Markets & Finance

Hostels maker Acorn diversifies into apartments


Acorn Group CEO Edward Kirathe at a past event at the Nairobi Serena Hotel on February 8, 2023. PHOTO | DIANA NGILA | NMG

Student hostels developer Acorn Holdings is planning to establish a new real estate investment trust (Reit) to venture into the development of apartments for young urban professionals.

The firm, which in 2021 raised Sh2.1 billion from investors in the debut Reit that had targeted Sh7.5 billion, now says it will return to the market for another issuance as it maintains its practice of funding projects with a mix of debt and equity.

Acorn currently has 11 properties with a capacity for 11,013 beds for students —either under development or operational—but says it now wants to transition those leaving colleges to new apartments suitable for young professionals.

Read: Acorn taps Sh6.7bn Absa loan for 12000-bed student hostels

Chief executive at Acorn, Edward Kirathe, told the Business Daily that the property developer could float the Reit in the next 12 to 18 months, depending on the timings of clearance from the Capital Markets Authority (CMA).

“We will soon announce a new Reit focusing on young urban dwellers. We are still working on it. The Reit size will probably be bigger or the same size as the first one because we have to build up the assets. In the next 12 to 18 months, we are likely to be ready,” said Mr Kirathe.

Acorn currently concentrates on developing students’ hostels under the brands Qwetu and Qejani and currently serves students from over 140 colleges and universities.

Mr Kirathe, whose firm recently took a Sh6.7 billion Absa Bank Kenya loan to finance part of the Sh11 billion students’ hostels projects with a combined bed capacity of 12,000, now wants to tap into the growing market of young professionals.

“Once students leave Qwetu or Kejani, the one single question they keep asking us is where they move to because there is no decent accommodation that is built for their needs,” said Mr Kirathe.

Official data shows the student population in post-secondary education institutions including universities and vocational centres crossed the one million mark in 2020 —a 31 percent growth in five years.

The over one million population of students in post-secondary school institutions provides a rich pool for Acorn’s students’ hostels projects as well as the planned apartments for young professionals.

Acorn will have to pick a promoter and a transaction advisor to help in structuring the Reit. Its previous Reit was offered at the Nairobi Securities Exchange under the unquoted securities platform (USP).

The firm offered investors an opportunity to invest in two Reits –one focusing on developing student hostels (D-Reit) and the other one offering investors income from completed units (I-Reit).

Read: Acorn invests Sh3.6bn in 3 new student hostels

Registered Reits are exempted from paying income tax, in order to increase issuance at the capital markets.

The law also requires them to distribute at least 80 percent of profits to unit holders to attract investors although the incentives have failed to drive the activity of the asset at the exchange which still remains low.

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