Housing Finance shuts down loss-making investment unit

Housing Finance building on December 27, 2019, Nairobi. [Edward Kiplimo,Standard]

Mortgage lender Housing Finance is shutting down its investment unit HF Development and Investment Limited in a move aimed at cutting losses and strengthening liquidity.

The firm made the announcement in a regulatory notice indicating that the development and investment division will now be handled by the parent company at the firm’s headquarters at Rehani House.

“HF Group has commenced the process of executing an internal corporate restructuring involving two of its beneficially wholly-owned subsidiaries, HFC Limited and HF Development and Investment Limited,” said the notice.

“The proposed transaction involves the transfer of business, various investments and liabilities of HF Development and Investment Limited to HFC Limited.” 

The firm further said the proposed transaction is aimed at “strengthening the group’s core activities in line with the group’s current strategic direction.”

Housing Finance Development and Investment was formerly known as  Kenya Building Society and in the eighties was part of major housing developments in Eastlands including Buru Buru and Komarock estates before going dormant in the late 1990s.

In 2012, Housing Finance revamped the unit to undertake real estate projects on behalf of the firm.

Over the past few years, however, the fortunes of the investment division have dwindled in tandem with a slowdown in the real estate sector, stiff competition from new market entrants and a glut in both residential and commercial property.

In 2018, HF Development and Investments Limited posted Sh172 million in losses, almost tripling the Sh60 million loss booked in 2017.

HF Group says HFC will assume certain assets and liabilities of HFDI incurred in connection to the business prior to the transfer date.

“Accordingly and as at the date of this announcement the company’s shareholders and prospective investors are advised to exercise caution while dealing in the securities of the company,” said the notice.

Housing Finance has recorded mixed performance over the recent past. According to latest financial results, the lender reported Sh84 million in profit after tax in the nine months to September 2019, becoming the only commercial bank in its tier to report a loss.  

Liquidity stress

With total assets standing at Sh57 billion against Sh46 billion in total liabilities, analysts say the firm could be experiencing liquidity stress even it continues to deploy new projects.

In October, the company announced the redemption of its Sh3 billion corporate bond issued in 2012 with a seven-year tenor that matured this year.