Centum Investment will invite high net-worth investors to put their money into a Sh30 billion property fund as the firm angles for a larger share of eastern Africa’s real estate market and tries to cut its reliance on the volatile equities market.
The listed company says it has injected Sh3.6 billion and plans to add Sh3 billion to its real estate unit over the next three years as well as tap Sh30 billion from insurance companies, pension schemes and foreign investors for construction.
Part of the money will also be raised from debt and earlier Centum said its seeking foreign currency loan equivalent to Sh6 billion.
“We are engaging specific investors who share our vision since planned investments are bigger than our size,” Centum chief executive officer James Mworia told the Business Daily earlier.
The investment firm is seeking to remodel itself into a private equity fund where it raised funds from high net worth investors instead of depending wholly on retained earnings and bank borrowings to close deals.
Mr Mworia says the Centum will deploy this model on its real estate division and will spread to its private equity and quoted equity units.
Centum is expected to start the first phase of a real estate project comprising offices, residential apartments, hotels, shopping malls and recreational facilities on a 100-acre piece of land in Runda. The developments will include a 255-bed hotel and 544 homes.
The company has also acquired a 300-acre piece of land in Uganda where it intends to roll out a similar plan to grow its assets outside Kenya from the current 18 per cent to 50 per cent by 2014.
The firm is shifting its focus to the region’s lucrative property market with an eye on rising rental income and reducing the influence of stock market cycles and dividend payouts on its earnings.
Under the property fund, investors can exit through selling their shares to third parties who will earn a return from sale of properties and rental income.
But the exit mode will be made easier by plans to list property at NSE through Real Estate Investment Trusts (REITS) — which use investors’ pooled capital to buy and manage income property as well as allow for the trading of shares in property at the exchange.
The Capital Markets Authority is developing regulations to allow the setting up of REITs.
Centum will join British-American Investments Company (BAIC) and Stanbic Investments in seeking funds from third parties for their real estate projects.
The property market, which has seen home prices and rents double over the past five years, is emerging as favoured investment vehicle compared to the equities and the bonds market.
Swelling incomes and large numbers of young people moving to urban centres and starting families, are seen as yet the other key drivers of demand across all asset classes.
This is what is driving the likes of Centum Investment to spend billions of shillings in East Africa’s real estate market.
The firm’s net profit dropped to Sh793 million in the six months to September compared to Sh836 due to the bearish run at the Nairobi bourse.