PERIOD: MARCH 21 to 27, 2016

Counties new real estate magnets for savvy investors

21/3/2016 :The Business daily, Page 16 -17

• Focus shifts to the devolved units as new growth hubs with companies cashing in on untapped regional opportunities.
• This is after crown paints opened a Ksh 400 million plant in Kisumu, signaling how the growing county construction industry could act as a magnet to attract other international manufacturers.
• The growth of the real estate sector in the lake side city has also been attributed to the development of roads in the region.
• In 2014 half acre plots in Nyamasaria along Nairobi road were going for between Ksh 2 million to 3 Million. A similar plot today.
• The Riat hills in Kisumu are also attracting developers such as Sweden firm  Coromandele Investment limited, which plans to put a gated residential community.

Fusion earmarks Sh 3.7 Billion for landmark property in Meru

21/3/2016 : The Business Daily, Page 18

• Real estate developer Fusion Capital announced that cash raised from its development Real estate Investment Trust (D- REIT) would be used to develop landmark property in Meru.
• Located in a prime address within Meru town where construction has started, the Ksh 3.7 Billion Greenwood city is a mixed use development that will comprise a shopping mall, and an upscale office block and apartments.
• The project is to be developed and sold within 36 months at a yield to investors.
• Fusion capital is moving fast to ensure the D- REIT of a minimum value of Shs 1.15 Billion and an upper threshold of Shs 2.3 billion. Read more

A sad tale of Neglect

23/3/2016 :The Standard,Wednesday Life, Page 6

• Nairobi’s pipeline estate, located in Embakasi South is on spot after county land and Urban Planning Chief executive Chris Khaemba raised the flag over its surging population and rapidly diminishing infrastructure.
• People are drawn to this area because of its relatively affordable housing, thus private developers rule the Pipeline roost, with haphazard construction and no protective measures to protect civilians from falling debris and dust.
• Challenges in this area include:
  • Inadequate Water
  • Poorly constructed balconies which are dangerous to playing children
  • Shoddy garbage disposal
  • Rampant prostitution
  • Noise pollution from bars and mushrooming makeshift Pentecostal churches.Read more

NCA planning to monitor all construction works online

24/3/2016 :The Daily Nation, Dn2, Page 42- 43

• The National construction Authority (NCA) is developing an online information system that will be used to track all construction sites in Kenya to weed out unregistered and non – compliant projects.
• The authority will use the geographic Information system (GIS- based) construction site mapping system (CSMS) to monitor construction projects online, while the developers can upload key information  on the project as it progresses.
• The system will allow members of the public to view all the ongoing construction sites in an area, choose from a particular project and see all the relevant information  about it.

Power now to come cheap to those near transformers

24/03/2016 :Daily Nation, DN2, Page 42-43

• Home owners seeking electricity connection and are within 600 meters of a transformer will now pay Ksh 15,000.
• The bulk of homes have been paying more than the in initial subsidized rate of Ksh 35,000 after a Ksh 2.7 billion state subsidy expired.
• The drops will come as a relief to aspiring home owners in urban areas where the construction of buildings attracts multiple regulatory levies.
• Some applicants in urban areas have been paying up to Ksh 100,000 to be connected to the national power grid, despite being near a transformer.
• The government has a separate arrangement to connect homes in villages at Ksh 15,000 under the Last Mile connectivity project.

Investment Vehicles in Real estate

24/03/2016 :Daily Nation, DN2, Page 42-43

• An aspiring real estate investor can use a number of strategies to gain a foothold in the industry, they include:

1. The Reit way

A Real estate investment Trust (REIT) is an indirect way of investing in real estate and ideal for those who do not wish to be actively involved in the management of the property.

The returns in REITs are normally low since they involve less risk, but REITs are recommended for people who want to invest in property with minimal capital.

2. The build, Operate and Transfer method

In this case, the owners of prime land find themselves disadvantaged in that they do not have enough capital to optimally develop their land.

In this case the land owner partners with venture capitalist who builds on the land enter into an agreement where the venture capitalists  operates the property for a number of years to recoup his investment, after which the ownership of the property reverts to the land owner.

3. The “Chama” Approach

Operates in the power of numbers. In an investment group, it helps to have a diverse membership ranging from lawyers to accountants and real estate agents. This will provide you with a ready pool of crucial expertise and save you a fortune on consultation fees.

4. Property Flipping

Flipping involves buying real estate with the intention of selling it within a short time (Usually a few weeks) for profit.

To reap maximum financial gain from flipping, an investor needs to understand the imperfect nature of the property market. I.e. while an investor can find a land owner willing to sell his land for Ksh 2 million shillings, he or she can resell the same land for Ksh 5 million the very next day.

5. Wholesaling

In real estate circles, wholesaling refers to the practice where spectator spots a real estate deal and enters into a binding contract to acquire the property from the seller after putting down a little or no money at all.

The spectator then sells the contract to another buyer. The difference between the contracted price and the amount paid by the buyer constitutes the wholesaler’s profit.Read more

Eastern bypass to get 250 go-downs

24/03/2016 :Daily Nation, DN2, Page44

• Vikken Thirty Industrial Park Ltd is looking to build 250 go-downs on 48 acres of land along the eastern bypass as the industrial belt that is sprouting along the route gathers pace.
• The proposed project has the overall objective of constructing an industrial complex of 250 go-downs that will provide space for various industrial and manufacturing activities as well as storage and finished goods.
• Support facilities will include a police station/ Chief’s office, a health centre and a restaurant.Read more

CMA issued a directive Compelling Home Afrika to refund investors Kshs 300 mn raised through a corporate bond in 2014

20/2/2016 : Cytonn weekly report no. 12

• According to a Standard digital article, the Capital Markets Authority has ordered Home Afrika to refund amounts raised from a bond issued in 2014, citing that the company was in contravention of the terms of approval through marketing the bond as a partially secure bond and purporting to revise the coupon rate to 17%, to make the bond more appealing to potential investors.
• Home Afrika, the only property development company listed on the NSE, issued the 5-year bond aiming to raise Kshs 900 mn with a return rate of 13.5%. The issue was however unsuccessful as it did not meet the minimum subscription level of Kshs 500 mn, managing to secure Kshs 301 mn after revising the return rate to 17%. The revised rate was an indication of investor’s perception of Home Afrika’s instruments as highly risky.
• Proceeds from the issue were expected to fund three real estate projects, namely Migaa in Kiambu, Lakeview Heights in Kisumu and Llango in Kwale. However, the undersubscription caused delays, forcing the company to obtain a Kshs 500 mn facility from commercial banks. Home Afrika has since recorded a 90% fall in Profit after Tax from Kshs 80 mn in 2013 to Kshs 9 mn in 2014, and has issued a profit warning for the year ended December 2015.Read more

State to fund Local Builders

20/2/2016 : Cytonn weekly report no. 12

• The Government has proposed to fund local contractors to the tune of 20% of project cost for large projects as the industry faces a surge of South African and Chinese firms. The National Construction Authority has noted that Chinese Companies have taken over most multi-billion projects in Nairobi with only 22 local firms registered as category one providers (contractors capable of handling projects of above Kshs 500 mn). 70% of Kenyan firms are registered as fit to handle small projects that are mostly found in counties.
• In order to support local contractors, the National Contractors Development and Guarantee Fund will enable them compete for multibillion projects by providing them with a project guarantee of up to 1/5th of the project costs. The fund will also enable them to lease equipment at a fee to compete with well-endowed foreign firms.Read more