NSSF packages its buildings for listing at Nairobi exchange
NSSF House in Nairobi, which is among those to be offered to the public. FILE
What you need to know:
NSSF has identified Bruce House and the NSSF complex block A, B, C plus the parking silo, all in Nairobi, and the Social Security House in Mombasa for offering to the public
The NSSF is packaging its commercial property into a real estate investment vehicle with an aim of listing at the Nairobi Securities Exchange.
The retirement workers’ fund, National Social Security Fund (NSSF), has identified Bruce House and the NSSF complex block A, B, C plus the parking silo, all in Nairobi, and the Social Security House in Mombasa for offering to the public.
“We are in the process of converting our commercial buildings to Real Estate Investment Trusts (REITs) in order to unlock capital. We are developing a questionnaire to help the public to understand what we are doing and also looking at the tax implications,” said Tom Odongo the fund’s managing trustee.
NSSF has the option of listing an investment REITs, commonly referred to as i-REIT, which allows the holders to share in rental yields of the listed property.
I-Reits facilitate introduction of property worth at least Sh300 million into the securities exchange through sale of a stake to the public.
As at June 2010, Bruce House was valued at Sh1.5 billion, Social Security House in Mombasa at Sh550 million and the NSSF complex as a whole Sh5.4 billion.
In the same year, the fund collected rental income of Sh809 million with another Sh363.7 million classified as accrued income. It did not have a breakdown of how much was collected from each building.
Other properties that yield rental income for the fund include View Park Towers, Hazina Towers, Hazina Plaza and Hazina Estate.
Mr Odongo ruled out the listing of View Park Towers and Hazina Centre, since they are already in the market for sale. He said their sale had been slowed by lack of offers that met their valuations.
The REITs will also help NSSF keep its real estate holding below 30 per cent of its total portfolio, a requirement that it complied with recently after years of non-compliance. NSSF currently controls assets worth Sh126 billion, with real estate constituting 26 per cent.
In the budget statement, the government had stated its intention of re-introducing capital gains tax but it is yet to issue guidelines on how it will be implemented.
Players in the property segment have recommended the exclusion of REITs from the tax as this would take away its competitive advantage over other investment options such as Treasury bonds and bills.
REITs is a new concept in Kenya that looks at helping property developers access cheaper financing. Last month, the Treasury secretary issued a legal notice outlining the rules that will guide the REITs market under the Capital Markets Authority.
Under the new rules, NSSF will have the option of exiting the projects offered to the public after two years.
Mr Odongo dismissed claims that the City Council of Nairobi had stopped the construction on grounds that its plan approval had been done three years ago.
“We have approvals as late as one month ago. I have spoken to City Council this morning (Monday) and they don’t have any issue,” said Mr Odongo.
Construction of the building was set to begin in 2011 but the tendering process was challenged in court by contractors who had lost out in the bidding.
Last year, the court ruled against NSSF, prompting the fund to invite new bids this year that saw Kenyan firm Cementers Limited lose the tender to China’s Jiangxi. NSSF is also offering to sell space in the new office block through pre-sale agreements.
