UAP eyes Sh4.3bn real estate plan in Kigali for growth

Corporate News

UAP Group Managing Director Dominic Kiarie. Photo/FILE 

By VICTOR JUMA

In Summary

• The firm also expects to complete its Equatoria Tower in Juba, South Sudan, by August.
• Cash-rich insurers have lately expanded their real estate presence is search of high and stable returns.

Financial services group UAP Holdings is set to invest Sh4.3 billion in a real estate project in Kigali as it seeks to grow earnings from the booming regional property sector.

 

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The company recently acquired a prime piece of land in the Rwanda capital where it aims to build residential and commercial properties. “We shall undertake a commercial mixed used development that is estimated at $50 million (Sh4.3 billion),” said UAP chief executive Dominic Kiarie.

UAP expects to raise Sh2 billion through a corporate bond and part of the cash could be used to fund the property development, among other investments. This is the latest real estate venture by UAP, which has stepped up its property portfolio to earn higher returns and diversify away from quoted equities and fixed income investments.

READ: UAP ventures into wealth management to grow income

The company is set to complete its 31-storey UAP Towers in Nairobi’s Upper Hill in August next year at a cost of over Sh3 billion. UAP will relocate its headquarters to the new building and lease out part of the total 350,000 square feet.

The firm also expects to complete its Equatoria Tower in Juba, South Sudan, by August. The property will have 71,000 square feet of space for renting out.

Cash-rich insurers have lately expanded their real estate presence is search of high and stable returns while also helping to diversify from bonds and stocks. Property developers have earned double-digit returns in the past decade, riding on increased demand for both residential and commercial units from the middle class and businesses.

This has seen more investors, including insurers and pension firms, build more high-end commercial properties such as malls and offices to gain from high rental fees and capital appreciation.

Pan Africa Holdings, which is strong in the life insurance business, is set to invest Sh2.5 billion in a new office complex on Waiyaki Way in Nairobi.

READ: Pan Africa in plans for 20-storey Westlands office block

The building, whose construction starts later this year, will have between 17 and 20 floors housing the insurer’s headquarters in addition to generating rental income. 

Britam, which deals in insurance and investments, is also constructing a 31-storey building in Upper Hill at an estimated cost of Sh7 billion. The building will have 340,000 square feet of space for letting and is projected to be completed in 2016.

For UAP, the project in Kigali is expected to boost its earnings from investments as insurers look at real estate to deploy their own cash and premiums paid by customers.

The company raised the allocation of its investments to property to 45 per cent last year, up from 40 per cent in 2012. This saw the share of bonds and equities drop to 40 per cent and 18 per cent respectively from 45 per cent and 22 per cent in the review period.

The property investments contributed 21.9 per cent of the company’s pre-tax profit last year, generating revenues of Sh573 million or 4.4 per cent of total sales. The firm’s general and life insurance, however, account for the bulk of its net profit which rose 31 per cent to Sh1.8 billion in the year ended December.