NSSF’s Nyayo Estate in Embakasi, Nairobi. The valuation of this estate reduced to Sh1.77 billion from Sh9.32 billion. File
What you need to know:
The regulator has fought a long battle to enforce compliance by the statutory pension fund, with NSSF arguing a quick divestiture would flood the property market.
National Social Security Fund (NSSF) has for the first time complied with the rule capping real-estate holdings to 30 per cent of total investment portfolio.
Following a reclassification of its Nyayo Estate in Embakasi to a tenant purchase scheme, NSSF cut its combined land and property holdings to Sh29 billion, representing 22 per cent of its total investment portfolio of Sh135 billion.
The property valuation of Nyayo Estate Embakasi reduced to Sh1.77 billion in June 2013 from Sh9.32 billion in 2012, as per an NSSF gazette notice published Friday.
“We now meet the regulatory requirement. The Tenant Purchase Scheme for Nyayo Estate phase four and phase five now falls under the investment class labelled ‘Other Investments’ as per the Retirement Benefits Authority classification,” said NSSF managing trustee Richard Lang’at.
The regulator has fought a long battle to enforce compliance by the statutory pension fund, with NSSF arguing a quick divestiture would flood the property market. In the year ending June 2012, the NSSF land and property investment stood at Sh35 billion, representing 32 per cent of its entire portfolio of Sh110.93 billion.
Previous NSSF administrations put in substantial funds into long-term real estate projects, making it difficult for the fund to cut its holdings levels. Effort to comply were also being hampered by the rise in valuation at a time when the real estate sector has been booming.
NSSF hopes to ride on new contributory rates to boost its cash arsenal for capital-intensive projects without breaching regulation. Other than the expected cash boost, NSSF plans to use a joint venture approach with private investors in its real-estate projects to reduce its contribution in such developments.
NSSF has previously announced it will use this approach with international partners to construct a 62-storey tower on its plot on Kenyatta Avenue in Nairobi for an estimated Sh20 billion. The fund also plans to build 30,000 housing units with shopping malls, recreational facilities and schools at an estimated cost of Sh80 billion on its 960-acre land at Mavoko, Machakos.
Last month, it announced that investors took up 104 apartments along State House Road, Nairobi, less than two weeks after the Fund put them up on sale.
According to Mr Lang’at, 114 applications were received for the three-bedroom apartments that were being sold off-plan at Sh31 million and Sh35 million for those with servant quarters, reflecting demand for housing units at prime locations near the city centre.
NSSF’s lower percentage of property holdings has also been helped by a substantial increase in the value of its quoted equity investment.
According to the disclosure, the value of quoted securities rose by 40 per cent to Sh51.1 billion from Sh36.3 billion in 2012, a trend observed across all pension fund managers in line with the high returns in the stock exchange last year.
Commercial paper
NSSF said its realignment of investments made it shift focus to other asset classes such as quoted and unquoted stocks, government securities and commercial paper with a combined value of over Sh87 billion as at June 2013 up from Sh64 billion the previous year.
“Fund managers continued investing heavily in government securities and quoted securities with the two investments constituting the largest share of the industry assets at 59.2 per cent of total assets under management,” said the Retirement Benefits Authority in its December 2013 industry report.
