Rent-to-own development, Nigeria

1. Investment Objective

GrowMyHome (GROWMYHOME) provides opportunities to the members to invest in the real estate market in the African Continent (initially South Africa and Nigeria) that should provide above-average returns on their investment.

The existing AFFORD A HOME program is an affordable housing program in Nigeria. The program is a second phase of existing development. This phase will involve the development of 54 housing units within an existing plot of land to be resold to home buyers.  Buyers will be given the option to pay on a rent to own basis over an extended period of time.

• Project Details

The developers have acquired and registered existing land. The existing land is an extension of a prior first Phase development consisting of 16 housing units.

This second phase is a build-up of the track record and model provided by the first phase.

Funding secured from investors will be used to develop one-, two- and three-bedroom housing units to be resold to potential home buyers.  These housing units will be owned by the investors until paid off by the home buyers.

Probable Scenario – The developers have also partnered with marketing agencies and a Primary Mortgage Institution (Mortgage Bank) to signup, process, and qualify a pipeline of potential home buyers. Successfully qualified homebuyers are registered and a homebuyer’s mortgage account is opened for them. Their payments will be made through these accounts.

Successful homebuyers are also at this stage registered with the National Housing Fund, which has been established to support the development of affordable housing.

Successful Home buyers will sign a purchase contract with the developer and the mortgage banks and then pay a deposit for their respective units. With the deposit paid, the home buyer is able to move into the house and continue payments for the duration of the contract.

Management of collections of monthly payments will be handled by the Mortgage Bank. All Homebuyers will also be required to have compulsory insurance coverage for loss of income and untimely death.

An additional advantage to investors is that the National Housing Fund offers to take over the contract successfully within a period of 36 to 60 months from purchase.  When this happens, the National Housing Fund will pay off the investor an agreed amount which will free the investors’ funds to enable the investor to take a payout or begin with a new development.

During the duration of the rezoning and subdivision, the existing building will continue to operate and generate income. This income will be shared pro-rata to all owners after deductions of all costs and taxes. Have we agreed that the surplus will be shared or retained? Operational costs will be at competitive market rates.

Homebuyers will be expected to complete payments for their units within a duration of 3 to 20 years. However, investor funds will be fully paid off within a 7-year period from purchase and investors will exit. Homeowners will receive a transfer of the property into their names upon completion of payment.

Home buyer payments will place priority on paying out the investors. By the 7^th year, investors would have fully been paid out and exit. At this point ownership will be transferred to either the Developers if home buyer has not paid in full, or to the home buyer if payment has been made in full.

In the event that the National Housing fund offers to take over the deal earlier, then investors will be settled sooner, and the deal closed.

Worst Case Scenario – In the situation of a default by the home buyer, the defaulting buyer will be evicted, and the house will be repossessed and resold to a new buyer. In such a scenario, the investors would have earned rental income for the property for the duration it was inhabited.  At every point, the investors have security in ownership of the property.

1.2.Basis for ROI

Payments by the home buyer include- Instalment purchase + Rental Income + interest spread over the duration of purchase.

1.3.Project Owner

Investors Fund Company

               +

New Year Transaction Ltd.

Valutrus Properties Ltd

ABCB Ltd

1.4.Primary Mortgage Banking Partner

LivingTrust Mortgage Bank Plc was incorporated on March 9, 1993. The Bank converted from a Private Limited Liability Company to a Public Limited Liability Company on January 25, 2013, and subsequently listed on the Nigerian Stock Exchange on December 11, 2013, where its shares are being publicly traded.

The principal activity of the Bank is the provision of mortgage financing, Real Estate Construction finance amongst other banking services to individuals, groups, and corporate entities. The Bank has made a significant impact in reducing housing deficits by advancing residential mortgage loans to thousands of individuals and has also financed tens of estate development projects across several states of the federation. Beyond its impact in Nigerian metropolises, the Bank has provided mortgage loans to several average and low-income earners to acquire residential houses in urban sprawls and semi-rural areas, in a bid to drive mortgage inclusion which is a fundamental strategic focus of the Bank. In consideration of the financial inclusion drive of the Bank, the Central Bank of Nigeria recently gave approval to the Bank as a participating financial institution in MSME funding. Since the CBN approval, Livingtrust Mortgage Bank Plc has disbursed loan facilities to over 620 small businesses across different regions of Nigeria. The Bank also participates in the National Housing Fund scheme.

2. Registration of Investors

Before an investor can start to invest, he must first be registered with GROWMYHOME. To do this, the investor must complete an application form and activate his investor status when he makes his first investment (minimum R1,000). Hereafter the investor can make further investments at any time at a minimum of R1,000. The investor will receive a welcome letter from GROWMYHOME with his unique investor code to be used in future deposits.

3. Investment Term

3.1. Payments & Financials

Cash payments – Investors will be able to make once-off cash payments. Payments can be made online or via EFT. Optionally, investors can make installment payments over a 12-month window. Payments will be via EFT, to be debited on the 25^th of every month.

3.2.Structure and security

Investors will be aggregated into a deal-specific ringfenced Company. Each investor owns a pro-rata share of the membership interests in the Company and as such, is entitled to certain rights that are described in the Shareholder Agreement, including the right to receive economic benefits from the Company. The Company will use the funds to invest directly into the properties within the project with 100% ownership. Thus, each investor’s share will reflect prorate the value of the share in the property.

3.3. Payout

Every month, home buyers will make payments which consist of a portion of the purchase price of the home + rentals + interest. This income will be allocated to investors after all costs are deducted (see fees and costs). Investors may either withdraw yearly or accrue to be withdrawn at the end of the deal.

At the end of the investment period, GIG Wealth/ GROWMYHOME will calculate the growth of the fund and make an allocation to the investor’s account. The aim will be to provide the investor with an average ROI over the duration of the project of 12%pa  In the event of the fund outperforming the 12%pa, the management of the project will share the portion of the extra growth with investors on a 50-50 ratio as a performance bonus.

3.4.Fees & costs

All fees are charged at the marketplace level as displayed on the marketplace at the time of the investment.  GrowMyHome will provide end-to-end management of the deal.  Its services will include:

• Management of the property during development. This includes the management of homebuyers and maintenance of the property. Grow my home or its agents will handle all property-related management at competitive market rates.
• Project management of the new development. This will include all stages from initiation to execution, including but not limited to council approvals, rezoning, architectural works, engineering, construction, conveyancing, and sales.
• Provide reports and statements for all investors,

Management costs on the property during the duration of the deal will be at competitive market rates, including the following.

• Property management agency – 8% of monthly rental income
• Cost of operational expenses including
• Utilities
• Maintenance and repairs
• Security services
• Sales agent fee (payable at the point of selling) – 6%
• Conveyancing fees
• Property registration and transfer fees
• Fund management fees
• Accounting
• Taxes

4. Rights

See Shareholders agreement.

5. Disclaimer

This proposal is for information purposes only and not advice to make an investment. Should the investor require investment advice he should contact his financial advisor. Any reference to a potential growth on the investment is for illustration purposes only and cannot be guaranteed.

An investment is secured only by the value of the property and while the fund management will take all the steps necessary to mitigate risk and protect capital it indemnifies itself against any losses that may result from investment decisions.