NSSF seeks equity investors in city real estate joint venture

National Social Security Fund (NSSF) Managing Trustee Tom Odongo at a past function. Photo/Diana Ngila  NATION MEDIA GROUP

By DAVID HERBLING

In Summary

• The project will enable NSSF to tap growing returns from real estate and reduce the influence of the performance of the NSE on the returns it offers workers.
• Under the joint venture, NSSF will provide the land, which is the biggest cost item in real estate projects and part financing.
• In return, it will earn capitals gains from the sale of the houses or earn rental income.

The National Social Security Fund (NSSF) is seeking equity investors to build office blocks and a shopping mall on Kenyatta Avenue opposite Nyayo House in Nairobi.

The project will enable it to tap growing returns from real estate and reduce the influence of the performance of the Nairobi Securities Exchange (NSE) on the returns it offers workers.

“We are planning a joint venture with an investor to develop a mixed property development on our 3.2 acres land along Uhuru Highway in Nairobi,” managing trustee Tom Odongo told the Business Daily.

“The project is waiting for cabinet approval and we are yet to decide on the exact equity ratio we will offer the investor.”

The NSSF did not provide timelines or the worth of the project but sources familiar with the plan said that the fund is seeking joint ventures due to the huge financial requirements of such projects and the need to remain within regulated investment thresholds set by the Retirement Benefits Authority.

Under the joint venture, NSSF will provide the land, which is the biggest cost item in real estate projects and part financing. In return, it will earn capitals gains from the sale of the houses or earn rental income.

The fund has been under pressure to meet regulatory requirement capping real estate investments by pension scheme to 30 per cent of their assets.

Its investments held in land and buildings, as a proportion of its entire portfolio, rose from 34 per cent to 39 per cent in December 2011 against a statutory requirement of 30 per cent.

This, however, was the result of a Sh10.3 billion drop in NSSF’s stock market portfolio following a bear run at the NSE, as its investment in property remained flat at Sh38 billion. But this could have reversed last year helped by the rebound of the stock market that made a return of 29 per cent.

The fund had assets estimated at Sh97.8 billion spread in government securities, equities, fixed deposits and property — which stood at Sh38.1 billion in December.

The regulator recommends that retirement funds should maintain at least 70 per cent of their portfolio in liquid assets to guarantee payment of pensioners’ claims.

NSSF plans to sell two commercial buildings in Nairobi’s central business district — Hazina and View Park towers — to comply with the RBA guidelines.

(Read: State sets aside Sh1.2bn deposit for two NSSF buildings)

It also plans to build a 36-storey skyscraper, which would be the tallest in the region and extension of Hazina Trade Centre, currently hosting Nakumatt Lifestyle in Nairobi.

The fund’s renewed interest in the property market comes as real estate emerges from a bearish run, surveys indicate. 

 CFC says that property prices have risen 3.5 times over the past decade compared to share prices appreciation of 2.42 times over the same period.