New 4-bedroom Duplex, Ferndale, South Africa

Summary

Download Proposal

Shareholder’s Agreement

Sign Shareholder’s Agreement

Location

Description

1.     Investment Objective

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

Four properties consisting of duplexes and single-story buildings are to be constructed on an existing plot of land. These buildings will be rented out to guests and tenants to generate income. In year four the units will be sold and investors will be paid out.

(The projections are based on liquidating the property by year 4, but if the markets are not favorable and the property cannot be liquidated, the owners will continue to earn rental income until a time when they can liquidate.)

1.1.Project Details

The developers have acquired (cash and fully paid) a plot of land measuring 2,500 square meters with an existing building with a floor area of 450 square meters. The City of Johannesburg approved the subdivision of the land into four portions.  With the approved subdivision, the existing building will be remodeled into three different houses with an average floor area of 150 square meters each.

These will include one double-story building and two single-storied buildings.

The fourth plot is an empty stand. A new four-bedroom duplex will be constructed on this stand.

The Developer has carried out preliminary works including.

–          Achieved 80% remodeling of existing buildings.
–          Made payments to the Johannesburg  council approvals for rezoning and subdivision.
–          Secured approved drawings for the new duplex to be built on the fourth plot.
–          Site development plan
–          Perimeter Fencing
–          Installation of entrance gate and driveway
–          Site leveling and preparation
–          Installation and connection of sewer including connection to municipal sewer.
–          Currently working with the City Power on installation of electricity access.

Probable Scenario

The remodeling of the existing buildings is expected to be completed in six months. The construction of the new duplex is expected to be completed in nine months. Upon completion, the buildings will be rented out to guests and tenants to generate income. This income will be shared pro-rata to all owners after deductions of all costs and taxes.

Investors are expected to gain from value appreciation at the rate of 7-9% per year.*

*not to be confused with the ROI projection, which is higher and consists besides the value appreciation also of a rental income and the property sale at the end

At the end of 48 months, the property will be sold and the proceeds will be withdrawn and shared pro-rate to all investors. Ownership of the units will be transferred to new buyer and the deal will come to a close.

Worst Case Scenario
A lower rate of value appreciation at 3% per year. Should this be the case, investors will have a lower rate of returns than projected.

1.2.Basis for ROI

●        Returns to be earned from the construction and sale of the new building.
●        Returns from the remodeling and sale of the existing buildings.
●        Rental Income – with potential year-on-year increase.
●        Participation in the upside upon sale of the property and share the profits resulting from price appreciation.

1.3.Project Owner: GMH AND ZOEINC (PTY) LTD

*This is company is established solely and entirely as a holding company for the property to ringfence it.

1.4.Due Diligence Provider
GIG Wealth (Pty) Ltd is a registered Financial Service Provider, FSP 49233, and was appointed by the management of 378 West (Pty) Ltd to do the cash-flow management of the project.GIG Wealth has extensive experience in the management of assets and projects and an in-depth understanding of the residential property market in SA.

2.     Registration of Investors
Before a person can start to invest, they must first be registered to be a member of Grow My Home’s Investor Group. To do this, the investor must complete an application form and activate their investor status when they make the first investment (minimum R1,000 or equivalent). 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 a unique investor code to be used in future deposits.

3.     Investment Term

3.1.Payments & Financials
Investors will be able to make payments via Payfast or Electronic Funds Transfer.

3.2.Structure and security
Investors will be aggregated into a deal-specific ring-fenced Company (GMH and ZOEINC (Pty) Ltd). 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 project with 100% ownership. Thus, each investor’s share will reflect prorate the value of the share in the property.

3.3.Payout
During the investment duration, investors will earn income from rentals of the property. 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, the GIG Wealth/ GMH will calculate the growth on 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 tenants and maintenance of the existing 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 – 12% of monthly rental income
• Cost of operational expenses including
  • Utilities
  • Maintenance and repairs
  • Security services
  • Accounting
  • Taxes
• Sales agent fee (payable at the point of selling in years 4 to 7) – 6%
• Property registration and transfer fees
• Fund management fees

4.     Exit Strategy

4.1. Transfer of Shares

Any Class B (Profit Share) shareholder that want to exit must first offer their shares to the current shareholders. These shares will be valuated at the current market value of the company.
If any dispute on the market value of shares, the company auditors will do valuation of the share value. This will be accepted by all shareholders as the value. The exiting shareholder will be responsible to remunerate the auditor for the services.
If none of the current shareholders are willing to purchase the shares the exiting shareholder may offer the shares to a third party. If the offer price is lower than the price offer to current shareholders, then the exiting shareholder must offer the shares at the same price first to current shareholders before selling to third party. The current shareholders will have 10 days to make offer for the shares. If no offer, then the exiting shareholder can sell to third party.

4.2. Come along clause

If offer is made from third party to purchase 100% of the shares of the company, the Management shareholder (Class A) will have veto voting rights to accept the offer and if more that 50% of the Class B shareholders has voted in favour of the transaction.

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.