Proparco, the French development finance institution, and 27four, a South African investment manager, led R550m investment in Divercity Urban Property Group alongside reinvestment from its existing shareholders.
The investment is intended to fund portfolio growth and balance sheet optimization.
“This significant investment in Divercity will enable us to develop over 2,500 new apartments,” Carel Kleynhans, CEO of Divercity, said:.
“This helps us to demonstrate the impact and commercial viability of this economically-productive, sustainable and fundamentally empowering urban development model.”
The majority of affordable housing in South Africa is located at the urban periphery, far from economic opportunities and essential amenities. This urban sprawl unfortunately perpetuates Apartheid-era spatial segregation while undermining numerous social, developmental and economic outcomes.
Divercity is a South African investment platform dedicated to affordable rental housing with supporting amenities in high-density and centrally-located urban precincts.
“As South African investors we are painfully aware of the critical shortage of quality and well positioned affordable accommodation in our cities,: Mardé van Wyk, Principal at 27four, said.
“We are excited by the innovative approach of Divercity to this perennial challenge and are pleased to be able to fund their expansion.”
Through this investment, Proparco and 27four will boost the affordable rental offering in South Africa, which has been identified as a key priority by the government given the severe housing shortage. It also helps to reverse the spatial segregation the country has been facing for decades.
Harvard University’s Growth Lab recently released its “Growth Through Inclusion in South Africa” report that identified spatial exclusion as one of the main barriers to South Africa’s economic growth, together with state capacity issues. To turn the country around and get South Africa back on a growth track, their recommendations include building more dense housing clusters closer to business centres. Divercity does exactly this, and with this R550 million transaction, Proparco has catalysed foreign direct investment for South Africa while leveraging the deep local context understanding of their in-country investment partners 27four, working together in a high-impact deal that greatly benefits the South African market.
“Beyond the support to regenerate South African cities, this project also gives Proparco an opportunity to support energy-efficient building programmes targeting EDGE certification. It aims to achieve several development goals (including SDGs 5, 8, 11, 13) through job creation and combating gender inequality by providing safe and best-in-class accommodation for tenants, of which women who account for approximately half of Divercity’s tenant base,” Gregor Quiniou, Principal at Proparco, said.
