PE firm Xterra to invest most of Sh61bn fund in Kenya’s real estate

Private equity firm Xterra Capital Advisors will invest the lion’s share of its upcoming fund in Kenya’s real estate sector.

Xterra, which is raising $300 million (Sh30.6 billion) in equity and an equal amount in debt, or a total of Sh61 billion, says that slightly over a third of the money raised will go towards the local property market.

“Indeed the fund now plans to invest 28 per cent of its capital in Nigeria, 19 per cent in Ghana, 34 per cent in Kenya, seven per cent in Rwanda, four per cent in Uganda and eight per cent in South Africa,” said the firm.

Half the amount raised will go towards retail properties, 19 per cent will be invested in office space, 28 per cent in hotels while the remaining three per cent will go towards industrial properties. The fund will buy rental properties and also finance greenfield developments.

In August Xterra said it would partner AMS Properties and Hass Consult to develop properties worth Sh10 billion using equity financing.

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The fund is targeting income properties with yields of at least 15 per cent. Other funds that have been launched in the market also seek to make similar returns.

Stanlib Investments’ Fahari Income Real Estate Investment Trust (Reit) is expected to have annual returns of at least 14 per cent.

The Fahari-I Reit, which is hoping to raise as much as Sh12.5 billion, will likewise invest in retail, office and industrial properties.

Stanlib has already identified Greenspan Mall in Embakasi, Nairobi, as one of the properties it would buy for Sh2 billion.

READ: Stanlib plans Sh2bn Greenspan Mall buy as IFC injects cash

Proceeds from Kenya’s first Reit will also go towards buying two office blocks in Industrial Area, Nairobi.

Centum Investments which is developing Two Rivers mixed development in Runda has previously said that its project would have a return of 14 per cent.

Despite the cooling of the property market after a decade of fast growth, large investors are still leaning towards the real-estate market.

Aviation Industry Corporation of China (Avic) is developing offices, a hotel and apartment blocks worth over Sh24 billion.

Private equity firm Actis’ Garden City mall on Thika Road is valued at Sh54 billion.