Finnish firm eyes Sh3bn investment in local real estate with Nairobi unit

Finnish investment firm Taaleritehdas has opened shop in Nairobi with plans to invest up to Sh3 billion in Kenya’s real-estate market with its $60 million (Sh6.4 billion) Africa-focused fund.

Taaleritehdas has already set aside some funds to develop properties with Cytonn Investments, a local private equity fund.

Cytonn this week announced it had secured Sh1.4 billion in the form of debt from both foreign and local investors.

The Finnish firm plans to carry out all its Africa operations which include property investments in Mozambique and Rwanda from the Nairobi office.

Taaleritehdas director Antti-Jussi Ahveninen said his firm is looking at all property types but added that the largest opportunity is in the mid-market where there is heavy demand, but a lack of affordable and quality housing.

“The main demand is in the affordable or mid-sector of the market,” said Mr Ahveninen.

He said price range for this market is between Sh6 million and Sh11 million for one-bedroom to three-bedroom units. The firm typically invests through a mix of debt and equity.

The funds go to construction finance, one of the toughest hurdle that developers face when putting up buildings. A common problem is funds running out halfway through a project, even for the public sector.

Cytonn chief executive Edwin Dande said lenders such as Taaleritehdas that bought its structured notes would fund the entire project which removes the risk of cash running out before completion of a project.

In exchange the investors will get a share in profits made from the sale of units.

“The attraction of this debt is that while it is participating, these types of investors are willing to fund the entire development plus land costs,” said Mr Dande.

The two are part of a group of investors who are developing Situ Village, a Sh3.3 billion high-end gated community in the Karen suburb of Nairobi County.

Mr Ahveninen did not disclose the expected rate of return for the projects it is funding.

Taaleritehdas announcement comes at a time when the shilling and other national currencies in the region are weakening with foreign investors taking cautious approach towards investing.

The Finnish firm, however, said it would not hedge on its investments since investors are willing to take the currency exchange risk.

Other property funds that are looking at entering the market include South Africa’s Grand Towers Property Fund which plans to make investments of between $1 billion and $3.5 billion.

Grand Towers Property Fund is interested in putting up mixed developments mainly shopping malls and warehouses.

Johannesburg-listed MMI Holdings, also of South Africa, is raising $250 million (Sh25 billion) through the Momentum Africa Real Estate Fund and some of the funds are expected to go to Kenya’s property market.

The Momentum Africa Real Estate Fund is investing in retail, office, and industrial properties across Ghana, Kenya, Nigeria, Mozambique, Rwanda and Zambia.