SA company to buy Nairobi drugs store at Sh2bn

Corporate News

A section of Buffalo Mall in Naivasha. Mara Delta Property Holdings has shown increased appetite for Kenyan property. PHOTO | FILE 

By VICTOR JUMA vjuma@ke.nationmedia.com

South African investment firm Mara Delta Property Holdings is set to acquire a pharmaceutical storage facility along Nairobi’s Mombasa Road from Imperial Health Sciences Logistics — another
South African multinational— for Sh2 billion.

The transaction, which is expected to be concluded next month, will expand Mara’s investments in Kenya’s real estate market.

The company in April last year bought a 45.5 per cent stake in Naivasha-based Buffalo Mall for Sh440 million.
“Mara Delta (via two wholly-owned subsidiaries namely Warehousely Limited and Mara Viwandani Limited) has agreed to acquire the Imperial Health Sciences logistics warehouse in Nairobi, Kenya,” Mara said in a trading update.
“The facility will be leased back to Imperial Health Sciences on a 10-year triple net basis, denominated in US$ and guaranteed by Imperial Holdings Limited.” Mara said it made a deposit on the deal in December.

It will pay $16.88 million (Sh1.7 billion) for the warehouse and $2.99 million (Sh310 million) for the vacant land.
The impending acquisition signals the company’s increased appetite for Kenyan properties which have traditionally offered stable and high returns.

“Kenya is one of Mara Delta’s priority, or first wave jurisdictions and the company is considering additional pipeline opportunities in that country,” Mara said in its latest annual report.

The multinational said Kenya is expected to be among the fastest growing economies in Eastern Africa in the coming years.

“The 2016 Country Economic Memorandum states that Kenya’s growth prospects will depend significantly on innovation, oil, and urbanisation on the long term,” Mara said. The Buffalo Mall has space of 6,722 square metres, with a second phase extension of 7,500 square metres about to be completed.

The retail complex has Tuskys Supermarket as the anchor tenant taking up 3,861 square metres. Other tenants include Spur and coffee chain Java House. Tuskys has taken a 15-year lease at the mall which Mara says has an average rent escalation rate of three per cent per annum, adding that vacancies are low.

Mara has valued its investment in Buffalo Mall at $6 million (Sh603 million), implying a capital gain of Sh163 million in less than a year. The mall now brings in two per cent of the multinational’s total revenues and represents two per cent of its assets. The property is however yet to make a profit, with the six months ended December showing a pre-tax loss of Sh2.8 million.

Mara appears to prefer the commercial segment of the local real estate market, benefiting from capital appreciation and rental from corporate clients.

Outperformed bonds

Rapid urbanisation and economic and population growth are the key drivers of demand in Kenya’s lucrative property market.

A report by Hass Consult found that real estate outperformed bonds and equities in the decade ended 2010 in terms of income and capital appreciation.

Property developers have earned double-digit returns over the years, 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 funds, build more high-end commercial properties such as malls and offices to gain from high rental fees and capital appreciation.