Listed property fund ILAM Fahari I-Reit is still waiting for approval of its restructuring by the Capital Markets Authority (CMA), according to the manager of the Nairobi Securities Exchange-listed trust.
The property investor is run by ICEA Lion Asset Management which says the proposals to restructure the business are being reviewed by regulators.
Fahari recently made a loss and has low returns, an outcome partly attributed to a high expense ratio. Property expenses take up 39 percent of the fund’s rental income.
“We are still engaging with regulators as we had indicated on our commentary that there were certain engagements that were involving the regulator that is still going on. Once we have those we will be able to progress further,” said Einstein Kihanda, the chief executive of ICEA Lion.
“Unfortunately because we are in a closed time, it’s not possible for me to go into the details with regard to the issues but we will be able to announce this month the performance of the REIT and insights into what we are engaging with the regulator.”
The Reit has multiple properties and has in the past considered raising more funds to expand its portfolio with an aim of lowering expenses as a share of income.
The proposed restructuring led to the postponement of Fahari’s annual general meeting which is usually held in April. The property fund’s profitability has been weak, resulting in a return on net assets of less than five percent.
The Reit reported a net loss of Sh123.9 million in the year ended December 2021, reversing a net profit of Sh148 million the year before. The performance was attributed to lower rental income after Tuskys supermarket –the former anchor tenant at the flagship Greenspan Mall— defaulted and was evicted.
There was also reduced rent collection from the rest of the tenants at the shopping complex. ICEA Lion recently became a significant shareholder in the property fund, making it both an investor and manager of the Reit.
The asset manager last year bought five million units (shares) with a current market value of Sh30 million. ICEA Lion said the share purchases were normal trades on the NSE and reflected prevailing market prices.
The investment saw the asset manager become the eighth largest shareholder of the Reit with a 2.76 percent stake.