Retail investors in ILAM Fahari I-Reit who fail to take up the offer to sell their units to the property fund's manager ICEA Lion Asset Management Limited will face an automatic buyout after three years.
The non-professional investors who left holding units after the closure of the offer and delisting of the Reit from the Nairobi Securities Exchange will have their units put into a single nominee account, which will be managed by ICEA Lion on an administrative basis.
The fund’s offering memorandum states that the Trust Deed will be amended to provide a sunset period for the operation of this nominee account, which is set at three years from the closing date of the offer (October 6, 2023).
“The amendment will provide that, in the event a non-professional investor still holds units in the Reit at the end of the sunset period, these units will be automatically redeemed by the ILAM Fahari I-Reit at the prevailing unit price through a redemption process or an alternative method that yields fair value for the investors and is in compliance with regulatory guidelines,” reads the offering memorandum.
“With a clear exit mechanism and the capacity to represent non-professional investors’ interests in the Reit’s AGM, this nominee account approach will ensure that the interests of non-professional investors who are not able to exit during the transaction period are protected and represented.”
Although non-professional investors will find it difficult to exit the Reit due to a lack of active trading before the three-year period once their units are bundled into the nominee account, they will retain other rights such as receiving their proportionate cash distributions (dividends).
ICEA Lion Asset Management, which manages Fahari, is buying up to 36.5 million units from retail investors and delisting the fund from NSE’s main investment market segment.
The Reit will then become restricted, meaning that it will be open to professional investors only (those with holdings valued at Sh5 million or more).
ICEA Lion Asset Management has offered a price of Sh11 per unit, which represented an 83.3 percent of the market price of Sh6 prior to the material disclosure which was made on August 29.
Fahari went public at Sh20 per share in October 2015, but the stock fell to lows of Sh6 before ICEA Lion announced its buyout offer.
After being delisted, the Reit will move to the NSE’s Unquoted Securities Platform, which will allow the professional investors holding the units an avenue to trade them.
Retail investors can either choose to accept the buyout offer or acquire additional units to graduate into professional investors.
Until now, Fahari has been the only Reit to offer retail investors a chance of ownership. Laptrust’s Imara I-Reit, Acorn Student Accommodation D-Reit and Acorn Student Accommodation I-Reit are restricted offers, open to deep-pocketed investors.