Companies

Valuation of Britam Tower falls Sh1.1bn on low occupancy

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Britam Tower. FILE PHOTO | NMG

Britam Group #ticker:BRIT has cut the valuation its 32-storey tower in Upper Hill by Sh1.13 billion on the back of occupancy levels falling below half.

The diversified investment firm says in latest disclosures to shareholders that the tower, which was completed in 2017, is currently 47 percent occupied.

Britam cut the valuation of the building from Sh8.04 billion in 2019 to Sh6.9 billion, coming on the back of Covid-19 disruptions that hurt demand for office spaces as firms turned to remote working to lower risks of contracting the virus.

“Britam Tower is currently at 47 percent occupancy rate,” the firm said in response to questions by shareholders in recent annual general meeting.

The figure is lower than the 98 percent occupancy recorded by UAP-Old Mutual Tower—a skyscraper completed mid-2017 and located in the same area.

The low occupancy level on Britam Tower translates into millions of shillings of lost rent despite the firm having to incur maintenance costs to keep the building attractive for potential tenants.

Britam has in reaction to the low occupancy said it will now stop new property developments and instead focus on property management to reduce its exposure to financial risks and lift performance.

“In the last few years, the performance of the commercial and residential housing property in Kenya has been negatively affected by excess supply amid depressed demand,” says Britam in annual report.

“The impact has been low occupancy levels, low rental yields, and consequently revaluation losses depressing profitability.”

Located in the upmarket Upper Hill area, the ultra-modern tower has a total lettable space of 350,000 square feet with 1,000 parking bays and was eying diplomatic missions, multinationals, private companies, and financial institutions.

Monthly office rents in Nairobi’s prime areas dropped by Sh19.40 per square foot to $1.12 (Sh120.71) in the first quarter of 2021 in an environment of remote working, Knight Frank said in a report released in June.

Britam last year booked Sh9.1 billion net loss from a net profit of Sh3.5 billion in the previous year due to underperformance of the asset management class and valuation loss from property investments and equities.

Net loss from investment property— which comprises rental income, fair value movements in investment properties and investment in property funds— worsened by 97 percent to Sh1.5 billion due to Sh2 billion revaluation losses.