The investment banking arm of CFC Group is seeking a piece of Africa’s booming real estate market with the creation of a property fund that will pool investors into a single vehicle.
A legal brief by a global ranking agency—IFRL1000—shows that a local law firm, Mboya, Wangong’u and Waiyaki Advocates, helped Stanbic Investment Management Services (SIMS) establish the fund.
This will see the fund manager invite investors to pool their resources with the promise of getting a return after five to seven years with SIMS earning a commission and bonus should the investments surpass target.
SIMS regional director James Muratha confirmed the property fund, but declined to give details.
Real estate analysts say that property funds offer a return of about 25 per cent and 30 per cent over a period of five to seven years with fund managers earning a fee of between three to five per cent.
“This is a new investment vehicle in Kenya, but there has been a growing interest in establishing property funds especially from South African firms,” said Moses Wekesa, the CEO of Grad East Africa—a local property development firm.
SIMS—which has preferred to put funds under its management in equities and fixed income securities—did not disclose how much they are targeting, but it has already hired property investment managers to shepherd its real estate division.
Mr Wekesa said property funds similar to SIMS start with the fund seeking a property developer to plan homes or office space and then forecast its costs and returns.
It then taps investors to provide construction cash—which is provided in tranches depending on the property development stages—and they exit through selling their shares to third parties after about seven years.
But this will be made easier by the ongoing plans to list property at the Nairobi Securities Exchange (NSE) through Real Estate Investment Trusts (REITs)—which use pooled capital of many investors to purchase and manage income property and trade in its shares at the exchange.
The rise in home prices and rents has seen property emerge as a prime investment vehicle in step with bonds and equities asset classes.
The sector is riding on nearly three decades of under investment in mid-tier housing segment.
Fund managers like SIMS are also seeking a piece of the action, hoping that the listing of property at the NSE will catapult the use of pooled funds on Kenya’s real estate market.