RELIEF

Fusion Capital cuts Flamingo Tower rent by 30%

The developer is considering a 30% rent reduction

In Summary

•The building currently offers leasing and purchase options for people looking for office space within the Upper hill area.

•The real estate developer says property owners can support SMEs through rent concessions.

Fusion Capital CEO Daniel Kamau /COURTESY
Fusion Capital CEO Daniel Kamau /COURTESY

Fusion Capital has extended a  30 per cent reduction on rent to its tenants within its Upper Hill property, Flamingo Tower, amid a tough business environment occasioned by the coronavirus.

The reduction on rent at the 18-floor prime building in Nairobi is effective April 1, to June 30, 2020, for all privately owned business in the premises.

“The board continues to monitor the situation and will advise by the end of the quarter whether the discounted rate shall be enforced further, or the way forward if the country will have resumed normalcy,” management said in a statement on Monday.

 
 
 

The Flamingo Tower board will also enforce the VAT reduction directive issued by President Uhuru Kenyatta, it said, by cutting VAT to 14 per cent on rent payments until further notice.

The building currently offers leasing and purchase options for people looking for office space within the Upper hill area.

According to executive director Samuel Kimotho, the developer is cognizant of the severity of the pandemic and the strain it has put on businesses across the country and the world at large.

“We very much see our leases with our tenants as mutually beneficial partnerships. We, as the board of Flamingo Tower Limited, hope that the discount on the rent will offer some relief to our partners during these uncertain times,” he said.

Fusion Capital CEO Daniel Kamau added: “SMES are really the engines of the East African economies. A lot of the retail and office occupiers are SMEs in nature and as such landlords should play a role in getting them back to trading after the crisis.”

He said property owners can support SMEs through rent concessions.

“It is in the landlord’s interest that these businesses continue surviving and so sharing of rent risk will be important,” Kamau said.

 
 
 

He said property owners will need to appreciate that the stability of the businesses post-crisis will be more critical to them.

Tenants, he said, will also need to appreciate that the landlords have standing costs including paying their employees, securing the premises, paying for water, security companies, electricity, and maintenance of the building, hence 100 per cent waiver over the lockdown period will not necessarily be the way out.

“With rent concessions, you achieve a win-win situation as you ensure business continuity for all parties,” said Kamau.

Meanwhile, the government has been urged to continue honoring payment to its suppliers especially the SMEs. This will ensure there is some cash in circulation.

Other major players including factories and supermarkets have been urged to improve their payment cycles.

Traditionally, manufacturers have had to wait for over 90 days to be paid for supplied goods and services.

Supermarkets are now encouraged to pay their suppliers within 30 days to ensure the producers, manufacturers continue to retain their workforce.

Fusion is a Private Equity firm focused on real estate investment and Fund Management based in East Africa (Kenya, Uganda Rwanda).