NSSF Sh2.9 billion deal with Treasury close to collapse
The Treasury. NSSF has given the government until March 31 to allocate funds to buy two of its buildings. Photo/SALATON NJAU
What you need to know:
NSSF is considering selling Hazina Towers and View Park Towers to private investors.
NSSF has given Treasury up to March 31 to raise the Sh2.9 billion.
The sale of the two office blocks was meant to help NSSF comply with the asset allocation limits set by the regulator Retirement Benefits Authority (RBA).
The Sh2.9 billion deal between National Social Security Fund (NSSF) and Treasury for the purchase of two office blocks in Nairobi’s city centre is on the verge of collapse after the government failed to meet the terms.
The fund Thursday said it was considering selling Hazina Towers and View Park Towers to private investors, whom it had rejected after the government offer that was hinged on curbing the State’s rising rental bill and need to get accommodation for the widening public service.
The government had promised to make a down payment of Sh1.6 billion by last June but failed due to lack of funds on rising expenditure amid below target revenues.
Now, the NSSF has given Treasury up to March 31 to raise the Sh2.9 billion — which looks remote because the supplementary budget was completed two weeks ago and Parliament has gone on recess ahead of the March 4 General Election.
“If Treasury will not have allocated the funds by the end of March we will be forced to go back to the open market,” said Tom Odongo, the NSSF managing trustee, in a telephone interview with the Business Daily Thursday.
“The (housing) ministry has been keen on buying the two buildings and this is why we retracted the initial publicly advertised sale in order to give them priority.”
The sale of the two office blocks was meant to help NSSF comply with the asset allocation limits set by the regulator Retirement Benefits Authority (RBA).
Retirement laws bar pension and provident schemes from investing more than 30 per cent of their assets on property.
The NSSF’s property investment stood at 39 per cent in December 2011 from 34 per cent in June the same year. The fund is yet to release 2012 numbers.
Housing permanent secretary Tirop Kosgey says his ministry has now suspended negotiations with NSSF following the non-payment, pending fresh guidance from Treasury.
“Treasury had initially promised to fund the deal but it appears they experienced financial constraints and the money was not budgeted, stalling negotiations,” said Mr Tirop.
“If the money is not awarded this time around, we will have no option but to let NSSF go ahead and offer the properties to other interested parties.”
The two buildings have a combined space of about 850,000 square feet, intended to house government offices and commissions created under the new Constitution.
The two buildings located along University Way are expected to tame government’s rising rent bill that stands at slightly above Sh2 billion annually, according to Mr Kosgey.
The rental bill will grow further this year under the devolved government as the State moves to accommodate new offices.
A sharp decline in the value of shares in December 2011 pushed NSSF further away from the RBA limits on the set proportion of property investments.
Total assets held by the NSSF declined from Sh113.5 billion in June 2011 to Sh97.9 billion in December 2011, representing a 13.76 per cent decline.
This was the result of a Sh10 billion drop in NSSF’s stock market portfolio following a bear run at the Nairobi Securities Exchange in that year, as its investment in property remained flat at Sh38 billion.
RBA recommends that retirement funds maintain at least 70 per cent of their portfolio in liquid assets to guarantee payment of pensioners’ claims.
But the bear run at the NSE is expected to reverse the fund’s investment ratios with the share of properties set to drop on the high valuation of shares.
BAT, for instance, is up 108 per cent to Sh540 over the past year while EABL is up 75 per cent to Sh304 over the period.
The sale of the two buildings is set to be among the single largest deals in Kenya’s property market, coming months after the World Bank acquired a 21-storey office block in the Upper Hill area.
The building was bought from a company associated with Indian billionaire Mukesh Ambani for Sh2.2 billion.
