Money Markets

US fund starts building Kenyatta University hostels from mid year

Kenyatta University’s Economics Building is one of the institution’s key projects in recent past. PHOTO | FILE
Kenyatta University’s Economics Building is one of the institution’s key projects in recent past. PHOTO | FILE 

Construction of the proposed 6,000 room hostels for Kenyatta University students will kick off mid this year, three years after the Sh5.1bn project was first announced.

Kenyatta University don Paul Gachanja — who is leading the project on behalf of the institution — told the Business Daily that New York-based private equity firm Africa Integras is now ready to proceed with the project after concluding negotiations with financiers.

The US fund won the tender to lead the public private partnership (PPP) investment in 2014 and signed a contract in mid-2015.

“We are at the financial close stage for the project and expect to break ground mid this year. We are building it under the build-operate and transfer model where the contractor will manage the property for 20 years and later transfer it to the university,” said Dr Gachanja.

Kenyatta University has allocated 20 acres for the project, which will house up to 10,000 students and ease some of the housing shortage that the university currently faces.

The project includes 9,350 undergraduate beds, 500 postgraduate beds and bed sitter units for 150 married students.

Kenyatta University has 74,000 students with many seeking accommodation outside the university , a situation shared with many public universities due to a steep rise in number of admissions in recent years.

Africa Integras is a global investor specialising in developing education infrastructure including classrooms, student hostels, faculty housing and commercial and leisure facilities using the PPP approach.

The US fund was tasked with appointing an architect, a building firm and the hostel operator. The fund disclosed that it would partner with local firms Triad Architects, Broll Kenya Facility Managers and EPCO contractors in the project. International Finance Corporation, the World Bank private lending and advisory arm, was the lead adviser to the university on the project.

Public private partnerships

Private equity funds have been tapped as possible investors in university housing programmes under public private partnership deals.

PE funds have the capacity to mobilise capital towards such projects, although with many funds having a seven to 10 year investment horizon they would need to craft acceptable exit strategies given that such projects could take longer to repay the investment.

“This type of PPP project will ease the cost of accommodation for students, making university education affordable and could soon be replicated across Kenya as public universities which can only accommodate a paltry 25 per cent of their student populations,” said Dr Gachanja.

Real estate investment management firm JLL said the rising number of university scholars makes it necessary for public universities to partner with private investors to fast-track development of student hostels on a commercial scale.

The firm said many students had rented houses in the vicinity of universities pushing the demand for housing up which in turn gives incentive to increase rental prices.

“Student housing in Kenya is now a powerful alternative asset class that continues to attract investors keen to clinch deals with public university authorities on a win-win basis” said JLL in its 2016 report on African student accommodation.

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