What barriers might hinder the success of your project and how do you plan to overcome them?
Our first main barrier will be the transparency in the market; both in land title and our partners we will be working with. Second will be in the funding of the projects; both in the initial start up and due diligence of the projects, as well as the project funding itself and making sure sufficient resources exist to finish on time and on budget. Finally, the lack of a developed supply chain and local technological inputs increases the logistical complications of real estate development, and require additional planning and foresight.
On the transparency issues, we plan do devote significant time in due diligence, both in terms of our partners and the land we will be investing in, considering personal references and conducting a through background check on their business integrity and reputation. As far as the land, we will identify and resolve title ownership prior to beginning development, eliminating the risk of dispute once title is transferred. With respect to access to capital, we plan to secure sufficient capital from our offshore financial partners to comfortably finalize the project in successive stages. Furthermore we plan to work with local financial partners, to secure both construction and mortgage finance to develop and sell the properties. As far as the technological inputs, we plan to partner with technology providers allowing us to manufacture innovative wall and roof systems, allowing us to control our supply chain and use local waste agriculture and plastics in their manufacture.
Tell us about your partnerships
We intend to have partners on a number of different levels. The three main types will be our local / development partners, our technical partners, and our financial partners. Our local and development partners will be either local real estate developers or land owners who wish to develop a specific site. To align interests, we would expect our partners to contribute the land into the investment vehicle, for which they would get an ownership share. Our technical partners would consist of those who own the license to the specific technology that we will use to implement our developments. This technology will have the benefit of bringing down the cost of our housing, as well as lowering the execution risk of delivering a high volume of houses within a limited amount of time. Finally our financial partners will be those entities that give us the financial resources to create high quality houses that will be desirable to our client base. Our offshore investors will be investing directly into the project companies, and will look for returns once the project is completed and all obligations of the project company have been satisfied. Our onshore partners will be providing construction finance to augment the equity funding provided by our offshore partners. Furthermore, we would be looking them to provide mortgages to the home purchasers at the completion of the project, if such demand exists.
Explain your selections
Our initial funding will come from private resources and friends and family as it is important that we conduct due diligence on the specific project and partner before soliciting investors. It is imperative we present a clear view to investors what the legal issues are, along with the financial risks and rewards. Further, we need time to understand the local environment we are operating in, and this is best done through funding sources that are patient and will not press for immediate returns.
Once we have identified a specific project, we will look to raise finance to support that project. This will cover all costs of that individual project, where friends and family will support costs underlying the company. Project specific investors would include private equity firms and other real estate investors; however we would also pursue funding from foundations and social investors for projects that deal with low-income housing, where the returns may not be high enough for traditional investors. We intend to facilitate the development of a mortgage market, and funding is likely to come from the offshore development agencies who have been traditionally been active in this space.
We will look to partner with regional governments to facilitate the creation of low cost housing. Specifically, we would work with local governments to provide land and other concessions, which would allow us to develop and sell houses to low-income residents. We would not expect to receive any direct funding from these entities, as generally they are cash constrained.
How do you plan to strengthen your project in the next three years?
As we deliver and sell housing projects over the next three years, AHB will internally finance an increasing percentage of project costs as our debt obligations are fulfilled. We will look to more strategic partnerships for technology innovations that improve housing performance or reduce construction costs so that our partners have a platform to implement new technologies and the incentive to share in successful project outcomes. We want to standardize the client qualification process to include a greater range of community groups that can assist low-income people with accessing affordable housing opportunities. To further help our low-income clients, we will create an independent mortgage fund that allows for more creative credit risk analysis and mitigation for low-income clients.
With our housing products, we intend to refine our construction processes to reduce the carbon footprint of each house and reduce the home operational costs for our clients. We will expand our supply chain for construction materials to engage the problems of the locales we are operating in so that urban waste can be recycled and agricultural waste can be combined into materials used to build our houses that increase durability, expand local employment opportunities and close inefficient waste loops.