Former Britam staff take Sh40bn real estate deal

Corporate News

Acorn Group CEO Edward Kirathe (right) and Cytonn CEO Edwin Dande when they announced deal. PHOTO | FILE 

By DAVID HERBLING

In Summary

• Cytonn Investments, a private equity fund formed by the executives, was appointed the lead transaction advisors for the deal.
• The Sh40 billion property deal that was to be previously undertaken by Britam, whose officials sit on the Acorn Group board.

Four former executives of Britam’s asset management unit, who resigned as a group last month, have taken away multi-billion shilling real estate projects from their previous employer.

A private equity fund formed by the executives, Cytonn Investments, was Wednesday appointed the lead transaction advisors for a Sh40 billion property deal that was to be previously undertaken by Britam.

“The original plan was for British-American Asset Managers (BAAM) to raise the funds for our real estate projects. But when the core team left, we decided to work with the original team which was involved in the development of the projects,” said Edward Kirathe, chief executive of Acorn Group, which is the developer behind the property deals.

Under the earlier agreement, Britam was to provide financing for ten real estate projects worth Sh40 billion while Acorn was to focus on the actual development of the properties which include shopping malls, office complexes and mixed-use projects.

Britam owns 25 per cent shares of Acorn Group.

“We had to make a decision when they left BAAM. A team is very critical in such projects and we know their capabilities,” added Mr Kirathe in an interview on Wednesday.

READ: Britam asset management unit hit by senior staff exits

The Britam chief executive Benson Wairegi had not responded to our queries on the matter by the time of going to press. In the company’s latest annual statement, Mr Wairegi had termed Acorn as a “strong brand with proven track record, expertise and experience in various key components of the real estate industry including execution capability, capital raising and investment structuring.”

Britam in November last year acquired a 25 per cent stake in property development firm Acorn for an undisclosed fee, as part of a plan to boost its presence in the real estate market.

Former chief executive of Britam’s asset management unit Edwin Dande — who quit BAAM in August together with Elizabeth Nkukuu (portfolio manager), Shiv Arora (investment analyst) and Patricia Wanjama (head of legal) — has now founded Cytonn Investments where he is a partner and chief executive.

The loss of part of Acorn’s real estate portfolio could affect Britam's strategy to tap into opportunities in Kenya and the region’s lucrative property market.

Acorn Group was founded in 2001 and is currently managing a portfolio of 25 projects valued at over Sh20 billion in Kenya, Uganda and South Sudan. The group says the matter between Cytonn and Britam would not affect its own relationship with the older firm, adding that Britam is still participating as an investor in some of its real estate projects and that Acorn is the Project Manager on the Britam Tower under construction in Upper Hill.

BAAM’s profit before tax more than doubled to Sh244 million in the period to December last year, compared to Sh115.9 million in 2012.

The growth in earnings was attributed to increased assets under management, which grew by a third to Sh36.3 billion from Sh28.1 billion in 2012.

Acorn on Wednesday announced that it was considering appointing Cytonn to its board, meaning Britam and its former executives would meet face-to-face as directors at the property developer. “It’s something we’re considering. It is not finalised yet,” Mr Kirathe told Business Daily.
 

Mr Wairegi and billionaire investment banker Jimnah Mbaru currently represent Britam in Acorn’s 10-member board. Britam’s asset management unit was also mandated to help Acorn structure real estate backed investment products and exit solutions such as real estate investment trusts (REITs).

These mandates have now been given to Cytonn, marking a major business coup in corporate Kenya’s dynamic deal making scene.

“We are happy to have been selected to have the sole mandate to source funds for such as high quality deal pipeline,” said Mr Dande.

“We have a team that is made up of highly qualified fund managers,” he said.