Companies owned by the Philip Ndegwa family have taken a combined 23.87 percent stake in property fund ILAM Fahari I-Reit after buying units (shares) in the open market and through a tender offer ahead of its recent delisting from the Nairobi Securities Exchange.
The latest annual report published by Fahari shows that ICEA Lion Asset Management and ICEA Lion Life Assurance Company—part of the Ndegwas’ collection of businesses—held 43.2 million shares, equivalent to a 23.87 percent stake in the property fund as of December 2023.
In the prior year, the asset manager had five million shares amounting to a 2.76 percent stake, while the insurer was absent in Fahari’s list of top shareholders.
In the new ownership structure, the insurer emerged with 23.5 million shares (13.03 percent) while the asset manager had raised its holdings to 19.6 million shares (10.84 percent).
In the buyout offer made to Fahari’s minority shareholders last year, the investors were invited to sell their holdings to the asset management firm for Sh11 per share.
This was an 83.3 percent premium to the closing price of Sh6 on August 28, 2023—the trading day before the announcement was made.
ICEA Lion Asset Management had targeted to buy up to 36.58 million shares from retail investors as part of the process of converting the property fund into a restricted Reit (real estate investment trust) primarily owned by high-net-worth investors.
Results of the redemption offer published last October stated that the asset manager had raised its ownership in the property fund to 22.74 percent after buying an additional 36.16 million shares.
Other investors bought 421,945 shares in the transaction, which allowed small investors to raise their holdings to a minimum value of Sh5 million, which qualifies one as a professional investor.
Fahari’s new disclosures indicate that the asset manager subsequently traded part of its holdings to the insurer. One or both firms also bought an extra 2.04 million shares outside the tender offer, surpassing the 41.16 million shares initially indicated by the asset manager’s previous ownership and the results of the redemption.
ICEA Lion Asset Management invests funds for the entities operating under ICEA Lion Insurance Holdings Limited. Some of the subsidiaries also invest part of their capital directly.
Fahari’s shares rallied to highs of Sh10 on August 29, 2023, but declined steadily to close last year at Sh6.3 on above-normal volumes beyond the offer closure date of October 6, 2023.
The property fund says it is now better placed to attract new capital and boost efficiencies, including through expanding its asset base.
“As has been reported previously, the strategic review conducted by the Reit manager highlighted the importance of expanding the Reit’s asset base to achieve economies of scale, improve asset quality as well as mix, and to ensure long-term value accretion,” said Andrew Ndegwa, the chairman of ICEA Lion Asset Management which manages Fahari.
“Unfortunately, maintaining the REIT’s listing status had become an obstacle to growth as units traded at a significant discount to net asset value, discouraging both existing and potential investors.”
