STANLIB gets the nod to launch East Africa’s first I-REIT

Keillen Ndlovu, Head of Listed Property Funds for Stanlib

In a bid to align Kenya’s listed property sector with international standards, enhance governance and boost expansion across sub-Saharan Africa, multi-specialist asset manager STANLIB has received regulatory approval from the Kenya Capital Markets Authority (CMA) to launch East Africa’s first Income Real Estate Investment Trust (I-REIT).

The proposed I-REIT, to be listed on the Nairobi Securities Exchange’s Alternative Investment Market Segment, will allow investors to indirectly own a slice of Kenya’s vibrant property market. The trust will invest in a select portfolio of properties and pay clients returns at a pre-agreed rate.

“We are pleased to be the first to list an I-REIT in East Africa as this will boost the property market, improve governance and give investors, an opportunity to invest in the growing property sector,” says Amelia Beattie, Head of STANLIB Direct Property Investments. “This new asset class adds diversity to investors’ portfolios while offering them a secure and regulated investment vehicle,” she adds.

Kenya’s Capital Markets Authority (CMA) granted approval for the issue of the REIT on Friday, 2 October 2015. Acting Chief Executive of the CMA Paul Muthaura said in a statement: “The approval of STANLIB Fahari I-REIT marks a fundamental step towards efforts to deepen and develop the capital markets by facilitating diversification of products available in the market.”

STANLIB’s move to list an I-REIT comes at a time when property as an asset class in Kenya is said to be heading for a boom. According to the latest Kenya Economic Survey 2015, growth in the real estate and property sector is set to continue, driven by demand for new office space and urban housing. The survey notes that high demand for fixed assets, largely property, was a major contributor to a 5.3 per cent expansion in the Kenyan economy last year.

According to Keillen Ndlovu, STANLIB head of Listed Property: “The STANLIB I-REIT will be pioneering the REIT structure in Kenya by providing local and international investors with a safe and a regulated investment structure which also presents a diversification opportunity into a new asset class. This should bode well for the real estate market with price discoveries and more listings in the region.”

A REIT is a collective investment vehicle that allows investors to pool capital, which is then invested in a portfolio of selected properties for a return. Investors can opt for capital appreciation or income from their investment. In Africa, growth in this market has been limited by the absence of enabling legislation. South Africa has traded in REITs for the last 10 years, while Ghana has had access to REITs since 1994 and Nigeria 2007.

“REITs allow anyone to invest in portfolios of large-scale properties the same way they invest in other industries – through the purchase of stock. In the same way shareholders benefit by owning stocks in other corporations, the stockholders of a REIT earn a share of the income produced through real estate investment – without actually having to go out and buy or finance property,” says Beattie.

STANLIB Kenya is the third largest asset manager in Kenya. STANLIB has assets worth over US$2.3 billion under management in East Africa for a wide array of clients including pensions, endowments, parastatals, corporates, governments, NGOs, churches, savings and credit co-operatives and charitable organisations.