British-American eyes investors for pooled property
Posted Thursday, June 7 2012 at 19:36
British-American Asset Managers is targeting pension funds and high net worth individuals to pool funds for multi-billion shilling investments in the property sector.
This is the first time the company will be investing in real estate on behalf of third parties.
The firm, which is part of the British-American Investment Company — is diversifying from government securities, equities and bank deposits.
British-American Investment Company (BAIC) has been investing in the property market using its own funds to diversify its balance sheet.
“This is the first time we’ll be seeking money from clients to invest in real estate where we intend to inject billions in the next five to 10 years,” said Edward Dande, the managing director at British-American Asset Managers.
“We are responding to clients’ appetite for assets that have little more stability like real estate and private equity.”
The firm is eyeing investments in residential property, economy hotels, retail outlets and industrial space in Nairobi and surrounding towns like Kiambu, Thika, Ruiru, Machakos and Kajiado.
It will make investments of between Sh253 million and Sh840 million on individual real estate transactions that include land, ongoing projects, existing property and planned real estate.
It will offer investors either regular monthly income or periodic returns depending on their needs—a signal that it is targeting clients in need of cash in the short term.
“Our target is pension schemes, high net worth investors and the diaspora and mode of making returns will be based on needs of the client,” said Mr Tande, adding that the BAAM will earn management fees.
It’s on course to unveil a Sh10 billion property fund in a joint venture with international and local high net worth investors. BAIC will put Sh1.5 billion into the fund directly and raise Sh8.5 billion from other investors as it seeks to grow earnings and cut its reliance on the volatile equities market. It will earn returns from its share of the fund as well as a fee for acting as the asset manager.
Unlike the model pursued by BAAM, the investment in the property fund will operate like PE funds where the asset management firm will pay investors a return and their principal investments after 10 and 15 years.
The company’s earnings have been hinged on the performance of the Nairobi Securities Exchange (NSE), which has seen it take a hit during bearish runs at the equities markets that culminated in a Sh1.9 billion loss in 2011.
Property accounts for 10 per cent of BAIC’s assets and the company intends to raise it 30 per cent in a period it did not disclose. Equities accounted for 40 per cent of its assets in December and it is keen to reduce this portion to 20 per cent.
It also plans to raise its holding of government securities from the current 17 per cent to 25 per cent as it seeks to reduce the impact of equities’ volatility on its earnings. “We are looking for more land in the region as we are planning more developments,” Mr Benson Wairegi, BAIC’s managing director, said in an earlier interview.