BRITAM's asset management subsidiary has raised its investment in real estate by building an additional floor at its flagship commercial building Lang'ata House located in a prime spot at Wilson Airport.
Britam Asset Managers bought the building three years ago at $4.6 million (Sh468 million) for investors seeking property investments whose returns are denominated in dollars.
“We are working on a pipeline to deliver similar investments that are dollar-denominated to shield investors from currency fluctuations. As a group, property remains an area of key focus as we diversify our portfolio to reduce risk and innovatively meet customer needs,” said Britam Holdings MD Benson Wairegi.
Wairegi said the additional floor is one of the value addition initiatives meant to enhance the property's returns to investors and grow the value of the investment.
Lang’ata House also has hangar space. The additional floor cost Sh43.3 million (US$425,000). It is expected to generate annual yields of more than 11 per cent to investors, up from the current nine per cent, Britam Asset Managers said.
The company had initially projected a rental yield of eight per cent for the extra floor. The value of the building, the company projects, will appreciate to Sh600 million from Sh550 million currently, once the new floor is complete.
Britam Asset Managers CEO Kenneth Kaniu said the company will increase its investments in real estate which has less volatility.
"Real estate investments enhance portfolio returns and introduce an element of portfolio stability. At the end of the day, we would like to deliver strong, long term, credible returns to our investors,” Kaniu said.
Investment management companies are reducing their exposure in company stocks and channeling more funds to real estate which has more stability in returns.
A report by investment management firm Cytonn stated that investors' funds were best placed in real estate, which had a 29 per cent growth last year.
The Cytonn Investments 2016 Outlook Report indicated that last year, property investors reaped handsome returns that stood at 29 per cent compared to 10-year Treasury Bond Yield which had an interest of 12.3 per cent, securities 10 per cent and the 91-day Treasury bills 9.6 per cent.