Express Kenya in 3-acre prime land sale to fund real estate plan

Corporate News

Dr Chris Obura, the Express Kenya chairman. PHOTO | FILE 

By VICTOR JUMA, vjuma@ke.nationmedia.com

In Summary

• Express Kenya is transforming into a property developer to cushion itself from a sharp drop in earnings from the logistics business.

Express Kenya is set to sell a fifth of its land holding to raise an estimated Sh200 million needed to partly finance its venture into real estate development.

The company is transforming into a property developer to cushion itself from a sharp drop in earnings from the logistics business which took a nose-dive following the loss of its single-largest customer, East African Breweries, in 2011.

Express will seek shareholders’ approval for the sale of part of its 15-acre land along Likoni Road in Nairobi’s Industrial Area, according to a notice published ahead of the October 27 annual general meeting.

“We are selling part of the land, about three acres,” Chris Obura, the Express Kenya chairman, told the Business Daily.

The latest assessment puts the value of the three acres at about Sh180 million. Dr Obura said the company will set a premium on the land’s fair value, meaning that the disposal could fetch the company more than Sh200 million.

“If we don’t get a higher price then we won’t sell,” he said. The 15 acres combined are currently valued in the company’s books at Sh900 million.

Express says proceeds from the land sale will partly finance the real estate venture besides boosting the company’s working capital in its warehousing and clearing and forwarding operations.

It plans to build a shopping mall and 224 apartments on the land. The apartment blocks will feature a mix of one, two and three-bedroom units. The company says the area is tranquil and has multiple exit points, making it an ideal location.

Each of the four blocks will have eight floors, basement parking, high speed lifts, solar power and green spaces.

Besides selling land, Express has also moved to boost its financial position by converting a Sh60 million loan from its CEO, Hector Diniz, into equity, saving it finance costs.

READ: Express Kenya to build houses in Industrial Area

The loans, from Diniz Holdings and Airport Trade Centre which are owned by Mr Diniz, will be retired by issuing the investment vehicles with a total of 12 million shares.

The proposed transaction will raise the effective interest of Mr Diniz in the company to 71.3 per cent from the current 61.6 per cent.

The deal, which is also to be ratified by shareholders, will dilute other investors by 9.7 per cent. The 12 million new shares are priced at Sh5 each, representing a 66.6 per cent premium on the company’s current share price of Sh3 on the Nairobi Securities Exchange.

Dr Obura said the transaction was approved at last year’s AGM and is again being put before shareholders as a special resolution “to be effective.

Express is among firms seeking stable and relatively higher returns in real estate compared to their traditional business models which have been hit by increased competition.

Tyre distributor Sameer Africa also plans several real estate ventures after closing its tyre factory, a move that will see an increase in commercial properties in Nairobi’s Industrial Area.

Sameer intends to build a 15,000 square metre mall along Enterprise Road. Its other planned projects include an office block in Nairobi’s Westlands and warehouses for leasing.

The company stopped manufacturing tyres as the onslaught of cheaper tyres sourced from low-cost Chinese and Indian manufacturers accelerated. Sameer says it will now outsource its tyre manufacturing to the Asian countries.