Home Afrika eyes Sh15bn injection for new projects

Property developer Home Afrika plans to raise up to Sh15 billion over the next 18 months to finance ongoing and new projects.

The money will be raised in the form of debt and equity, signalling a possibility that the Nairobi Securities Exchange-listed firm could issue new stock to current shareholders or to strategic investors.

“We are looking at raising between Sh10 billion to Sh15 billion in various forms of a mix of debt and equity,” said Home Afrika’s new CEO Dan Awendo in an interview.

“The funds will be deployed primarily for our existing projects in addition to providing seed for new projects in the medium term.”

The move reflects the capital-intensive nature of the real estate business, making Home Afrika’s fundraising one of the largest for a company of its size.

This will be the latest fundraising by the company, which issued a Sh500 million bond early last year at an interest rate of 17 per cent.

Mr Awendo, who was recently appointed as the substantive chief executive of the firm after holding the position in an acting capacity since last September has made raising new funds his priority.

Mr Awendo said the funds would fast-track the completion of projects which can take several years, with the company also set to enter into joint ventures.

He added that Home Afrika plans to sell non-core assets to improve its liquidity.

A large part of the company’s assets is locked in land and real estate projects that take years to complete and sell to buyers.

Morning Side Office Park on Nairobi’s Ngong Road was the company’s first completed project followed by Mitini Scapes in Kiambu, which was launched last week.

READ: Home Afrika issues profit warning for 2015 returns

Mitini, consisting of 82 units of cottages and apartments, was built over four years at a cost of Sh700 million but is now valued at Sh1 billion. Most of the units have already been sold, but two cottages and 13 apartments remain unsold.

Home Afrika says sale of the remaining units will see it book revenues of about Sh686 million.

Some of the planned or ongoing developments include Tamarind Tree Residence (Kiambu), Lakeview Heights (Kisumu), Lango (Kwale) and several others within the flagship Migaa Estate in Kiambu.

The company has made a cumulative net loss of Sh126.4 million in the six years ended 2014.

Minority interests in the various property projects have meanwhile earned a net profit of Sh93.3 million in the same period.

The contrast in the distribution of earnings has been attributed to Home Afrika shouldering the costs of implementing the projects, including administrative and marketing expenses.

The company owns a 60 per cent stake in a typical project, with the other partners holding the remaining 40 per cent.

Home Afrika’s performance has seen its share price decline to trade at Sh1.85, representing a 92.6 per cent drop from the peak of Sh25 in its first day of trading on July 15, 2013 when it listed by introduction.

The company listed at an offer price of Sh12, which analysts at the time said was too expensive relative to other stocks.