CDC Group invests US$36m in urban property fund Divercity for affordable housing

SOUTH AFRICACDC Group, the UK government’s development finance institution, has invested ZAR500 million (US$36 million) in Divercity Urban Property Fund (Divercity), a platform dedicated to building affordable housing and focusing on the regeneration of South African cities.

The platform will use this funding to build green housing in Johannesburg.

Carel Kleynhans, CEO of Divercity,  expressed confidence that CDC will add significant value to the funds’ goal of changing the face of affordable rental housing in South Africa and establish it as an investment-grade asset class.

“The business is now adequately capitalized to deliver another 2,500 units, which we intend to commit to and announce this year still. That money will largely be spent by the end of this year.”

Kleynhans confirmed that a further R180 million (US$12.6 million) has been committed by Divercity’s existing shareholders, which include Atterbury Property Fund, Ithemba Group Investment, RMH Property and Nedbank Property Partners.

He said the CDC investment coincided with Ithemba Group Investments selling its residential and property manager Ithemba Property to Divercity through an ‘internalization’ process, resulting in Ithemba increasing its shareholding in Divercity.

CDC Group invested in Divercity in a funding round that also saw the participation of South African impact investor Futuregrowth and Divercity’s existing shareholders.

Kleynhans added CDC now has a shareholding of more than 26% in Divercity while Futuregrowth has a stake in excess of 10%.

The funds invested will be used to build and manage over 2,500 new residential units over the next five years, primarily in Johannesburg.

This city of approximately 5.6 million people is experiencing a housing shortage and according to CDC Group, South Africa has a housing shortage of approximately 2.3 million units and in that context, a large majority of its low-cost housing is built on the outskirts of major cities and that limits the residential options of low- and middle-income households to mostly informal, congested and poor-quality housing on the outskirts of cities.

“Cities in sub-Saharan Africa are experiencing rapid population growth and a growing housing shortage, with low-income populations particularly affected and this investment will help promote inclusive growth and strengthen social and economic integration in the country” 

Samir Abhyankar – Managing Director of CDC Group’s Direct PE Arm

Divercity is focusing on eco-responsible housing to reverse this trend and contribute to sustainable and environmentally friendly urban development. 

“Cities in sub-Saharan Africa are experiencing rapid population growth and a growing housing shortage, with low-income populations particularly affected. This investment will help promote inclusive growth and strengthen social and economic integration in the country,” said Samir Abhyankar, Managing Director of CDC Group’s Direct Private Equity arm.

Ilaria Benucci, head of construction and real estate at CDC Group, said urban population growth and a challenging macroeconomic environment necessitates patient and long-term investments that will help close the gap between demand and supply in South Africa’s housing market.

“We are delighted that our investment in Divercity will support the developer to deliver rental housing that will meet the housing needs of groups within the low- and middle-income bracket.”

The funds invested in Divercity will also finance the acquisition of residential property and asset manager, Ithemba Property and this other transaction is intended to bring new expertise to the management of Divercity’s future homes.

Ithemba Property has 20 years of experience in the field.

Liked this article? Subscribe to DealStreet Africa News, our regular email newsletter with the latest news, deals and insights from Africa’s business, economy and more. SUBSCRIBE HERE

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.