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Investing in distressed assets risky, says Fusion Capital official

Fusion Capital executive director of real estate James Maclean. FILE PHOTO | NMG
Fusion Capital executive director of real estate James Maclean. FILE PHOTO | NMG 

A private equity has termed investing in distressed assets risky. Distressed assets, which are put on sale usually at a cheaper price because the owner is under pressure to sell, should sometimes be avoided, says Fusion Capital executive director of real estate James Maclean in a new market report.

Mr Maclean advises investors eyeing such property to have an understanding of the market and resist the urge to make bets. They should also look out for true value opportunities and focus on yield and an exit.

Fusion African Monitor (FAM) notes that the prolonged 2017 elections led to low investor confidence, resulting in stagnation or falling of land prices in many of Nairobi’s suburbs.

The report further says that banks with debt in recently completed development projects — ranging from private houses to malls — are reluctant to restructure to longer-term asset financing because they want to force the landlord to sell at a discount and repay the loan.

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Also, funding committed to on-going developments which had not yet started to drawdown is being taken off the table.

The report, however, says that private lenders and non-bank financial institutions who are not constrained by the rate capping law are well placed to refinance these opportunities at low risk even with high interest rates.

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