Markets & Finance

Nairobi bourse eyes new REIT listing as segment uptake rises


The price of ICEA Lion’s listed Real Estate Investment Trust (Reit) Fahari has fallen significantly. PHOTO | SHUTTERSTOCK

The Nairobi Securities Exchange (NSE) expects to list a new real estate investment trust this year, highlighting the growing interest in funds as an alternative investment in the Kenyan market.

Sources say the REIT will come after the listing of the Laptrust Imara I-Reit by pension scheme Laptrust, which will hold seven properties.

Laptrust I-Reit is a close-ended fund that will list 346,231,413 units at Sh20 each placing its valuation at Sh6.9 billion and has set a minimum investment of Sh5 million for those who want to buy.

Read: Laptrust sets Sh5m minimum investment in fund

A closed-end fund’s shares are traded on the exchange but no new units will be created and no fresh money will flow into the investment vehicle.

REITs are used as alternative investment avenues among gold exchange-traded funds (ETF) and derivatives, outside equities and fixed-income securities.

They allow investors with less capital to invest in large-scale commercial, residential and industrial properties without holding large sums of money.

In Kenya, they are traded at the exchange platform where Ilam Fahari-I REIT is listed and the unquoted securities platform (USP), an over-the-counter market, where Acorn Holdings’ two property fund - income and development REITs are traded.

The new listings are expected to build the supply side at NSE and raise market activity and liquidity.

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.

Ilam I-REIT gained 4.15 percent last year to close at Sh6.52, having traded 4.75 million shares with a market cap of Sh1.179 billion. Last month, the share declined by 7.4 percent to Sh6.04, trading 74,500 shares and market capitalisation dropping to Sh1.093 billion.

NSE chief executive Geoffrey Odundo has still expressed optimism on the alternative, pointing to the possibilities of new listings and expected good performance.

“For Ilam- I REIT the turnovers were not as good. The price is way below the net asset value and didn’t see very much activity there (last year). But of the unquoted securities, there was very much activity and traded a turnover of Sh1 billion since the platform was launched it. REIT will continue to be a very good space for us to operate on,” he said in an online platform.

Read: 257 retail investors buy into Acorn's property fund

“We are constantly looking at the REIT market and see how we can incentivise it more... It’s a market that is building up and I think this year we will see quite a number of REITs coming through... We have talked to service providers to ensure they provide competitive pricing for the consultancy services and it’s not expensive to do REITs…As more of advisors, trustees and custodians come in we will see issuance or REITs getting more affordable going forward.”

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