Indian tycoon Mukesh Ambani’s real estate projects in Kenya have earned him Sh2 billion profit nearly a decade since entering the country, the chief finance officer of his local subsidiary, Delta Corporation East Africa, has revealed.
The billionaire businessman’s Reliance Industries in 2007 entered into a joint venture with Delta Corporation, which has developed high-end office blocks and a mid-to-low cost residential estate in Nairobi.
Delta Corporation now says it plans to exit its real estate investments to venture into hospitality and gaming businesses.
“We have done exceedingly well in Kenya and we almost doubled our money. We had invested 70 crore (Sh974 million) in 2007 and total inflow from Kenya is in the region of 140 to 145 crore (Sh1.95-Sh2 billion),” said the Delta Corp chief finance officer Hardik Dhebar in an interview with CNBC.
“It has been a good investment and a good exit,” he added.
One of the landmark projects by Delta Corp is the Delta Centre, located in Nairobi’s Upper Hill, which was sold to the World Bank Group for close to Sh2 billion.
Another one is the 21-storey twin-tower Delta Corner in Westlands, which was sold to consultancy firm PwC and the University of Nairobi’s Staff Pension Scheme for a reported Sh4 billion.
Delta Riverside, a gated complex of four office-blocks targeting small and mid-size companies, has also sold off but Delta Corp did not disclose how much it made from the project.
Mr Ambani’s Reliance Industries controls 60 per cent of the joint venture with Delta Corp, whose annual report for 2012-2013 shows that the firm made net profit of Sh453.8 million from its Kenyan subsidiary, compared to the previous year when net profits attributable to the Kenyan operations stood at Sh510 million.
Delta said that it will gradually exit the Kenyan market as soon as it sells all projects which also include residential property.
“DCEAL has already completed construction of Delta Plains, a mid- to low-cost residential complex at Athi River near the Jomo Kenyatta International Airport.
This relatively-industrialised area is being considered an upcoming residential hub due to its proximity to both the airport and the city,” said the annual report.
“The returns have been good and the added cash flow will aid further growth of our gaming and hospitality business,” Delta Corp chairman Jaydev Mody said in a statement.
The firm expects to close shop by the end of the year. It had also bought 10 plots in prime locations covering an estimated 27 acres.
The wave of multinational corporations that have chosen Nairobi as their regional or Africa headquarters has catalysed demand for high-end offices.
“Corporates are leading the charge into Africa and, out of necessity, are acting as a catalyst for new real estate development,” said global property consultants Jones Lang LaSalle in a 2013 report on African cities.
Diageo Plc, IBM, Pepsi, Google are some of the firms that have chosen Nairobi as the base for their operations.
The nascent oil and gas sector is also attracting more multinationals who in turn require high-end offices that are increasing demand and making the market look good to both local and foreign investors.
“There is an urgent requirement for quality office assets to meet the strong demand from a broad range of growing corporate sectors such as finance, outsourcing, oil and commodities, manufacturers and telecoms,” said the report.
South Africa is the only exception on the continent that has an adequate supply of world class office space, the report added.
Lagos and Casablanca, Morocco, are cited as other African cities that are virgin territories for developers looking at investing in high-end office space.