Property developer Acorn Holdings’ student accommodation income Reit (real estate income trust) cut its effective interest rate on debt from 16.3 percent in January to 11.1 percent last month after refinancing its facilities to take advantage of falling interest rates.
Disclosures contained in the company’s semi-annual report for the period to June 2025 show that the Acorn I-Reit opened the year with total borrowings of Sh2.65 billion, which by the end of June had fallen to Sh2.41 billion.
Within the half year, the I-Reit made principal repayments of Sh4 billion, and took on new facilities of Sh3.81 billion. The overall borrowings movement was also affected by interest expenses, accruals and repayments.
The debt was further reduced by Sh400 million in July, bringing the total debt portfolio to Sh1.91 billion, Acorn said in the report.
The effective cost of the debt thus fell to 13.3 percent by the end of June, and further to 11.1 percent in July, attributed by the company to the refinancing actions and access to cheaper capital.
“In the second quarter of 2025, the ASA I-Reit undertook a strategic refinancing initiative following a favourable pricing differential between lenders. One of the new facilities was priced at 300 basis points lower than the existing loan, prompting the Reit manager to act decisively to reduce the cost of debt,” said Acorn in the semi-annual report.
“A further reduction is anticipated in August 2025, driven by a 134-basis point decline in the base rate for the short-term commercial facility, which is expected to lower overall borrowing costs even further.”
Acorn did not, however, provide specific details of the lenders whose facilities were retired, and those advancing it with new loans.
The cut in loan costs was most pronounced on facilities carrying floating interest rates pegged on short term government securities, whose yields have nearly halved over the last 12 months.
Most local floating rate facilities are pegged on the 182-day Treasury bill, which represents the risk free cost of money for the lender.
“This softening in interest rates reflects improved liquidity and lower government borrowing pressures and is expected to reduce financing costs across the ASA I-Reit portfolio, particularly for facilities benchmarked against the 182-day T-Bill,” said Acorn.
T-bill rates now stand at 8.11 percent for the 91-day paper, 8.4 percent for the 182-day and 9.71 percent for the 364-day paper. A year ago, the rates on the three tenors stood at between 16 percent and 16.92 percent.
The fall in rates has tracked several cuts in the Central Bank Rate (CBR) over the period, to the current rate of 9.75 percent from 13 percent in August 2024.
For the I-Reit, lower financing costs frees up more funds for distribution to unit holders, as well as building the kitty for purchase of completed properties from the Acorn student accommodation Development Reit.
The Acorn D-Reit puts up student hostels near various universities using borrowed funds, and uses the proceeds of their sale to settle the obligations.
The I-Reit, meanwhile absorbs the hostels—which are held under the Qwetu and Qejani brands—from the development arm once they are completed, thereafter generating income from rent and utilities that are then distributed as dividends to Reit holders.
