British American eyes real estate after Sh2.2bn share sale

British American Investment Company has cut its ownership in Housing Finance and Equity Bank, earning more than Sh2.2 billion that it plans to invest in real estate projects and cut its reliance on the Nairobi Securities Exchange (NSE).

Regulatory filings show that the firm sold 110 million shares in Equity Bank worth Sh2.2 billion in what cut its stake to 7.66 per cent in June from 10.63 per cent in December.

In Housing Finance it sold 3.8 million shares estimated at Sh54.5 million — making it the first time BAIC was cutting its stake in the mortgage firm where it has grown its ownership 7.5 per cent in 2008 to 20.78 per cent in December. It now owns 18.93 per cent in the firm.

BAIC is seeking to create a Real Estate Fund in which it will put its money along with money from wealthy individuals and institutional investors for long-term investments in the property market.

READ: British-American eyes investors for pooled property

It would also seek to create a land bank with an eye on capital gains from their sale or property development.

The share sale means that BAIC has bridged the funding gap on its property division that stood at Sh2.2 billion that it had sought to commit to the property market before its IPO. The IPO raised Sh3.5 billion against a target of Sh5.8 billion.

“The investment committee has begun to look into the reallocation of assets with the aim of going big into real estate,” said Benson Wairegi, the chief executive of BAIC in an earlier interview with the Business Daily.

Its interest in the property market was dimmed by underperformance of the IPO, which forced it to scale down its investment plans.

The sharp rise in the price of homes and rental income, driven by the region’s rapid urbanisation, population growth and expansion of the middle-class, is behind the shift to the property market.

The company has relied on the stock market to drive its profit, but it is now changing tack to reduce the effect of bourse cycles on its profitability.

The NSE plunged 31.4 per cent in 2011 compared to 2010 on reduced participation by retail investors shackled by sky-high inflation and net sell off by foreign investors — the first in three years.

The bearish runs at the equities market culminated in a Sh1.9 billion loss last year compared to a net profit of Sh2.7 billion in 2010.

The company is set to invite international investors to put their money in a Sh10 billion property where it will put Sh1.5 billion in the fund directly and raise Sh8.5 billion from other investors.

Top on the list of owners are Peter Munga, who chairs Equity Bank, Jimnah Mbaru, the investment banker, Equity Bank CEO James Mwangi, Jane Michuki, a managing partner at Kimani & Michuki Advocates and Dawood Rawat.

gngigi@ke.nationmedia.com