELOPMENT COMPANY

INVESTOR/INVESTMENT COMPANY

One Investor or

Consortium

Sales and

Leasing

Management Company

Outsourced Cleaning Security

Maintenance etc

FUNDING

• Property finance requires a balance of equity and debt

• Equity is a limited resource • Gearing at right levels enhances returns

Equity

Relationship between borrowed money and owner’s

equity

Debt

Gearing

EQUITY FINANCIERS• Investment is unsecured• Prefers lower risk• Seek to maximise their returns

DEBT FINANCIERS• Debt is typically secured• Seek to minimise risk (property, interest rate,

cashflow)• Requires sufficient return (margin, fees)

DEVELOPMENT FINANCE

Purpose for construction of a new property

Characteristics

• Short term

• Approx. 80% of construction cost

• Monthly construction draws

• Interest capitalised

• High risk/high return

DEVELOPMENT FINANCE

Purpose for construction of a new property

Characteristics:• Short term• Approx. 80% of construction cost• Monthly construction draws• Interest capitalised• High risk/high return

ACQUISITION FINANCE

Purpose:• To finance the purchase of an existing property

Characteristics:• Medium to long term• Approx. 70% of purchase price• One draw• Interest only or interest and capital• Medium risk/medium return