UK investor: Nairobi is where the action is
By Mwaghesha Mkala | June 9th 2016
St Paul’s was originally supposed to have been listed in the Nairobi Securities Exchange under the Growth and Enterprise Market Segment by the end of last year. It is now six months later, what has caused the delay?
The cost of capital rose from about 14 per cent to 25 per cent, and we had to factor that in. Right now, it has gone down. You see, the market has undergone a bit of turbulence, which can be seen with how some financial institutions have been affected. We wanted to be patient and wait for the market to stabilise.
The Capital Markets Authority has also put more stringent measures for companies wishing to be listed, and we are in the process of finalising the requirements. We expect to list in July.
Why would Kenyans want to leave the investment opportunities here and invest in London and other British cities, thousands of miles away?(The firm plans to invest primarily in UK government and quasi-government occupied property)
Nairobi is the financial hub of the region and the pool of wealth located in this country, specifically in Nairobi, is immense. Property is in the DNA of each and every Kenyan, including myself. All we want to do is make these investors diversify their investments portfolios across the globe. London, and other cities like Leeds, Manchester, Liverpool, Newcastle and Sheffield, will afford these investors yields in foreign currency, in this case, a stronger sterling pound. We want them to look outside Kenya.
What is the demographic of Kenyans you are seeking to interest in the properties you want to buy in Britain?
We are looking at institutions mostly. We want to attract investment managers because the capital they have is appropriate for the property we are looking at buying.
We are also attracting high networth individual, because our minimum capital is Sh1 million. Most of these individual already own property in the West, and they are already conversant with these investments. Wealthy African are spending almost £4 million (Sh580 million) on London property every week as they look to snap up exclusive investments in the UK. In short, the investment is not for the man in the streets.
And why Kenya specifically, considering there are many African countries with willing investors?
First, Kenya has very sophisticated property investors. The investment managers handle a lot of money and they understand what the markets are all about. The investors are vibrant and they know what returns they want with their investments.
Secondly, when you look at Nairobi, the city has the potential to pass Johannesburg as the leading financial hub in Africa. Nairobi is where the action is at. The UK property market is estimated to be worth £5.48 billion (Sh794.6 billion). Most of the properties St Paul’s currently invests in and intends to invest in are government and quasi-government occupied.
What is the logic behind that?
The British government is triple A rated. It is politically stable, and unlike other tenants like in the private sector, the government will never fold. To invest in such a tenant who is solid is safe for investors and it offers the best quality of income stream.
St Paul’s is straightforward and ethical, that is why we bank on solid investments. Also, the UK has legal, regulatory and accounting systems that are transparent and consistent with international standards.
With Britain set for a referendum on June 23rd that will decide if it stays in the European Union or exits, what is the speculation on property in London if Britain does exit?
Personally, I do not think Britain will exit. Anyway, the pound will soften in currency against the Euro, and buying property will be cheaper at that particular time, which means higher returns for investors.
But one way or another, the market will eventually stabilise. Also, the fundamental attraction of UK property assets has more to do with the assets themselves than whether they sit in or outside the EU.
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