SA firm seeks to venture into Kenya’s real estate with Sh8bn

A South African-based firm is planning to venture into Kenya’s real estate market with an eye on buying completed office blocks, warehouses and malls.

African Land Investments, which has applied to be listed on the Johannesburg Stock Exchange (JSE), said this would be part of its multi-billion shilling sub-Sahara Africa expansion.

“In Kenya we are talking of anything between $25 million (Sh2.1 billion) and $100 million (Sh8.8 billion),” chief executive Kevin Teeroovengadum told the Business Daily.

He said the firm is looking at offices in Nairobi’s Upper Hill and Westlands areas but finer details are expected once the listing is completed, early in November.

Acquisition plans are expected to gain traction in the first and second quarters of 2014, he added.

Real estate players say that a budget of between Sh2 billion and Sh8 billion offers a wide choice in the retail, commercial and warehouse properties investment, but the challenge lies in the location.

Steve Kagume, the project manager at listed developer Home Afrika, said most commercial buildings in Upper Hill are being put up by companies that plan to occupy them, making Westlands an easier entry point for a company that wants to buy as opposed to buying land and building.

Britam is constructing a Sh5 billion 30-storey building in Upper Hill while KCB Pension is putting up a 21-storey office block valued at Sh2.1 billion. The buildings will be headquarters for the firms.

Mr Kagume said buying a complete building has the advantage of saving a foreign company the hustle of searching for land, buying it and getting developers, but was more expensive.

“If you can buy when the developer has just broken ground you can get a square foot for Sh10,000 but on completion it costs up to Sh13,000,” said Mr Kagume.

Warehouses and shopping malls, the other properties African Land Investments is interested in, also offer opportunities for an investor looking at properties with a price tag of between Sh2 billion and Sh8 billion.

Ben Woodhams, the managing director of property management firm Knight Frank (Kenya) said the targeted investment required more money.

“Malls like Westgate cannot be bought for less than $80 million (Sh6.9 billion), so if someone is looking for something like that will have to pay more,” said Mr Woodhams.

Private equity firm Actis is putting up Garden City, a $150 million (Sh13 billion) investment that will be East and Central Africa’s largest shopping mall on completion in 2015.

Shopping malls also have higher rent yields. Demand for this space is expected to increase and other South African firms have already seen the opportunity.

Stanlib is already looking at deals that could see it invest as much as Sh5.2 billion in shopping malls while Sanlam is looking to invest up to Sh5.5 billion in a diverse set of properties.