British American Investment Company has begun reallocating its assets to put money in real estate projects and cut its reliance on the Nairobi Securities Exchange (NSE).
The firm is seeking to create a Real Estate Fund in which it will put its money along with money from wealthy individuals and institutional investors for long-term investments in the property market.
It would also create a land bank with an eye on capital gains from their sale or property development.
It is seeking a real estate war chest of slightly more than Sh1 billion from the assets transfers — which shy of the Sh2.2 billion it had sought to commit to the property market before its IPO, which raised Sh3.5 billion against a target of Sh5.8 billion.
“The investment committee has begun to look into the reallocation of assets with the aim of going big into real estate,” said Pamela Lutta, the marketing and corporate affairs manager at the firm.
The sharp rise in the price of homes and rental income, driven by the region’s rapid urbanisation, population growth and expansion of the middle-class, is behind the shift to the property market.
The company has relied heavily on the stock market to drive its profit, but it is now changing tack to reduce the influence of bourse cycles on its profitability with its focus on the lucrative property market.
The NSE plunged 31.4 per cent in 2011 compared to 2010 on reduced participation by retail investors shackled by sky high inflation and net sell off by foreign investors — the first in three years
British America Investment Company interest in the property market was dimmed by underperformance of the IPO, which forced it to scale down its investment plans.
Its profit warning is a blow to investors who bought shares in the firm upon its listing in September at the NSE — where the share has shed 40 per cent since its debut at the bourse. In 2010, it reported a net profit of Sh2.7 billion up from a loss of Sh420 million in 2009 — highlighting the impact of the performance of the NSE on its earnings.
The NSE witnessed a recovery in 2010 after a bearish run in 2009 and 2008, when Britak saw its profit drop to Sh242 million compared to Sh2 billion in 2007 — which was another good year for investors at the NSE.
The Britak IPO was priced at Sh9 a share and its close trading on Monday at Sh4.65 — meaning that investors in the firm have lost nearly Sh8 billion since its debut at the NSE.
Top on the list of owners are Peter Munga, the billionaire businessman who chairs Equity Bank board, Jimnah Mbaru, the investment banker, Equity Bank CEO James Mwangi, Jane Michuki, a managing partner at Kimani & Michuki Advocates and Dawood Rawat, a foreign national.