Britam last year sold its 25 per cent stake in property developer Acorn Group for Sh299.6 million, ending its short-lived association with the company that has now teamed up with private equity firm Helios.
The Nairobi Securities Exchange-listed firm says it sold the shares to an undisclosed buyer at cost, booking neither losses nor gains from the transaction.
“Acorn … was disposed of by the group in the course of 2015 for a consideration equal to its carrying value as at December 31, 2014 of Sh299.6 million,” Britam said in its latest annual report.
“The group has therefore not recognised any gains or losses on the transaction.” Britam bought into Acorn in 2014 as the two firms agreed to partner on big-ticket real estate projects.
The two parties however fell out, with the insurer selling its stake in Acorn. This paved the way for Acorn to team up with a new partner, leading to its deal with Helios in the form of joint ventures.
This will be Helios’ entry in the local real estate market that has seen lucrative returns, especially in Nairobi and other major towns where demand for residential and commercial units has been driven by the middle class and expansion of multinationals.
The PE firm is expected to help fund projects undertaken together with Acorn.
Acorn is a major player in Kenya’s real estate sector, developing and managing properties for clients such as Coca-Cola East Africa, Deloitte East Africa and UAP Holdings.
Its ongoing projects in Nairobi include Tiara Office Park, Mashiara Park, Pan Africa Life Assurance head office and Elono Plains. Britam says it will continue to invest in the real estate market on its own using billions of shillings that had previously been earmarked for projects with Acorn.
“We drew back into our sole ownership the funds and assets formerly committed to the partnership with Acorn and aggressively pursued our in-house property development,” Britam said in the report. Besides exiting Acorn, the insurer also reduced its investment in Equity Group last year by selling 34.3 million shares with a market value of about Sh1.3 billion.
This cut its stake to nine per cent as of December 2015 compared to 10.1 per cent the year before.
The insurer’s move to reduce its ownership in the bank comes at a time when the Insurance Regulatory Authority (IRA) has published new proposed regulations meant to guard against concentration risks in insurers’ portfolios.
Among these is the capping of a general insurer’s investment in any company at 10 per cent of the underwriter’s total assets.
The share sale has seen Equity represent less of Britam’s total assets, dropping to 17 per cent at the end of last year from 26 per cent the year before.
The concentration in Equity, which Britam first bought into in 2004, has fallen over the years despite the bank’s sharp rise in book and market value.