CPD SEMINAR

Thursday & Friday 1st & 2nd September, 2016

Safari Park Hotel (Nairobi)

Eng. Oumar DIOP, MBA, PMP

Director Portfolio & Projects Management – Shelter Afrique

Directeur Gestion de Portefeuille & Projets

PROJECT FINANCING & INVESTMENT PLANNING

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Content

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Shelter Afrique in Brief

Project Finance Cycle

Quantity Surveyors role in project financing

What is Project Financing ?

Key Debt Parameters – Raising Capital

Project Financing Products & Services

Selected Projects in East Africa

Shelter Afrique in Brief

• Strategic Goals

• Providing a full suite of funding solutions for affordable housing & Infrastructures related projects across Africa.

• Membership & Impact

• 44 Member Countries, Leader and channel of choice for affordable housing & Infrastructures across Africa

• Expert on best practice government policies and processes to support affordable housing

• “Go-to Lender” for affordable housing projects and investor in projects with significant social impact

• Expert in innovative private-public partnerships (PPPs) to unlock and develop land

• Knowledge repository for new and innovative technologies to reduce costs of housing

• Moody’s Baa - stable rating (2015)

• 4 regional offices Nigeria – Kenya- Cote d’Ivoire - Zambia

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Shelter Afrique Value Proposal

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National

and local housing entities

Local and state

governments

Large developers

Materials and

equipment suppliers

Large construc-tion

companies

Financial institutions

▪ Link developed projects to banks to ensure there is end-user financing

▪ Connect quality developers with large projects (Master plans, PPPs, etc.)

▪ Provide guidance on permitting where SHAF has relationship with govt.

▪ Pilot projects with new types of materials to reduce costs and improve quality

▪ Connect contractors with large projects in need of high quality contractors

▪ Co-develop standardized building designs and construction processes

▪ Support banks to develop mortgage markets

▪ Invest in private equity funds with a focus on affordable housing

▪ Provide technical advice on housing development initiatives

▪ Coordinate PPPs and co-develop innovative structures on new projects

▪ Providing technical advice on appropriate housing delivery strategies

Shelter-Afrique Projects

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Residential Office Buildings Shopping Malls Mixed Real Estate Developments

Social Housing

Sites and Service/Infrastructure

Slums upgrading Equipment and Material procurement

What is project financing?

Defining Project Financing

• Project finance is the long-term financing of projects based upon the projected cash flows of rather than the balance sheets of its sponsors

• A project financing structure involves a number of equity investors, known as 'sponsors', a 'syndicate' of banks or other lending institutions that provide loans to the operation

• Project are most commonly non-recourse loans, which are secured by the project assets and paid entirely from project cash flow, rather than from the general assets or creditworthiness of the project sponsors

• Higher risk projects may require the surety/guarantees of the project sponsors

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Parties to a project financing

• Sponsor

• Lenders, Debt Financiers

• Financial Advisors (A & QS)

• Technical Advisors (A & QS)

• Legal Advisors

• Equity Investors

• Regulatory Agencies

• Multilateral Agencies

Project Finance Cycle

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Project Finance Cycle (Cont’d)

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Screening of projects – Justification of

eligibility

Presentation to Internal Loans

Committee – Issue of Indicative Offer

Letter

Appraisal Mission -Final Evaluation

Report

Board of Directors -Final Approval and

Final Offer

Signing of the Loan Agreement and

Legal Documentation

The Project

• Feasibility Study

• Architectural and Engineering Designs• Bill of Quantities

• Project Description

• Evidence of approval by relevant authorities

• Land title – Free from any encumbrances• Environmental Impact Assessment Report

• Profiles of Technical Team

The Sponsor

• Application Letter

• Brief description of Sponsor’s background• Certificate of Incorporation

• Memorandum and Articles of Association

• Audited Financial Accounts

• Bank References

Quantity Surveyors role in project financing

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• Advising on the potential of a site and working out what a client can afford to build, often termed ‘feasibility’.

• Presenting detailed information on the cost of particular elements of work on a periodic basis to enable payment for those works carried out to date. This process is known as ‘valuations’.

• Organising the division of a project into its component work packages, then awarding these work packages to smaller, more specialised construction companies (known as subcontractors).

• Dealing with contractual and legal matters.

• Managing costs to make sure that the initial budget isn’t exceeded.

• Arranging staff payments and, at the end of a job, settling the final accounts.

• Acting as financial advisors and monitoring progress for the Sponsor.

What does a Quantity Surveyor do?

PROJECT BRIEFPROJECT

INFORMATION SUMMARY

BOARD PAPERPROJECT

MANAGEMENT PLAN

PROJECT EXECUTING

PROJECT CLOSING

Baseline Definition @ PIS OUPUT

• IPM Report & PIS Approval Sheet

Baselines Monitoring @ Executing - OUPUT

Initiating Report

Planning Report

Executing ReportInspection Report

Escrow Account Statement

Debt Recovery Report

Disbursement ForecastDisbursement requests

Restructuring Requests

Baselines Validation @ Appraisal - OUTPUT

• Technical , Marketing Assessment Report

RISK DEPARTMENT

•Loan Classification Report•SCN on Restructuring

•Portfolio Risk Report3 41

FINANCE DEPARTMENT

•Loan Disbursement Report

•Invoices to Customers

•Receipt of payment - Customers

•Feedback on forecasts

•Loans Overdue Report

LEGAL DEPARTMENT

•Agreements

•Legal Opinions

•Discharge Request

•Valuations

BUSINESS DEVELOPMENT DEPARTMENT

•Feasibility Study•Market Survey Report

•Design & Drawings

•BOQ & Specifications

•Program of Works

•EIA Report

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DEVELOPER/BORROWER

• Equity Injection Schedule• Sales Projections

• Disbursement Projections

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Architects, Quantity Surveyors & Project Finance Cycle in SHAF

Key Debt Parameters – Raising Capital

Security/Collateral

• Mortgage Charge on Land and Construction Works:• Preferably freehold land• Leasehold is acceptable

• All risk Insurance to cover works with Shelter-Afrique’ interest duly endorsed

• Pledge of Shares of the Borrowing Company

• Corporate Guarantees of Parent/Holding Company

• Personal Guarantees main shareholders

• Assignment of all Project Proceeds

• Payment for construction works will be against an Architect’s Certificate and valuation of works done by QS.

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Key Debt Parameters – Raising Capital (cont’d)

Pricing & Fees

• Interest rate: Variable Base + Margin% p.a.

• Tenure: 2-7 years inclusive of grace period of 18-36 months

• Repayment: Quarterly instalments of principal

• Appraisal Fee: 0.5% of the loan amount

• Front-end fee: 1% of loan amount upon signing of the Loan Agreement

• Commitment Fee: 0.85% per annum of any undisbursed loan balance.

• Loan Management Fee : 0.5% per annum on any disbursed and outstanding loan amount payable quarterly

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Project Financing Products & Services

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Direct Lendin

g

Lines of Credit

Corporate

Loans

Syndication

Direct Lending

• Financing of real estate projects

• KES, FCFA, Euro, US$

• Tenor: 5-7 years

• Grace Period: Up to 3 years

• Financing: 60%

• Maximum KES 1.2 billion.

Lines of Credit

• Available in KES, FCFA, Euro, US$

• Banks and financial institutions

• Tenor : 10 years

• Grace Period: Upto 2 years

• Maximum KES 1.2 billion.

Corporate Loans

• Portfolio of projects

• Available in KES, FCFA, Euro, US$

• Large scale sponsors

• Tenor: 5-7 years

• Grace Period: Up to 3 years

• Maximum KES 1.2 billion.

Syndication

• Co-financing available in KES, FCFA, Euro, US$

• Large scale projects

• International partners

Project Financing Products & Services

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Trade Finance

• Opening and confirmation of documentary letters of credit

• Import and Export of construction materials and equipment

• Financial institutions

• Real estate developers

Equity Participation and Joint Ventures

• Provision of risk capital resources

• Participation in equity financing

• Participation in PPPs

• Partnership with real estate developers

Guarantees

• Loans from local institutions

• Trade suppliers

• Financial institutions

• Real estate developers

Equity Participa

tion

Trade Finance

Joint Ventures

Guarantees

Selected Projects in East Africa

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Selected projects In Kenya

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Country: Kenya

Developer: Magnolia

Investments Ltd

Project: Magnolia Heights

Selected projects In Kenya

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Country: Kenya

Developer: Kenya Medical

Association

Project: KMA Estate

The Rugarama ProjectRWANDA

Mixed use development of 2,700 homes including schools, health facilities, shopping and related infrastructure services in Rugarama, Kigali.

The project will be implemented in at least 4 phases with exit opportunities at the end of each phase.

Phase has started.

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The Kenya Housing Implementation Programme (KHIP) Financing & Constructions of 100,000 nos. housing units and related infrastructures for the National Police Service and Kenya Prisons Service over five years.

The program is divided into phases and is estimated to cost Kshs 16.2 billion (US$ 162 million) for Phase 1, involving the construction of 20,000 units.

Funding for Phase 1 will be provided by the African Development Bank (AfDB), Shelter Afrique and Other Partners.

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THANK YOU

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