IFC cuts Stanlib Reit investment after poor uptake

Money Markets

Stanlib Fahari I-Reit chief executive Anton Borkum. PHOTO | FILE 

By JOHN GACHIRI, jgachiri@ke.nationmedia.com

In Summary

• The IFC invested $6.7 million (Sh684 million) to match the other investors, which is less than half the $15 million (Sh1.53 billion) it was proposing to invest in Stanlib Investment Fahari Income-Reit.
• The investment rules of the World Bank’s private financing arm do not allow the institution to own more than one fifth in such ventures.
• IFC will be the second-largest investor in the Reit behind only the Liberty Group — including Stanlib Kenya Limited and its fellow subsidiaries

The International Finance Corporation (IFC) reduced investment in Kenya’s first Real Estate Investment Trust (Reit) to avoid breaching its rules after poor market response to the issue.

The investment rules of the World Bank’s private financing arm do not allow the institution to own more than one fifth in such ventures.

The IFC ended up investing $6.7 million (Sh684 million) to match the other investors, which is less than half the $15 million (Sh1.53 billion) it was proposing to invest in Stanlib Investment Fahari Income-Reit.

“As set out in the public notice issued by IFC, it sought approval from its board to invest up to $15 million.  However, the IFC’s internal policies require it to limit its investment in such projects to no more than 20 per cent,”  Stanlib Fahari I-Reit chief executive Anton Borkum told the Business Daily.

“Consequently, IFC in the end applied for and was allotted units to the approximate value of $6.7 million.  IFC will be the second-largest investor in the Reit behind only the Liberty Group — including Stanlib Kenya Limited and its fellow subsidiaries.”

Mr Borkum said Liberty’s stake could not be disclosed since the company first has to get regulatory approval.

The debut I-Reit managed to raise Sh3.6 billion out of the targeted Sh12.5 billion or a 29 per cent subscription rate which was attributed to investors not fully understanding the concept of the new investments.

READ: Kenya's first Reits offer misses target

IFC’s announcement of intended investment was widely thought to be a good cue for other investors.

East Africa regional institutional investors accounted for Sh2.1 billion or 58 per cent of the offer. Retail investors took up 17 per cent of the Reit (Sh617 million) while foreign investors took up the remaining 25 per cent of Sh899 million.

IFC is listed amongst East African institutions meaning it accounted for a third of the money put in the category.

Stanlib said the funds are enough to buy Greenspan Mall in Embakasi area of Nairobi County and two other properties in Industrial Area.

The information memorandum on the offer said the Fahari I-Reit was also looking at the possibility of investing in five other office blocks in Nairobi, a shopping mall and an office block in Mombasa.

The investment firm said other options are still on the table.

“We will continue to grow the I-Reit through acquiring more properties, and have a number of different mechanisms by which we may fund these property acquisitions, such as borrowing, issuing Reit units to the owners of properties we want to buy, and completing rights issues to our existing unit holders.