Qwetu Hostels in Nairobi’s Ruaraka area. FILE PHOTO | NMG
Property developer Acorn Holdings Limited is creating a
development real estate investment trust (D-Reit) through which it will
sell part of its ownership in a group of branded student hostels it is
building in Nairobi.
The company has already completed
three hostels in Parklands, Ruaraka and along Jogoo Road. It plans to
build six other projects in various locations including Nairobi West and
Kasarani.
The properties are projected to cost a total
of Sh7.6 billion, with Acorn planning the D-Reit to offload part of its
interest to institutional investors and high-net-worth individuals.
“Acorn
is in the process of structuring a D-Reit as the promoter. Acorn’s
current development pipeline will be sold to the Development Reit,” the
company said in disclosures to bond investors from whom it recently
raised Sh5 billion.
“It is intended that the D-Reit
will purchase the partnership interests of Acorn in the issuer (the
basket of hostels). Acorn intends to retain a 30 percent stake in the
proposed D-Reit.”
A D-Reit is an investment vehicle that is principally involved
in development and construction of properties for sale and/or rental. It
must have a minimum of seven investors.
According to
Kenya’s securities regulations, promoters of such trusts can offer them
only to professional investors who are to make minimum investments of
Sh5 million each.
The investment threshold is aimed at
locking out retail investors who may not have the knowledge or financial
resources to stomach the potential risks in D-Reits such as illiquidity
and volatility in the market value of the units or shares. Promoters of
D-Reits are required to maintain an investment of at least 10 percent
of the value of the fund as at the date of the issue of units for two
years. Thereafter, a promoter may reduce its investment.
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