The Nairobi Securities Exchange. FILE PHOTO | NMG
Low rental yields for buildings in Nairobi and long-term holding
by institutional investors are the major factors behind the poor
performance of real estate investment trusts.
A new
analysis by Sterling Capital shows the price of Reits quoted on the
Nairobi Securities Exchange had declined by 50 per cent to just Sh10 –
compared to the initial price of Sh20 – since listing with little
activity on the counter.
The Reit counter trades low
volumes with its monthly turnover being a third of Safaricom’s daily
turnover, said the report prepared by corporate finance analyst Wangechi
Njogu.
“A major challenge has been the low supply of (Reit) units due
to a majority of the underlying Income-Reit investor composition being
institutional investors, who comprise close to 70 per cent of the
investor pool and they tend to take a long-term view,” said Ms Njogu.
She added that inadequate understanding of the asset class had also
contributed to low interest in Reits.
Ms Njogu said the
way to revive the Reits market was by increasing investor awareness and
understanding of the benefits of the asset class.
“People
don’t really understand the product, so the first thing naturally is to
ensure that they know what it is, are aware of its existence in the
market. Otherwise they will shy away. Demand can only be realised if we
promote awareness,” Ms Njogu said.
Stanlib is the only listed Reit on the Nairobi Securities Exchange.
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