Express Kenya to build houses on 15-acre land

NSE-listed logistics firm, Express Kenya, is set to construct 1,200 residential houses on a 15-acre piece of land in Nairobi’s Industrial Area, marking a significant shift in the company’s business strategy in an attempt to turn around its dwindling fortunes.

Express Kenya suffered a sudden dip in fortunes about two years ago after losing its main business line, the distribution of East African Breweries products.

In its latest annual financial statement, the company says diversification into real estate is one of the firm’s strategies to improve its prospects.

“The said project shall be executed over a five-year period and is structured in such a way that it shall not interfere with the operations of the current business segments,” said the company’s chief executive Hector Diniz in the annual report.

The logistic firm returned to profitability last year posting Sh13 million in after-tax profits compared to a loss of Sh229 million a year earlier.

The company’s stock at the Nairobi Securities Exchange (NSE) has been steady moving up 1.23 per cent in the past 12 months to trade at Sh4.10 each.

The planned apartment sizes shall range between 80 and 120 square metres per unit and will be in blocks of 10 to 12-storey buildings.

Express Kenya already owns the land on which the estate comprising of studio, one and two bedroomed houses are to be built.

The transport and logistics company indicated that it has received interest from investors who want to partner with it in the real estate project, with some banks also willing to offer loans.

“Several reputable international as well as local firms have thrown in their proposals to be the company’s chief architects with some bringing their own funding. Several banks have also expressed their interest in the same project, offering very competitive interest rates,” said Mr Diniz.

Express Kenya joins a growing list of NSE listed companies that are turning to the vibrant real estate sector to boost their growth.

After losing the EABL contract, the transport company turned to hiring out some of its fleet and is now talking of divesting instead of putting more resources into its transport and logistics business to revive it.

Besides EABL, Express has also lost other clients to competitors due to theft incidents at its warehouses which also exposed it to huge legal liabilities, according to disclosures in the annual report.

The company has been contemplating making a shareholders’ cash call, inviting private investors or borrowing funds from financial institutions to finance the project.

Last year, shareholders agreed to inject an additional Sh323 million into the firm through a rights issue, which fell short of the reported demand of Sh1.1 billion extra capital. It has opted to first restructure its internal operations before inviting shareholders to put in more cash.

Analysts said it makes sense for Express Kenya to diversify given that competition and uncertainty in the transport business threatened its growth.

“If they can get finance and there is a ready market, then it will boost them,” head of research at Suntra Investment, Johnson Nderi said.

The company sold assets to settle debts which had posed a risk to the company’s future. It also auctioned goods of long-standing debtors in efforts to improve its cash flow position besides shedding jobs which cut its wage bill by close to half.

Other firms that have ventured into real estate to boost their performance include insurance companies that are cutting back their exposure at the NSE whose slump in 2011 cost them heavily.

Centum Investment and Sasini Tea have also ventured into the sector which has been in a rally for over a decade due to housing demand in the country outstripping supply.