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Real estate boom creates new crop of Kenya property barons

Artist’s impression of Tatu City. Photo/FREDRICK ONYANGO
Artist’s impression of Tatu City. Photo/FREDRICK ONYANGO 

For the more than 10 years that they have been in public life, Kenyans have always known Vimal Shah and Nahashon Nyaga as industry captain and banking executive respectively.

But in recent months, they have been in the backroom drawing one of Kenya’s most ambitious real estate plans in the country’s history that is also promising to turn them into property barons over the next decade.  

Mr Shah, the managing director of edible oil processor Bidco, Mr Nyaga, a former governor of the Central Bank of Kenya and little known coffee dealer Steve Mwagiru are the local faces behind the Sh240 billion real estate project, dubbed Tatu City

The trio has a 50 per cent stake in the project with the remaining half firmly in the hands of Renaissance Capital, the Moscow-based investment bank.

Little is known about Mr Mwagiru who is said to be in his 40s, but people familiar with him say he owns coffee farms in Ruiru — part of which will be occupied by the multi-billion shilling real estate project and has interests in Waguthu Farmers, a major coffee dealer.

In the Tatu City project, Mr Mwagiru is believed to have brought to the table the much needed land, while Mr Shah who is shaping up as a real estate developer, brings in the cash.

Renaissance Capital, the Russian investment bank, is pumping in additional seed money and about 300 acres of land that it gained last year after acquiring a 62 per cent stake in Eaagads — a Nairobi Stock Exchange (NSE) listed coffee grower. 

In the emerging Tatu City shareholding structure the religious and reserved former governor of Central Bank of Kenya Nahashon Nyaga with his elaborate network of friends in Kenya’s business and political arena is being seen as the power broker.

His presence in the project is expected to particularly come in handy in selling the multi-billion project to local investors.

Capital gains

Tatu City project involves the use of private capital to construct a whole new city of 62,000 residents who will live in a well planned environment of manicured homes, office blocks, shopping malls and industrial parks on 1,000 hectares in Kiambu County, behind Kenyatta University.

With the property market having outperformed other assets classes such as equities and bonds, and prices expected to remain bullish, observers expect the owners of Tatu City to reap outsized capital gains in the next 10 years.

A deep look at planned workings of the private city indicate that Renaissance Capital and the three local investors plan to subdivide the land into small plots and resell it to developers complete with the earmarked design for each.

The shareholders in the Tatu City project will also earn annual lease fees from the private investors who are expected to pump billions of shillings in the development of homes, office blocks and shopping malls.

Under the deal, Renaissance Capital and the three local shareholders alongside other yet to be identified investors will put up basic infrastructure on the 1000 ha land then tap investors who will buy parcels of land and develop it under strict specifications.

They will basically act as Tatu City’s local authority, controlling developments in the area and charging property owners lease fees in what is expected to earn them huge returns.

“Our intention is to create Tatu City Council that will see investors pay the shareholders for the land and annual leases,” said Mr Shah in a telephone interview with the Business Daily. “The investors should gain from the forecast appreciation of their property,” added Mr Shah without giving further details on the project.

While Mr Shah is better associated with the Thika-based Bidco Oil—which manufacturers Elianto Oil, Gold Band margarine, Gental detergent, and Yellow Star bar soap, his recent activities indicate that he is quietly building a real estate portfolio that includes several real estate projects in Thika. 

“I am moving in because of the good returns coming from the real estate market,” said Mr Shah.  

Swelling incomes and large numbers of young people moving to urban centres and starting families, is emerging as a key driver of demand in Kenya’s real estate market that has seen the prices of apartments in Nairobi’s middle-income areas more than double in the five years.

The trend is expected to hold underlining real estate as an asset class of premium returns relative to equities, bonds and bank deposits.

This is what is attracting the likes of Mr Nyaga to bet big on the real estate market, propelling him to the limelight seven years after resigning from the high profile post at the CBK.

The 55 year old Nyaga has maintained a low profile since leaving Central Bank and has only been seen occasionally preaching at a church along Ngong rd.

But people close to him reckon that he has built a massive portfolio of real estate, farming and share investors with the estimated Sh70 million golden parachute he received from CBK following his resignation.

The most intriguing part of the Tatu City deal however remains the relationship between Renaissance Capital and Mr Mwagiru, which started with the buyout of 62 per cent stake in Eaagads. 

The Tatu City project appears to have been in motion one year ago when the Nairobi Stock Exchange (NSE) listed agricultural firm, Eaagads Ltd, announced it was selling part of its coffee estate.

The press notice, which triggered a rally of Eaagads’ share price at the NSE, first appeared in December last year.

It indicated that Waguthu Holdings, incorporated in Kenya as WHL, and Manhattan Coffee Investment Holdings, incorporated in Mauritius as MCIH, had entered into a deal to buy out Socfinaf Company’s 62 per cent shareholding in Eaagads.

Steve Mwagiru was then listed as a director of Waguthu Holdings.

It turns out that Waguthu Holdings and Manhattan Coffee Investment Holdings were fronts for Renaissance Capital, the company that effectively acquired a majority stake in Eaagads.

Patrick Mweheire, the Renaissance Capital Kenya chief executive said in an interview on Wednesday the Russian investment Bank acquired through Waguthu Holdings at least 300 acres of the 487 acres of Eaagads’ “Tatu” coffee estate.

“We bought the whole stake that was previously held by Socfinaf for purposes of developing Tatu City,” said Mr Mweheire.

Mr Mwagiru is known in social circles as a prominent Kiambu coffee farmer and director of Waguthu Farmers Ltd.

Details of the transaction, including valuation of Eaagads’ shares remained scanty and Eaagads managing director, Fabian Philipart, declined to comment on this story. 

The Eaagads stock has been one of the highest gainers in the past 12 months, going up by about 140 per cent to the current price of Sh48.

The share at one time touched a high of Sh75 following announcement of the deal.

The purchase of 9.9 million shares of Eaagads is however estimated to have cost Renaissance in excess of Sh200 million going by the prevailing market price of the stock of Sh20 per share at the time.

With an acre of land in Kiambu area costing at least Sh4 million, it must have cost Renaissance at least Sh1.2 billion to acquire the land from Eaagads.

Buying shares

“By buying shares in Eaagads Renaissance made a kill, it would have cost them a whole lot more to buy the land they acquired,” said the source who was involved in structuring the transaction.

Eaagads’ shift towards property development from coffee farming appears to have found minority investors by surprise, with some claiming exclusion from the company’s dealings.

One of the minority investors who owns close to 1.5 per cent of the 16 million shares in the company says that he is not aware about the shift towards real estate sector, despite being a top player in Kenya’s capital markets.

“We small shareholders are not aware of what is going in the company, I am totally shocked that Tatu City will be built on our coffee plantations,” said the shareholder who requested anonymity saying he will raise the issue at the company’s annual general meeting.

Among the other shareholders in the company are Mrs Viviene Rogerson and Mrs Arbella Illingworth who each owns 11.08 per cent, as per the end of the 2009 financial year.

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