Property developer Acorn has received Sh1.78 billion from the sale of a student hostel built near the United States International University-Africa (USIU-Africa) to an income-focused real estate fund.
The Qwetu Aberdare Heights hostel, previously held by Acorn Student Accommodation D-Reit, was transferred to Acorn Student Accommodation I-Reit last month.
Raghav Gandhi, managing director at Acorn Investment Management Limited, told the Business Daily that the property was sold at the price of Sh1.785 billion.
The hostel has a 697-bed capacity. Its occupancy stood at 75 percent as at the end of June, recovering from 22 percent a year earlier, according to the property developer.
“The university had initially made the decision to remain largely online in 2021 in light of the Covid-19 pandemic. However, the property has bounced back with the resumption of in-person learning at the institution,” Acorn D-Reit said in its report for the half year ended June.
The firm had received regulatory approvals for the sale of the hostel and part of the proceeds was used to repay debt worth Sh800.2 million last month. The early bond payment has lowered finance costs for the property developer. The bonds redeemed early had a fixed interest rate of 12.25 percent.
The partial debt settlement has brought down the value of Acorn’s outstanding bonds to Sh2.6 billion, according to Mr Gandhi.
The D-Reit borrows funds for specific projects and uses proceeds of the sale to settle the obligations.
The income-focused trust meanwhile will be absorbing more hostels from the development arm over the coming years. Acorn is the first to systematically build modern student hostels on a large scale, betting on rising student enrolment and incomes to take up the accommodation spaces.
The rental fee for the rooms ranges from Sh9,900 to Sh14,500 per month, depending on the amenities and size of the space.
Acorn was initially set up targeting institutional investors but has since expanded to include retail investors after Acorn set up an investment club dubbed Vuka through which retail investors can invest in the property fund.
The income Reit is not listed but its shares can be traded on the unquoted securities platform of the Nairobi Securities Exchange. The fund is set to acquire more properties to expand its portfolio of income-generating assets.