Property fund ILAM Fahari I-Reit has begun trading on the Nairobi Securities Exchange's unquoted securities platform, bringing the firm back to the bourse on a restricted market after its delisting from the main investment segment in February.
The Reit’s shares (units) were available for trading on the platform yesterday at a fixed price of Sh11, which represents the price at which a section of minority investors were bought out last year by ICEA Lion Asset Management Limited.
ICEA Lion is also the manager of the real estate investment trust (Reit).
Investors seeking to buy into the Reit are obligated to acquire a minimum of 454,545 units worth Sh5 million in the fund based on the offering's restricted status, where high net worth or professional traders dominate.
The Reit manager expects the price per unit to grow based on the revaluation of the property fund, helping to cure part of the challenges that prompted the fund's removal from the NSE’s main market segment.
“We are at the redemption price and have indicated going forward what will happen in terms of the price. Obviously, there will be an opportunity for price discovery, and that is something we will see over time as the Reit continues to trade,” said ICEA Lion Asset Management CEO Einstein Kihanda.
The Reit's price going forward is expected to be dictated by three valuation methods, including the income, market, and asset approach.
The income approach is based on the discounting of cash flows to determine the intrinsic value, while the market approach compares the volume-weighted average share price of the Reit and the offer price. The asset approach uses the net assets of the business to determine its value.
ICEA Lion began the restructuring of the property fund by buying out minority investors at a premium price and subsequently delisting the security for the NSE. The Reit promoter is also seeking to review the fund's investment portfolio in addition to the price discovery goal.
“What we now have is a platform to undertake the restructuring process in terms of reviewing our property portfolio and building a pipeline of property investments. The restructure will reposition the Reit for growth,” added Mr Kihanda.
ILAM Fahari became the first Reit in East Africa in September of 2015 and listed on the NSE in November of the same year, raising Sh3.6 billion.
The listing of the fund on the Unquoted Securities Platform (USP) is targeted at providing liquidity to the remaining unitholders.
The Reit narrowed its net loss last year by 99 percent to Sh297,642 from a loss of Sh28.3 million previously.
The improved performance was attributed largely to a reduction in the fair value loss on investment property at Greenspan Mall Limited. The market value of its property portfolio fell slightly to Sh2.93 billion from Sh3.11 billion previously.
ICEA Lion Life Assurance and ICEA Lion Asset Management Limited hold a combined stake of 23.87 percent in the fund represented by 43.2 million units.
