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Britam’s partner Acorn to put up Sh40bn property projects

Acorn Group chairman Antony Mwaniki (right) with CEO Edward Kirathe during a press briefing at the firm’s offices August 5, 2014. PHOTO | DIANA NGILA | NATION
Acorn Group chairman Antony Mwaniki (right) with CEO Edward Kirathe during a press briefing at the firm’s offices August 5, 2014. PHOTO | DIANA NGILA | NATION 

Acorn Group, a company partly owned by listed financial services group Britam, plans to develop real estate projects worth Sh40 billion over the next two years.

The property management firm said the projects constitute a mix of shopping malls, commercial offices, residential properties and commercial hotels to be located within Nairobi and its satellite towns of Kitengela and Lukenya.

The firm is rolling out the projects with Britam, which has a 25 per cent stake.

Acorn chief executive Edward Kirathe said the partners are targeting the middle and lower ends of the property markets.

“The highest demand for property, especially retail and residential, is going to be in the middle and lower income segments. In the commercial space, it is going to be in suburb retail malls and shopping centres, the mid-scale business, conferencing hotels and mid-sized commercial office buildings,” said Mr Kirathe.

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Each of the projects will be financed through different cash sources, with 60 per cent of the funding coming from commercial loans, 20 per cent through equity and the remaining 20 per cent from a mix of the two.

Mr Kirathe added that the developers will sell some of the properties and package others into Real Estate Investment Trusts (Reits).

Construction is expected to begin between October this year and March 2015.

Some of the major projects include Elono Plains, a residential estate in Kitengela that will consist of 600 housing units, a public transport terminus, a recreational park, clinic, shopping centre, primary and secondary school.

Arboretum Square in Kileleshwa, Nairobi, will have a shopping mall and an office block.

Various property types have different returns, with residential estates on average having the highest at between 10 to 12 per cent.

Analysts said the project is significant for Britam though the impact on the bottom line will delay.

“The impact will be felt maybe between two-and-half to three years from now,” said Agnes Achieng, a research analyst at Sterling Capital.

Acorn’s expansion away from Nairobi is influenced by availability of bigger parcels of land and the growing demand for high quality housing in these regions.

“The reality is that the vast majority of the developments is not investment grade at all,” said Mr Kirathe.

Investors have increasingly targeted areas outside the capital. Longonot Gate is one of the mega projects being constructed in Naivasha on 2,400 acres and like Acorn’s project, will have houses, hospitals, shopping malls and hotels. The project promoters have already signed Gems Cambridge International Schools and the Africa International University as anchor education institutions.

Migaa, which is being developed by NSE listed-Home Afrika, is coming up in Kiambu County on 774 acres. It comprises 4,000 homes, hotels, schools, a hospital, offices, an 18-hole golf course and a commercial centre.

Home Afrika has said it plans to issue a bond to partly finance the completion of Migaa.

The government is also joining the private sector in going to the counties with its own set of resort cities in Isiolo County, Manda Bay (Lamu County) and Lake Turkana. 

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