Former Britam executives open PE fund with focus on real estate

A former chief executive of Britam’s asset management unit has teamed up with three colleagues who recently resigned from the company to set up a real estate-focused private equity fund eyeing the booming property market.

Mr Edwin Dande — who quit British-American Asset Managers (BAAM) in August together with Elizabeth Nkuku (portfolio manager), Shiv Arora (investment analyst) and Patricia Wanjama (head of legal) — has now founded Cytonn Investments where he is a partner and chief executive.

Cytonn was registered in Kenya in September and is currently pursuing registration in the quasi tax-haven of Mauritius, the US and the UK in a bid to reach global market investors. The fund said it is working with Acorn Group Ltd, where Britam owns a 25 per cent stake, to raise Sh500 billion in the next five years to be invested across the eastern African region.

Mr Dande, 38, said its pioneer Sh10 billion Cytonn Acorn Real Estate Fund (CARE Fund) will provide between Sh1 billion and Sh2 billion in equity financing to commercial and residential property projects.

“The single largest opportunities today for any investor in this region is in private equity and real estate,” said Mr Dande in an interview with the Business Daily.

Cytonn said it is currently fundraising for a Sh40 billion real estate project in partnership with Acorn, where the PE fund will offer Sh20 billion in return for a 50 per cent stake, with the balance to be raised from bank loans.

Online platform

Cytonn fund’s life will be 10 years and is currently fundraising from high-net-worth individuals, investors from Europe and Mauritius as well as Kenyans in the diaspora.

“We will be the first company to develop an online platform for diaspora investors,” Mr Dande said. Cytonn is eying stable returns from the real estate market riding on increased demand for both high-grade office space for corporates and residential property for Kenya’s growing middle class.

Kenya’s lucrative real estate sector accounted for 7.9 per cent of the newly released gross domestic product (GDP) for 2013 compared to 4.9 per cent under the previous estimates in 2009.

However, Mr Dande said the fund will in the long-term broaden its scope beyond the property market to high-growth sectors such as fast-moving consumer goods (FMCG) and financial services.

“But we will broaden to financial services, business hotels, education, retail and healthcare in our next fund,” he said. The quartet of former Britam investment executives now joins a growing list of Kenyan managers who have started their own PE firms in search of lucrative returns offered by the private equity asset class.

Mr Dande was appointed CEO of BAAM in 2011 and was in charge of the group’s portfolio that currently stands at Sh36.3 billion. Ms Nkuku, 34, is a Certified Financial Analyst (CFA) and joined the Britam subsidiary in 2012.

Cytonn has tapped Eskor John, a Chicago-based investment adviser, as business development associate.

Oslo-based PE, Norfund, last year made Sh463.4 million from the sale of its 5.6 per cent stake it had acquired in Family Bank in 2010 for Sh278 million — representing a return of 66.6 per cent — and highlights the sweet returns available for private funds in Kenya.

The ex-Britam foursome have followed in the footsteps of former Centum executive David Owino who quit his job to form Ascent Capital, a PE fund targeting small and mid-sized businesses.

Mr Owino in July raised Sh4.3 billion ($50 million) for his fund will provide between $3-$8 million in equity to SMEs in sectors such as agribusiness, consumer, finance, services, FMCG, education and health in return for a majority stake.

Tony Wainaina, former TransCentury CEO, set up Fanisi Capital with Ayisi Makatiani. Paul Kavuma was previously a director and head of East Africa private equity at Actis before he established investment fund Catalyst Principal.