James Mworia (right), CEO of Centum Investments and Risper Alaro, the Group Finance Director, during the company's Investor briefing held at their Two Rivers offices on July 30, 2024.
Centum Investment Company is planning to set up Kenya’s first dollar denominated income Real Estate Investment Trust (I-Reit) at its Two Rivers special economic zone in Nairobi.
The company said it is still in the process of pooling capital towards the Reit, whose initial investment will be an office tower at its Two Rivers International Finance and Innovation Centre (Trific).
The proposed issuance, if successful, will see Centum join ICEA Lion, Laptrust and student housing developer Acorn Holdings as Kenya’s Reit issuers, just over a decade since the Capital Markets Authority (CMA) 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 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.
“The process of establishment of a dollar I-Reit is advanced and the Trific North Tower is expected to be sold into the I-Reit upon completion of the ongoing capital raise,” said Centum in a presentation on its financial performance for the half year to September 2024.
The Trific North Tower currently has about 16,234 square metres of lettable area, with centum saying that by the end of September, it had been 85 percent leased.
Second office
The company is also constructing a second office tower within the SEZ with lettable space of 76,400 square metres, although it has yet to disclose whether the new property will eventually be sold into the I-Reit.
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.
In June, Trific received 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 to a large scale development.
Trific earlier said that out of the Sh6.1 billion, it would use Sh2 billion to acquire the North Tower and fit it out, with the remainder going towards the second tower development.
