KENYA – Market regulator Capital Markets Authority of Kenya (CMA), has approved the issuance of a development and investment real estate investment trust (Reit) by student hostel developer Acorn, setting the stage for accelerated development in the capital city Nairobi.
The Reit approval follows the issuance of a Reit Manager licence to Acorn last month, with the firm also having issued the first country’s first green bond in October 2019.
Acorn had disclosed in a roadshow presentation to potential investors in September that the D-Reit is expected to be worth US$35.9 million while the I-Reit’s size is estimated at US$36.8 million in the initial fundraising.
“Approval is granted to Acorn to issue for purchase in Kenya units in both the Acorn Student Accommodation Development Real Estate Investment Trust (ASA D-REIT) and Income Real Estate Investment Trust (ASA I-REIT) respectively for a total minimum subscription of US$7.6 million and up to a maximum of US$76.3 million,” said the CMA in a notice.
“The ASA D-REIT will develop our Qwetu and Qejani student hostels and, once completed and rented out, will be sold to the ASA I-REIT for long-term hold”
Edward Kirathe – CEO, Acorn
Acorn’s D-Reit vehicle will build the student hostels, after which the I-Reit will acquire the properties and hold them for rental income.
Acorn has already completed three projects in Ruaraka, Jogoo Road, Parklands and Madaraka, in Nairobi with another seven in development and pre-development.
Acorn also disclosed that it would hold stakes of 67 percent and 24 percent in the D-Reit and I-Reit respectively but plans to steadily sell down its ownership over the years.
European fund InfraCo Africa has already committed to take up a US$9 million stake in the Reit programme as the anchor investor, consisting US$2.7 million in the D-Reit and US$6.3 million in the I-Reit.
“The ASA D-REIT will develop our Qwetu and Qejani student hostels and, once completed and rented out, will be sold to the ASA I-REIT for long-term hold,” said Acorn CEO Edward Kirathe.
“The two REITs are expected to offer stable and long term returns to investors and will for now only be offered to institutional and sophisticated investors through a restricted public offer.
Acorn will retain a significant combined stake in both Reits.”
The minimum investment is US$179,414, spread into the D-Reit (30 percent) and I-Reit (70 percent), meaning that one must buy into both investment vehicles.
The offer is priced at a range of between US$0.18 and US$0.22 per unit (share), with both Reits tradeable on the over-the-counter (OTC) market.
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