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Raising money the Reits way

REAL ESTATE
By Mwaghesha Mkala | July 21st 2016
Daniel Kamau, Executive Director Real Estate at Fusion Capital. (Photo: Courtesy)

Private equity firm and real estate developer Fusion Capital launched the first D-Reit offer in Kenya last month, with the money raised planned to fund the development of Greenwood City Mall in Meru. MKALA MWAGHESHA talked to DANIEL KAMAU, the executive director of real estate at Fusion about the progress of the offer and the project to be funded

What does the Fusion Capital D-Reit intend to achieve?

The D-Reit (development real estate investment trust) is being driven by Fusion Real Estate Development and we are looking at raising a maximum of Sh2.3 billion for the construction of Greenwood City Mall in Meru. The mall is 25 per cent done. Sh868 million has already been spent on the project and the new cash is Sh1.4 billion. Globally, Reits is a good option to raise funding and give as many people as possible the opportunity to participate in a real estate project. In our case, the least an investor can spend is Sh5 million.

Sh5 million is a lot. Can people form chamas and invest?

Yes. The Sh5 million was set by the Capital Markets Authority but people can invest privately or via Saccos, chamas, and other forms of groups.

Why did you extend the Reit offer from July 15 to July 26?

We approached CMA to have the Reit extended because of interest from investors. The extension will also afford the investors, especially institutional investors, time to go through the investment processes. Others want more time to pool resources.

The Reit offer was to be launched earlier this year but it was rescheduled at the last minute. Why was the launch date changed?

We had to update the offer memorandum to reflect the correct and current information. The CMA is very strict when it comes to the information that goes out to investors and we had to make sure we had crossed all the Ts and dotted all the Is.

Tell us more about Greenwood City Mall, the choice of such a project and its current status

It occupies six acres in Meru town and is set to be the biggest mixed-use project in the area. It will provide retail, commercial and residential services. The shopping mall is 12,000 square metres while the office block is 10,000 square metres and the apartments — two and three-bedroom units — 53 in number. The apartments will go for between Sh11 million and Sh15 million. The project is expected to be completed by the last quarter of 2017.

Why did you choose to invest proceeds from the country’s first D-Reit offer in a project in Meru County instead of a city like Nairobi or Mombasa?

Meru has 1.4 million people with the population growing at a rate of 15 per cent. Urbanisation in the county is also growing at 14 per cent, with the area well served by financial institutions — there are more than 22 banks in Meru — there are so many financial activities.

Investment companies and developers are starting to push more projects to the counties that are far from major towns? Why is that so?

Counties are the future and where the business is. About 70 per cent of the GDP is said to be generated in Nairobi but with devolution and the decentralisation of resources to counties, that figure is going down. The opportunities that are in the counties are immense and entrepreneurs and institutions like ours are now diversifying their portfolios to cover all counties.

What lesson has Fusion Capital learnt from sourcing funds through Reits?

It is a very painful process that requires a lot of patience. We started this process two years ago and we only got approval the other day. Nevertheless, it is a great avenue to raise funds.

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