Fusion Capital gets regulator green light to raise Sh7.4bn

The Capital Markets Authority (CMA) has given Fusion Capital the greenlight to issue two development Real Estate Investment Trust (D-Reit) to complete its existing projects.

The private equity firm plans to raise a maximum of Sh7.4 billion to be split between commercial and residential developments.

“The approval of the first Development REIT schemes is in line with our mandate to facilitate uptake of the innovative product to support the growth ambitions of the vibrant real estate sector” said CMA’s acting chief executive Paul Muthaura.

The commercial D-Reit will retail at Sh17 a unit with a target of raising a minimum of Sh1.15 billion and a maximum of Sh2.3 billion.

The residential D-Reit has separately been approved to issue and list new units of a minimum of Sh2.58 billion and a maximum of Sh5.16 billion. A unit of the residential D-Reit has a nominal value of Sh23.

“They are not new projects; all of them have been in the market but we are looking for cash to complete,” said Fusion Capital’s chief executive, Luke Kinoti.

Some of the developments being undertaken include commercial properties in Nairobi’s Upper Hill area where it is developing a Sh1.25 billion office complex named Panorama, a Sh1.4 billion office block called Upper Scale Developments and a Sh850 million project christened Flamingo Towers.

It is also constructing a Sh2 billion mixed development in Meru comprising a 25,000-square metre shopping mall, a grade ‘A’ office block and 50 two- and three-bedroom apartments.

Other investments include Sh1.1 billion Marina Creekside luxury apartments in Mombasa and Sh250 million Grandepark Estate in Nakuru.

READ: Fusion sets sights on Meru with town's first shopping mall

Mr Kinoti said the firm was currently packaging the projects for each Reit, noting they had six months to detail the offer.

“We will now move fast to ensure the D-Reit is available to investors through an initial public offering (IPO) and subsequent listing on the NSE,” he said.

Fusion Capital investments in real estate have been funded by its Sh10 billion ($100 million) African Real Estate Fund earmarked for Tanzania, Rwanda, Uganda and Kenya.

The offer is restricted to professional investors who are able to evaluate the level of risk they are taking when they buy into the project. The investors will put in a minimum of Sh5 million.

READ: Fusion Group breaks ground on $34m Kigali Heights

A Reit is a unit of ownership in a real estate project allowing retail investors to participate in the capital intensive sector, which has reaped high returns in the last decade. It also unlocks investments made by developers releasing their cash to take on new projects.

An investment Reit, commonly referred to as I-Reit, allows transfer of ownership of existing property to the public while a development Reit is used for construction of a property.

Investors in an I-Reit get returns from rental income while those in D-Reit mainly eye capital gains from sale of a project upon completion.

Last year Stanlib issued an I-Reit, dubbed Fahari I-Reit, which has been trading on the Nairobi Securities Exchange since November. The Fahari I-Reit is currently trading at Sh20, which is at par with its listing price.