PE fund to invest Sh2bn in housing

OPPORTUNITIES GALORE: An aerial view of Green Park estate in Athi River. Photo/COURTESY
OPPORTUNITIES GALORE: An aerial view of Green Park estate in Athi River. Photo/COURTESY

The Pan-African Housing Fund (PAHF) is about to close its first deal for Nairobi, kick-starting a journey that will see it invest up to $24 million (Sh2.08 billion) in Kenya.

Kenya is one of the six geographies in East Africa that the private equity fund for housing will be serving, besides Uganda, Tanzania and Rwanda among others.

“We are busy concluding negotiations for our first deal in Nairobi and hope to agree final terms before the end of January 2013,” Eton Price, Fund Partner for PAHF at Phatisa – the fund manager – told The Star.

PAHF is seeking to have $80-100 million (Sh7-8.7 billion) under its management by end of the year. It can only invest up to a maximum 30 per cent of this in any one country.

“We have six investors totalling $41.5 million currently and have 12 months to bring more investors to the table, which could result in us managing $80 million of equity for investment. So, this would equate to up to $24 million (Sh2.08 billion) being deployed in Kenya,” Price said.

The fund has set an indicative amount of $5 million (Sh434.3 million) for a single deal.

Real estate developers in Nairobi often cite high costs of land as a key impediment to affordable housing, which will be one of PAHF’s primary targets.

“We are aiming to invest in projects where the sales prices of the units will average around the Sh6-7 million mark,” Price said.

The Shelter Afrique-sponsored fund was designed to respond to the “ever growing housing shortage in Eastern and Southern Africa” and will provide equity and risk capital to indigenous developers.

The first private equity fund focused exclusively on housing development in Africa outside of South Africa, PAHF will invest primarily in affordable and middle-income housing projects and mixed-use developments comprising of housing and aligned commercial developments.

A developer will be expected to contribute at least the value of the land parcel applicable to a particular deal. PAHF will deploy equity into Special Purpose Vehicles (SPVs) that will own the housing projects.

The fund was established in 2011 and Phatisa Property Fund Managers – registered in tax-friendly Mauritius – appointed by Shelter Afrique to manage it.

Investors in PAHF are primarily European development finance institutions, African banks and insurance companies. The fund says a number of its investors have expressed interest to either co-invest with it or provide debt into projects where the deal size is too big for it.

PAHF’s time horizons for investment will not exceed five years, “with clearly defined exit strategies being addressed before investment.”

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