European fund snaps up Sh1bn Acorn hostels stake

Acorn-owned hostels in Nairobi’s Ruaraka. FILE photo | NMG

By VICTOR JUMA
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Summary

• European fund InfraCo Africa is set to buy a Sh1 billion stake in student hostels developed by Acorn Holdings.
• It is also establishing an investment real estate investment trust (I-Reit) that will acquire the properties and hold them for rental income.
• The D-Reit is expected to be worth Sh4 billion while the I-Reit’s size is estimated at Sh4.1 billion in the initial fundraising.
• Acorn will have stakes of 67 percent and 24 percent in the D-Reit and I-Reit respectively but plans to steadily sell down its ownership over the years.

European fund InfraCo Africa is set to buy a Sh1 billion stake in student hostels developed by Acorn Holdings.

Documents seen by the Business Daily show that InfraCo, owned by the governments of UK, Netherlands and Switzerland, is among the investors approached by Acorn to invest in new vehicles that will own the properties. Acorn is creating a development real estate investment trust (D-Reit) which will build the student hostels.

It is also establishing an investment real estate investment trust (I-Reit) that will acquire the properties and hold them for rental income.

The D-Reit is expected to be worth Sh4 billion while the I-Reit’s size is estimated at Sh4.1 billion in the initial fundraising.

Acorn will have stakes of 67 percent and 24 percent in the D-Reit and I-Reit respectively but plans to steadily sell down its ownership over the years.

InfraCo has committed to invest Sh300 million in the D-Reit and Sh700 million in the I-Reit.

Acorn plans to raise another Sh3.5 billion from local institutional investors including insurers and other asset managers.

“Based on work done for the green bond (which raised Sh4.6 billion), we narrowed down to InfraCo Africa as an anchor investor,” Acorn said in the offer documents.

The offer is priced at a range of between Sh20 and Sh25 per unit (share).

The minimum investment is Sh20 million and will be spread into the D-reit (30 percent) and I-Reit (70 percent), meaning that one must buy into both investment vehicles.

Acorn expects to close the fundraising in mid-November.

Both Reits will allow investors to trade their holdings on the over-the-counter (OTC) market.

Acorn says the I-Reit will be listed on the Nairobi Securities Exchange (NSE) after a few years of demonstrating dividend payouts and growth of rental income.

It will be the second such property fund to be listed on the NSE after ILAM Fahari I-Reit.

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, Karen and Kasarani.