- It has set a minimum investment of Sh5 million for those who want to buy.
- The government is seeking to raise Sh1 trillion through private-public partnership (PPP) with Sh311 billion coming from pension funds in five years
Image: PCS
The Local Authorities Pension Trust (LAPTRUST) seeks to benefit from real estate investments and has listed at the Nairobi bourse to tap into this sector.
On Wednesday, LAPTRUST listed the first pension driven Income-Real Estate Investment Trust (I-REIT) at the Nairobi Securities Exchange (NSE).
The ceremony, presided over by President William Ruto is a sign of confidence in funds in the Kenyan capital market, which has experienced sluggish uptake since 2013.
The capital markets regulator introduced regulations to govern the performance of the REITs in 2013 but the investment product has only attracted one listed firm — ILAM Fahari I-REIT – and the Acorn Student Accommodation REIT that trades both as a Development REIT (D-REIT) and Income REIT (I-REIT) on the Unquoted Securities Platform (USP).
Laptrust I-Reit is a close-ended fund that will list 346,231,413 units at Sh20 each placing its valuation at Sh6.9 billion and has set a minimum investment of Sh5 million for those who want to buy.
It will provide investors with a unique opportunity to invest in a diversified portfolio of income-generating real estate assets. This is also expected to spur other pension schemes heavily invested in physical assets to unlock liquidity for the benefit of pensioners.
A closed-end fund’s shares are traded on the exchange but no new units will be created and no fresh money will flow into the investment vehicle.
REITs are used as alternative investment avenues among gold exchange-traded funds (ETF) and derivatives, outside equities and fixed-income securities.
The Kenya Kwanza government is seeking to raise Sh1 trillion through private-public partnership (PPP) with Sh311 billion coming from pension funds in five years (2022-2027), under the Sanduku imitative.
The plan brings together the pensions industry, insurance firms, Saccos, cooperatives and Islamic finance institutions to support the government’s plan for significant infrastructure initiatives and affordable housing with a Sh500 billion investment in the first year, and then distribute the remaining amount over the following four years.
The Sanduku project will prioritise the Railway City Development, Nairobi International Financial Centre, Kinanie Leather Park, and Makongeni Modern Suburb among other public-private partnership initiatives.
Speaking during the launch, Ruto hailed the fund managed by County Pension Fund (CPF) for the bold step to enter the capital markets, urging more to join forces to raise local funds and cut foreign debt.
“Pension funds have traditionally been reluctant to invest in real estate, but with the introduction of innovative asset instruments such as REITs, they can now access the huge potential of property-backed investments,'' Ruto said.
CPF Financial Services Group managing director, Hosea Kili promised investors better returns.
"The enormous potential of this asset class is that it provides investors with both capital growth and rental income which makes it an attractive investment for those looking for steady returns,'' Kili said.
Nairobi Securities Exchange chairman Kiprono Kittony termed the listing of the LAPTRUST Imara I-REIT as a testament to the growing issuer confidence in local markets and the attractiveness of the Kenyan real estate sector as an investment destination.
His counterpart at CMA, Ugas Mohamed said the upscaling of REITs as a capital markets product is quite timely as the product can unlock the potential of the real estate industry.
"REITs offer investors a unique opportunity to invest in the real estate market, including those who may not have the capital or expertise to invest in physical properties,'' Mohamed said.
He added that this is an ideal investment vehicle for Mama Mboga and the Boda Boda community.
The Standard Investment Bank (SIB) is the lead transaction advisor for the LAPTRUST Imara I-REIT.