Co-op Bank lent Sh9.2bn to Centum’s Two Rivers

Kenya’s third largest lender by assets, Co-operative Bank, was among the top financiers of Nairobi’s multi-billion shilling Two Rivers Mall, having lent the project a total of Sh9.2 billion.

It has emerged that Co-op Bank initially got involved in the project when it lent Two Rivers Lifestyle Company Sh1 billion to buy the 100 acres on which the mall stands.

The bank later lent the firm an additional Sh8.24 billion ($80 million) for construction of the mall.

“Co-operative Bank has been involved throughout the life cycle of this project. The bank was involved in the acquisition of the 100-acre land parcel by way of advancing the first Sh1 billion to Centum,” said Gideon Muriuki, the managing director.

“The bank was subsequently involved in structuring the financing deal right from conceptualization and later advanced a project financing facility of Sh8.24 billion ($80 million) for the development,” he said.

Phase one of the Two Rivers development, comprising shopping and leisure facilities, is estimated to have cost Sh1 billion.

Two Rivers Lifestyle Company owns the mixed development project and is in turn owned by Two Rivers Development Limited and OMP Africa Investment Company, a company associated with Old Mutual Group.

Each has a 50 per cent stake in the development.

Two Rivers Development Limited is a company owned by Centum Investment (58 per cent), AVIC International (39 per cent) and ICDC (three per cent).

Co-op Bank’s core capital stood at Sh48.8 billion by September 2016, meaning that its Sh9.2 billion exposure in the Two Rivers project amounts to 18.8 per cent – well within the statutory limit.

Banks are by law not allowed to lend more than 25 per cent of their core capital to one borrower.

Co-op Bank’s loan book stood at Sh227 billion while it recorded profits of 10.5 billion by end of September 2016.

“The bank’s ability to lend the developer a huge amount of money was a clear indicator that Kenya’s financial services sector is maturing,” President Uhuru Kenyatta said during the unveiling of the phase one of the mall.

The ICDC, which has a 23 per cent stake in Centum, made a $5 million (Sh503 million) equity investment in 2015.

Last year, Old Mutual invested Sh6.4 billion in the project giving it a 50 per cent stake in the firm. It also took a 10 per cent stake in Two Rivers Lifestyle Centre Limited (TRLC) in exchange for cash and has issued a convertible loan to the company that could later be turned into an extra 40 per cent equity ownership.

The mall is part of the Two Rivers complex that sits on a 100-acre property along Limuru Road.

Phase Two of the development is set to begin before the end of the first half of the year and will involve the construction of two office towers, a three- star hotel by South African hotelier City Lodge. There are plans to construct apartments later. 

The mall, which is currently the biggest in Kenya, has increased  the amount of lettable space from 460,000 square feet to 700,000 square feet.

It was set to open in October after it missed out on its earlier (September) target. The developer cited reason for delay as the scale of work involved and the un-readiness of some tenants.

The shopping complex plays host to more than 150 international and local brands that include Turkish clothing line LC Waikiki, Nike, Chandarana, fine jewellery dealers that include Swarovski and Anmol, Nove Coffee Roaster and The Designers studio. French retail giant Carrefour is the anchor tenant, taking up 10,000 square meters of space.

It is expected that Two Rivers will generate $25 million (Sh2.6 billion) in annual rental income, representing a yield of around 14 per cent in dollar terms.