Four Nordic PE funds back developer of Sh7bn Radisson Blu hotel

Corporate News

Ascent Capital partner David Owino. PHOTO | SALATON NJAU 

By DAVID HERBLING, hdavid@ke.nationmedia.com

In Summary

• Swedfund has taken a 21.3 per cent stake in Elgon Road Developments Ltd – the special purpose vehicle behind the five-star hotel.
• Finnfund and Danish investment fund IFU each have a 10 per cent stake in the development.
• Norfund provided part of the €7.85 million (Sh811.8 million) loan advanced to the project through Afrinord, a joint-venture fund backed by four Nordic countries.
• The luxury hotel, set to open in May, is majority owned by local businessman Michael Kairu, who controls a 58.7 per cent stake.

Four Scandinavian private equity funds have given financial backing to the developer of the upcoming Sh7 billion Radisson Blu Hotel located in Nairobi’s Upper Hill.

Swedfund has taken a 21.3 per cent stake in Elgon Road Developments Ltd – the special purpose vehicle behind the five-star hotel.

Finnfund and Danish investment fund IFU each have a 10 per cent stake in the development while Norfund, though it does not own any equity in the hotel, provided part of the €7.85 million (Sh811.8 million) loan advanced to the project through Afrinord, a joint-venture fund backed by four Nordic countries.

The luxury hotel, set to open in May, is majority owned by local businessman Michael Kairu, who controls a 58.7 per cent stake.

READ: Five-star Radisson Blu prepares for Nairobi debut

The four Nordic PE funds said Nairobi’s growing status as a business hub for the Eastern Africa region has created opportunities for investment in hotels to meet the growing need for accommodation and conferencing facilities.

“We have a positive long-term view of the economic development of Kenya,” said Tomas Bie, senior investment manager at Swedfund.

The 271-bed hotel, set on a two-acre plot, will be operated and managed by Carlson Rezidor Hotel Group under the Radisson Blu brand.

Carlson Rezidor Hotel Group will earn commissions from Elgon Road Developments Ltd, pegged on meeting revenue targets and maintaining set quality standards.

“Norfund invests in the hospitality industry mainly because it is a big employer and it has very positive ripple effects through buying supplies and services in a local community,” the Oslo-based PE firm told the Business Daily.

Mr Kairu said he partnered with the Nordic development finance institutions to help raise the huge capital outlay and access cheaper funding.

“The PE funds give very cheap funding and also take an equity stake in the project,” said Mr Kairu in an interview Thursday.

The project comprises 55 per cent equity, including the Afrinord funding, and debt sourced from KCB. Mr Kairu said KCB has advanced the project a dollar denominated loan of $25.6 million (Sh2.3 billion) and a further Sh800 million in local currency.

Transport & Infrastructure secretary Michael Kamau is the chairman of the Elgon Road Developments board.