Nairobi bourse expects to list two new REITs next year

Nairobi Securities Exchange expects to list two new real estate investment trusts (REITs) in the first quarter of 2016 after the first was launched last week, the chief executive of Kenya’s bourse said on Friday.

Geoffrey Odundo told Reuters that the listing of Kenya’s first REIT on November 27 would encourage others to follow, offering retail investors a new vehicle on the bourse to invest in East African nation’s booming property sector. “We are certain there will be an increased level of interest (in REITs),” Odundo said.

He said two potential issuers “are at very advanced stages. We are certain that they should be coming through in Q1.”

REITs own or finance real estate that offer investors both income and capital appreciation. Until now, the only way for a listed firm to invest in the sector was through a single mortgage firm or three cement makers that supply construction.

The NSE held a ceremony on Friday to formally launch the first REIT, known as the STANLIB Fahari I-REIT, a vehicle worth Sh3.6 billion that is invested in a portfolio of properties that generate rental income.

Units in the I-REIT, which attracted 6,000 mostly small scale investors, were listed at Sh20 each last week, initially climbing to a high of Sh23.75 on the first day before closing at Sh20.50 on Thursday. Kenya sees itself as a financial hub for the region and officials have been encouraging new investment products in order to deepen its financial markets.

The new vehicle was sponsored by STANLIB Kenya, a subsidiary of Liberty Holdings. The fund had sought to raise more than the Sh3.6 billion it achieved. The Fahari I-REIT offers investors a chance to grow their capital through a vehicle that is traded and earn a share of net income. As an incentive to investors, it is exempted from the 30 percent corporate tax rate on gross profits.

Odundo said the government had committed to fast-track validation of title deeds by creating a department focused on commercially-related land searches and registrations.