FINANCING

Cytonn seeks D-REIT to diversify real estate funding

In Summary

•A Real Estate Investment Trust (REIT) is a company that owns or finances income-producing real estate

•The company has traditionally relied on private sector funding, which while easier to access, has been more expensive

Cytonn Investment chief executive officer Edwin Dande with Cytonn head of private equity Shiv Arora during the release of the Q3 financial report in Nairobi on December 4,2017
Cytonn Investment chief executive officer Edwin Dande with Cytonn head of private equity Shiv Arora during the release of the Q3 financial report in Nairobi on December 4,2017
Image: Enos Teche

Cytonn Investments is looking to raise Sh2 billion to finance part of its housing projects through a Development Real Estate Investment Trust.

The alternative investment management firm said it has filed an application with the Capital Markets Authority (CMA), to register the DREIT for the first phases of two of its real estate projects, The Ridge in Ridgeways, and RiverRun Estates in Ruiru.

“The capital raise is in line with Cytonn’s strategy, through which landowners connect with institutional capital and development capability onto one platform,” real estate investment analyst at Cytonn Bryan Gitia said.

A Real Estate Investment Trust (REIT) is a company that owns or finances income-producing real estate.

Stanlib Income-Real Estate Investment Trust was the first to be issued in Kenya whose public offer to the investor market was on October 22, 2015.

While I-REITs focus on income generating property, D-REITs focus on construction and development of real estate.

This means D-REITs acquire land, develop it and sell at a profit as I-REITs may acquire already developed property or in some cases decide to develop property.

There are currently five companies licensed to act as REIT managers by the CMA including Centum Asset Managers Limited, UAP Investments Limited, Stanlib Kenya Limited, Fusion Investment Management Limited and CIC Asset Management Limited.

The offering is being advised by Standard Investment Bank- the transaction advisor, KN Law LLP handling legal advise, Baker Tilly Merali’s (reporting accountants), Housing Finance (trustee) and Cytonn Asset Managers Ltd as the REIT manager.

Cytonn draws funds from four main sources including foreign and local institutional investors with a 40 per cent contribution, high net worth investors at 40 per cent while diaspora and while cooperatives (small scale) investors cater for 15 and five per cent of the firm’s funds.

The company has traditionally relied on private sector funding, which while easier to access, has been more expensive.

The firm, which was established in 2014, has also been looking for the right time to float shares at the Nairobi Securities Exchange(NSE) ahead of a planned cross-listing at the London bourse.