Centum secures Sh14bn real estate pledges

Centum Investment has attracted Sh14.45 billion investment pledges for its Two Rivers real estate project in Runda, Nairobi County, which it has earmarked for listing on the stock market.

Centum is planning to convert the project into an investment vehicle that will allow the company to pool investor funds, develop the Runda property and eventually sell it on completion.

“We are in the process of converting Two Rivers into a Development Real Estate Investment Trust (D-REIT) and we have so far secured interest for funding of over Sh14.45 billion in equity and long-term debt from local and institutional investors,” said the firm its half-year results ended September 30. The Two Rivers project is expected to be completed in 2015.

Centum is also developing the Pearl Marina estate, a project similar to Two Rivers, covering 300 acres on the Garuga Peninsula on the shores of Lake Victoria. On completion it will have serviced apartments, shopping malls, hotels, a medical centre and office parks sitting on 100 acres of land.

“We attracted high quality development partners for the construction and operation of a three-star hotel. We are in advanced discussion with some of the top luxury hotel brands in the world for the development and operation of a luxury hotel,” said the statement.

Raising debt and equity for the project has been in the pipeline since last year.

“The funds required for the development will be raised through partnership with lenders and equity investors. Negotiations with a number of debt and equity investors who have shown interest in financing the project are in progress,” said the information memorandum of the Sh3.2 billion bond. The information memorandum said that as at March 2012 the land on Two Rivers had been valued at Sh2 billion.

Analysts said that the company’s share, currently trading at Sh30 each, an annual high, is supported by investors who expect that the project will pay off in future.

“In the medium-term, this (future growth) is expected to come from progress in construction at the Two Rivers real-estate project that will unlock additional balance sheet value,” says a note by Kestrel Capital after release of Centum’s half year results.

The introduction of laws regulating REITs in 2012 has seen listed firms show interest in the newly introduced instruments as an alternative to bank loans and internally generated money when financing projects.

Listed firms Britam and Home Afrika have also said that they will use REITS to finance real estate projects and make it easier for investors to buy into and exit investments.