Investment firm Britam has acquired a 25 per cent stake in property development firm Acorn as it races to boost its presence in the real estate market.
The deal, whose value was not disclosed, underlines the increased interest of high net worth investors in the region’s real estate market.
Real estate has become one of the fastest growing sectors over the last decade, fuelled by a burgeoning middle class.
Britam will now claim a quarter of Acorn’s profits, with Acorn becoming an associate company of the investment firm.
Acorn is a major player in Kenya’s real estate sector, developing and managing properties for clients such as Coca-Cola East Africa, Deloitte East Africa and Equity Bank.
Britam sees the tie-up with Acorn as a strategy to help it go big in the booming property sector and reduce its reliance on insurance business, which accounts for most of its earnings.
Returns on investment in real estate have outpaced those of equities and government securities, prompting investment firms like Centum to pour billions into the sector.
“We will work with Acorn to realise our ambitions in the regional property market,” said Benson Wairegi, Britam’s chief executive. He added that the firm will provide land and funds while Acorn will undertake developing and managing the properties.
Britam’s asset management arm will mobilise funds from investors and package the properties into instruments such as real estate investment trusts (REITs) through which investors can exit.
This means that Britam will earn investment management fees and profits from the projects besides being entitled to a quarter of Acorn’s profits.
Britam’s net profit rose 28.7 per cent to Sh2.1 billion in the six months to June, helped by capital gains in its equity portfolio. Its share price has remained unchanged over the past one year at Sh10.3.
Acorn is managing a portfolio of 25 projects valued at more than Sh20 billion in Kenya, Uganda and South Sudan, among them the Coca-Cola headquarters in Upper Hill, the Waterfront Gardens Estate on Waiyaki Way and Nakawa Business Park in Kampala. It also holds its own properties.
Mr Wairegi said Britam’s upcoming Sh10 billion property fund will provide most of the cash for the projects it will be undertaking with Acorn.