The National Social Security Fund (NSSF) is planning a multi-billion shilling investment in high-end residential houses on its prime land on State House Road in Nairobi, as the retirement fund seeks to benefit from high returns in the real estate market.
The workers provident fund said the housing project—to be developed across the road from its Milimani head offices—will unlock the value of its 3.5-acre piece of land.
Sale of the high-end homes is expected to be completed in 2014.
The cash raised will accelerate NSSF’s asset growth by tapping into a decade-long boom in the real estate sector even as returns from stocks, another key asset class that the provident fund has invested billions in, continues to falter.
The project also marks a departure from the fund’s investment in the property sector in the recent past- where it has focused on developing commercial buildings and homes for middle-income earners such as the Nyayo Estate in Embakasi. In a call for consultancy services published yesterday, NSSF is seeking design and supervision experts.
The NSSF managing trustee did not disclose the possible details of the development, saying such a disclosure would contravene the Public Procurement and Oversight Authority regulations.
The development of the prime land also serves to highlight the soaring valuations on property and land, especially in the proximity of Nairobi’s CBD where reported sale prices have exceeded Sh150 million per acre on recently concluded deals.
Highest possible returns
Gikonyo Gitonga, the managing director at real estate firm CBRE, estimates that land in the prime location would ‘easily exceed Sh150 million per acre’.
Sources at the NSSF said the number of apartments to be constructed would be guided by consultants, but noted that the fund was keen to earn the ‘highest possible returns’ from the prime plot.
The provident fund has gone big on property development, beginning the construction of 1,600 apartments in Nyayo Estate in Embakasi and planning to construct an additional 34 floors to the commercial block housing retail chain Nakumatt’s Lifestyle branch in the CBD.
Apart from the two multi-billion shilling projects, NSSF is also scouting for investors to help develop middle-class homes in a 960-acre piece of land in Mavoko in a joint venture meant to limit the amount of funds tied up in the real estate projects—which tend to be long-term.
High returns from the property market has seen the fund invest billions of shillings in the development of its prime land. Rules have, however, limited NSSF’s investment in property as an asset class to 30 per cent.
As at June last year, the fund’s total assets were worth Sh104 billion, with more than Sh33 billion held in property —representing 31.7 per cent of its total portfolio.
The new investments accompanied by the bearish run in the stock market and the devaluation of the assets held in debt securities stands to stretch NSSF’s asset allocation further.
Edward Odundo, the chief executive at the Retirements Benefits Authority, said in an interview last week that retirement schemes that were yet to comply with the set asset allocation criteria would be allowed additional time, so as not to expose them to losses.