Centum Investment Company will partially finance a new office tower at its Two Rivers special economic zone using proceeds of a dollar-denominated income Real Estate Investment Trust (I-Reit) that is being issued before the end of the first quarter of this year.
The company said the new tower at the Two Rivers International Finance and Innovation Centre (Trific) will have 22 floors, with lettable space of 76,400 square metres.
Centum’s Reit is targeting Sh5 billion ($37.3 million), whose first charge will be acquisition of an existing office property within the SEZ, known as the Trific North Tower, which has 16,234 square metres of lettable area that the company said is fully occupied.
“Part of the proceeds will be rolled over to develop the next tower,” said Trific SEZ chief executive officer Brenda Mbathi.
“The planned I-Reit is backed by fully dollar-denominated rental income, implying limited foreign exchange risk for investors seeking a dollar-denominated return.”
Centum, which had stated its intention to float the dollar Reit at the beginning of last year, will be paying investors a dollar return of about eight percent on the facility.
The company is planning to issue long-term, dollar-based leases with guaranteed annual escalations on property to be developed using the proceeds of the Reit, in order to achieve a currency match between the investment and returns.
Trific, which was given the SEZ licence in June 2023, sits on 64 acres or more than half of the two Rivers development’s total area of 106 acres, and has grade-A offices, residential, hospitality, and social amenities.
In addition to the North tower, the zone also covers Victoria Towers, the Holiday Inn Hotel, and housing projects known as Mizizi, Riverbank, Cascadia, and Lofts. The Two Rivers Mall, however, lies outside of the economic zone.
Centum mainly targets global service exporters, including Business Process Outsourcing (BPO) firms, tech companies, shared services centres, and professional services entities for the special economic zone.
In June 2024, Trific bagged funding worth $47.5 million (Sh6.14 billion) from Africa-focused fund manager Vintage Capital to finance the construction of the new tower, as well as furnishing the existing one.
The funding came under what is known as a mezzanine debt, which is a hybrid of debt and equity that can also come with an added option to convert the debt portion into equity. Such loans are usually given to established companies, rather than startups, and offer flexible terms that are suited for large-scale development.
Through its proposed Reit issuance, Centum will join ICEA Lion, Laptrust, and student housing developer Acorn Holdings as Kenya’s Reit issuers, just over a decade since the Capital Markets Authority introduced the product in the Kenyan market.
Income Reits are structured to purchase and hold property for rental income. They are mandated by the law to distribute to unit holders at least 80 percent of their net profits as a dividend, which is exempt from taxes.
In Kenya, the existing Reits are exclusively marketed to a class of buyers known as professional investors, who are high-net-worth individuals or institutions whose minimum investment in the Reit is Sh5 million.
By issuing the I-Reit in dollars, Centum is targeting external investors who may have been wary of a shilling-denominated Reit on fears of exchange losses when converting the income distribution.
