Acorn secures Sh23.6bn US funding for affordable student housing

This is in a deal with the U.S. Development Finance Corporation.

In Summary

•Funding will go towards the development of 35 affordable student housing units in Kenya that will deliver an additional 48,000 student beds under Acorn’s portfolio.

• Acorn will use the funding to secure over $380 million and will also crowd in over $315 million financing from the Kenyan capital markets.

Qwetu student hostels/HANDOUT
Qwetu student hostels/HANDOUT

Acorn Holdings Limited has signed a $180 million (Sh23.9 billion) financing deal with the U.S. Development Finance Corporation (DFC), for the development of affordable student housing in Kenya.

President William Ruto witnessed the deal during the US–Kenya Business Forum, hosted by the US Chamber of Commerce at their headquarters in Washington D.C., in what now becomes Africa’s largest affordable student housing deal.

Acorn is the largest developer of Purpose-Built Students Accommodation (PBSA) in the continent, with the facility further reinforcing its profile, by enhancing its affordable student housing portfolio and helping close the gap in quality student housing in Kenya.

Particularly, the financing will lead to the development of 35 new affordable student housing units in Kenya, which will offer a package of key essential services and amenities at an affordable monthly rate to students.

Upon completion, an additional 48,000 beds will be added to Acorn’s portfolio,taking the total bed offering to students in Kenya to 69,000, while creating over 50,000 direct and indirect employment opportunities.

Up to $90 million (Sh11.9 billion) will go to the Acorn Student Accommodation Development-Real Estate Investment Trust (ASA DREIT) for use in the construction of the new PBSAs.

This amount will be recycled up to two times during the term of the loan, facilitating up to $270 million (Sh35.8 billion) in financing through redeployment.

The remainder of the funds totalling $90 million will go towards the Acorn Student Accommodation Income-Real Estate Investment Trust (ASA I-REIT), to finance the acquisition of stabilised Purpose-Built Student Accommodations from the DREIT.

The financing will be repaid over 18 years and shall provide a long-term and sustainable financing solution for Acorn.

Further, Acorn will use the financing from the DFC to secure over $380 million in Kenya shilling equivalent arranged by Stanbic Bank Kenya (part of Standard Bank Group).

Additionally, the financing will crowd in over $315 million (Sh41.7 billion) financing from the Kenyan capital markets, including domestic pension funds and asset managers, for a total blended financing of $700 million (Sh92.8 billion) over the 18-year life of the transaction.

Speaking at the signing ceremony in Washington D.C. on Friday, Acorn Holdings CEO Edward Kirathe said: “We are immensely proud to be signing this landmark deal with the U.S. Development Finance Corporation for the expansion of our affordable student housing offering in Kenya, which accords Acorn the opportunity to continue contributing positively to Kenya’s affordable housing agenda.”

“By being Africa’s largest-ever deal of its kind, it asserts Acorn’s commitment to the development and provision of safe and affordable housing for students in Kenya, whilst confirming the tremendous confidence the US DFC has in Acorn and by extension, the opportunities in the country.”

As part of its sustainability programme, all projects under the facility will carry the International Finance Corporation’s Excellence in Design for Greater Efficiencies (IFC EDGE) ADVANCED Certificate– contributing 40 per cent reduction in energy and water utilisation, as well as materials with less embodied energy compared with conventional buildings.

The financing deal involves MIDA Advisors, global advisory firm specialising in facilitating institutional investments and trade in Africa and other emerging markets, as lead arranger and advisor.

Stanbic Bank is the joint lead arranger and lender, Prosper Africa and USAID are providing technical assistance support, and Morrison Foerster, HillStern & Morley, IKM Advocates, and TripleOKLaw Advocates are legal advisors.

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