Stanlib Kenya, a financial service provider, launched its much anticipated Real Estate Investment Trust (REIT) that would offer billions to investors. The move was a first for the Nairobi Securities Exchange (NSE), it mainly targeted individuals interested in investing in the real estate sector. Moreover, even with limited funds, an individual could still invest at the price of Sh20 per share. The introduction of REITs in the Kenyan property market came at the peak of the sector when developers gained profits from developing, buying, flipping residential and commercial property in Nairobi’s satellite areas.
The REITs firm promised Kenyans that they would have a chance to be part of the real estate that was ranked in billions. “We handle the due diligence and present a bundled offer of billions to investors as a lot of individuals are curbed in investing in real estate due to the high capital investment required,” one of the managers told the journalist. Besides, the firm would adopt a scientific approach of analysing supply and demand that would help ensure projects yield high returns and have a quick exit rate.
In 2017 Stanlib’s Fahari i-Reit saw its price decline by 13.4 per cent closing at Sh10.30 down from Sh11.90 at the beginning of 2018 and shedding 50.5 per cent from its listing price of Sh20.80 in November 2015. The price of the REIT remained low because of poor dividend yields and negative market sentiments. Being the first Reit, it left investors with losses while the second REIT attempt Fusion D-Reit failed. The disappointment of Kenya’s first Real Estate Investment Trust left developers and investors with billions in losses.
Stanlib Kenya finalized a transaction to sell its business including the Fahari i-Reit to ICEA Lion on February 29, 2020. ICEA is assuming all responsibility of Stanlib’s operation that includes asset management and the running of the property fund. South Africa -based insurer Liberty Holdings decided to sell Stanlib to ICEA with the transfer having been effective and implemented on 18 May 2020. “REIT managers have to align their interests with those of investors to deliver higher returns of billions, thus boosting investor appetite for the REIT product,” said Cytonn.
The mortgage lender Housing Finance Group (HF Group) announced it would be closing down its investment unit HF Development and Investment Ltd (HFDI). The move aims to cut down losses and strengthen liquidity. The competitiveness of the real estate sector with the entry of new players made the business unsustainable resulting in margins falling due to low demand. In 2018, HFDI posted a loss of Sh 172 million surpassing the Sh 60 million loss booked in 2017. According to the recent Financial Reports, HF Group obtained a 77 per cent decline from Sh 183 million in 2017 to Sh 41 million in December 2018.