Property developer Acorn will repay Sh800.2 million worth of bonds at the end of this month, redeeming the securities early using cash from the sale of two hostels.
Acorn secured Sh5.7 billion through a medium-term green bond out of, which the company has drawn Sh4.2 billion to put up several student hostels including at USIU, Chiromo, and Hurlingham.
“The redemption will be effected on or before October 31, 2022 … The total amount of the notes to be redeemed is Sh800.2 million in relation to Project 3 (USIU3, Rowan Properties LLP),” the developer said in a statement.
The early bond payment will lower finance costs for the property developer. The bonds have a fixed interest rate of 12.25 percent.
The upcoming redemption will bring down the value of Acorn’s outstanding bonds to Sh2.6 billion according to Raghav Gandhi who is the managing director of Acorn Investment Management Limited. The property developer had also made an early bond payment last year of Sh775 million. Mr Gandhi said the upcoming bond redemption will be funded from the proceeds of the sale of the USIU3 and Qwetu Aberdare Heights (Rowan Properties LLP) hostels.
The properties are currently held by Acorn Student Accommodation D-Reit, a trust that focuses on the development of real estate assets. The hostels will be transferred to Acorn Student Accommodation I-Reit, an investment vehicle that holds properties for income. Acorn has brought on board investors to the two trusts.
The income-focused trust will be absorbing more hostels from the development arm over the coming years. Acorn is the first to systematically build modern student hostels on a large scale, betting on rising student enrolment and incomes to take up the accommodation spaces.
The rental fee for the rooms ranges from Sh9,900 to Sh14,500 per month, depending on the amenities and size of the space.
Acorn was initially set up targeting institutional investors but has since expanded to include retail investors it set up an investment club dubbed Vuka through which retail investors can invest in the property fund with capital starting from Sh50,000.
The income Reit is not listed but its shares can be traded on the unquoted securities platform of the Nairobi Securities Exchange
The fund is set to acquire more properties to expand its portfolio of income-generating assets.