Wescape is a 3100 hectare city-scale, private development comprising residential, commercial, and industrial real estate functionally integrated with education, healthcare and civic facilities for 800 000 residents, to be built over 15 – 20 years.
The Wescape city development is the largest single private real estate investment opportunity in Africa. It is located in the Western Cape Province of South Africa and will be an official extension to the City of Cape Town.
Wescape City Development
Wescape is a planned city development, which creates value from day one through converting non-productive rural, agricultural land into a full scale city.It is located optimally along the West Coast corridor, identified as the only growth corridor for Cape Town, which currently has an affordable housing shortage of over 400 000 homes.
Wescape is currently in land use rezoning development stage, and has achieved approval by two tiers of Government, being the City of Cape Town (municipal) and the Western Cape Provincial Government, who have expanded the urban edge of the City to include the Wescape site, after a two year application process. This has successfully converted the land from rural land to urban land, increasing the land value by over US$75-million.
The 3100 hectare Wescape land site is currently secured under option, embedded in full purchase agreements which have been signed by the landowners. The urban edge approval has triggered the need to acquire the land now, at a significant discount to value. The Wescape land purchase price is US$130-million, against a comparative value estimated at US$200-million.
The land options mature in three years, however, we have an opportunity to purchase the land right now at a further discount, for a price of US$90-million, thereby achieving positive equity of over US$100-million immediately.
Our target capital raise is US$100-million, utilized as follows:
- Acquisition of 3100 hectares of urban land designated as the Wescape development site
- Funding of land use rezoning application from agricultural to mixed use subdivisible land
The loan will be denominated in domestic currency, being South African Rands (ZAR). Alternatively, should the investor want the loan denominated in USD / Euro, the hurdle return of 15% will be adjusted downwards accordingly to absorb the currency risk.
The structure of the investment will be as follows:
- A loan for US$100-million, over a four year term;
- fixed return of 15% per annum, capitalized over the loan term;
- fully secured by a freehold land asset valued at US$200-million;
- capital and interest payable at the end of the four year loan term;
- defined exit at the end of the term by acquisition of the land by Wescape LANDCO, which will be the developer of Wescape;
- return is provided through purchasing the land at a discount to value now and selling it to Wescape LANDCO at a value that recovers capital plus hurdle return at 15% compounded and capitalized over 48 months. The sale value of the land will be within market comparable land valuation and therefore presents no valuation risk.
- 25% free carry shareholding in Wescape Land Company after the loan has been repaid, with project profit potential projected at over US$2.8-billion over 15 years.
Who should respond to this opportunity?
This investment is directed at sophisticated investors that understand loan structures that are fully asset backed and have free carry features. Understanding the value chain of real estate development from barren land to fully serviced and saleable real estate will be advantageous. Any investor is eligible.
The first round of capital raising will close within 90 days. Interested investors are encouraged to respond to this opportunity well in advance of the deadline.
Benefits to respondents
- Investment is structured as a loan which is an efficient structure, for tax and risk mitigation purposes.
- Investment is 100% secured by a fixed land asset.
- Investment offers very competitive return at 15% per annum, compounded.
- Investment offers lucrative free carry in project that will achieve significant yields, and has already been substantially de-risked over the last four years.
Project partners and exit strategy
Wescape will be delivered through a turnkey agreement between Wescape LANDCO and communiTgrow. communiTgrow is a full service executive city building project manager, who will deliver all aspects of a fully functional carbon neutral on a turnkey basis, which reduces the risk of Wescape LANDCO significantly. Please visit www.communitgrow.com for more information.
Wescape LANDCO will raise capital through a Wescape Development Fund, which will be managed by a tier 1 financial institution, which is the largest financial services company in Africa, listed on the London Stock Exchange. Wescape Development Fund will fund the acquisition of the land in 48 months, and provide the exit for your loan.