Financiers of the multi-billion shilling Garden City Mall are set to list the shopping complex at the stock market as an exit strategy for top shareholders.
Development consultants for the project, Mentor Management, Monday said the option of publicly listing Garden City Mall through Real Estate Investment Trust (Reits) would provide a wide pool of investors to help founders to earn competitive returns on their investment.
Garden City Mall, expected to be the biggest shopping complex in East Africa on completion, is principally financed by Actis, a private equity fund.
“Reits broadens our ability to exit so we don’t have to just rely on foreign pension funds taking up the investment. When you come to a market like this one, where Actis has a five to 10-year financing horizon, we need to see a way out at the other end with good returns for the investors,” said James Hoddell, the CEO of Mentor Management.
The complex along the Thika Super Highway will have retail, commercial and residential space.
The expected introduction of Reits in Kenya’s capital markets is set to attract more investors in the real estate sector as it offers a viable opportunity to exit route. Residential units at the 30-acre Garden City complex will be sold to individual buyers. According to Mr Hoddell, the country’s real estate sector stands to gain more from the Income Reits (I-REITs) than the developer REITs (D-REITS), which he said is not common in many markets.
Stuart Blandford, the director of the project’s international development consultants Aspire Group (UK), said that the developers will first hold on to Garden City until it matures and the rental income stabilises before making an exit.
“We will do that to make it more attractive to potential buyers,” said Mr Blandford. He, however, said that the exit plan is not fully developed, with the project set to be built in phases and delivery of complete units staggered from the end of 2014 to 2017. Garden City is planned to house a 500,000 square foot shopping complex and 420 residential houses.
On Monday the complex was incorporated as a Vision 2030 project, giving it a private sector partnership status with the government’s development blueprint that seeks to transform Kenya into a middle-income country by the year 2030.
Speaking after the MoU signing ceremony, Actis East Africa managing director Michael Turner said the project will benefit from the branding that comes with such status.
Ground breaking for the project is planned for July 24.