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Kenya licences three more real estate investment vehicles

NEWS
By JAMES ANYANZWA | April 9th 2014
Mr Kung’u Gatabaki (right), chairman, Capital Markets Authority and Paul Muthaura, acting chief executive officer.  [PHOTO: FILE/STANDARD]

By JAMES ANYANZWA

NAIROBI, KENYA: The Capital Markets Authority (CMA) has licensed three more Real Estate Investment Trust (REITs) managers to deepen the sub-sector’s participation in the Nairobi Securities Exchange (NSE).

This comes after the regulator approved the appointment of Stanlib Kenya Ltd, Fusion Investment Management Ltd and CIC Asset Management Ltd as REIT managers.

The first two licences for the operation of REIT managers were issued to Centum Asset Managers Ltd and UAP Investments Ltd in December last year.

In a statement Tuesday, the market regulator noted that the applications by the three institutions had satisfied the requirements of the Capital Markets’ Real Estate Investment Trusts and Collective Investment Schemes Regulations, (2013).

A REIT, or Real Estate Investment Trust, is a type of real estate company modelled after mutual funds.  REITs are created to give Kenyans the opportunity to invest in income-producing real estate in a manner similar to how Kenyans invest in stocks and bonds through mutual funds.

REITs may invest in the properties themselves, generating income through the collection of rent, or they may invest in mortgages or mortgage securities tied to the properties, helping to finance the properties and generating interest.

The introduction of REITs is expected to attract property developers to the capital markets to raise funds.

It is also expected that through a higher level of participation in the capital markets by property developers, bank financing would be forced to become more competitive thus helping to further reduce development costs.

A REIT manager, according to the regulations, is a company incorporated in Kenya and licensed by the CMA to provide real estate management services in respect of a Real Estate Investment Trust.

The REIT manager is required to be independently audited and to have a minimum paid up capital of Sh10 million.

MANAGEMENT SKILLS

In addition, the REIT manager is expected to have key personnel with experience and skills to manage the scheme and implement the objectives of the scheme.

According to the Capital Markets’ Real Estate Investment Trusts and Collective Investment Schemes Regulations, (2013), the REIT manager is expected to acquire, manage, maintain and dispose assets of the scheme and conduct development and construction activities where authorised.

The manager is also expected to take all reasonable steps and exercise due diligence to ensure that the assets of the scheme are invested in accordance with the scheme’s guidelines.

CMA is expected to play a strong role in the further development of the real estate sector. The introduction of REITs is seen as viable investment option given the demand for real estate, and the need for additional financial instruments.

It is argued that housing should be given extra incentives to help the Government meet their 2030 Vision goals.

EXPERIENCE

Stanlib Kenya Limited is currently licensed to operate as a fund manager in the Kenyan capital markets, and has managed collective investments schemes for more than six years and has also been involved in property development and investments for over 15 years.

 Fusion Investment Management Limited is also licensed to operate as a fund manager and with the addition of a new REIT Manager license, will develop investment vehicles that provide a viable home for collective investment funds. 

CIC Asset Management Limited is a subsidiary of Nairobi Securities Exchange-listed CIC Insurance Group.

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