Acorn, a leading property developer, has rolled out an 8-week roadshow to sell its Real Estate Investment Trusts (REITs) to fund managers.
This promotion, which took off a week ago, provides an opportunity for institutional investors who wish to put their cash into the construction of hostels as well as earn a return. Due diligence by fund managers on the Acorn REITs proposition will take place between 28th September and 19th October 2020.
Placement agents in this transaction will conduct reviews and query sessions until 6th November during which IC reviews and approvals will take place. Fund managers will finally be required to make commitments between 9th-14th November, 2020.
“We expect that the Local Fund Managers will be engaged over an 8-week period, which will commence on 21st September 2020 with the management roadshow presentations. This will be followed by an issuance of a process letter outlining the timeline and steps for securing the commitment of investors in the Acorn REITs,” said the firm in a note.
The minimum investment in Acorn’s Income REIT is 14 Million and KSh 6 Million in the Development REIT, or a total of KSh 20 Million.
Both REITs will initially be unlisted and closed-ended with restricted public offering regulated by the Capital Markets Authority(CMA).
Infraco Africa will be the anchor investor while Acorn Investment Management Limited will be the REIT manager with Co-operative Bank Plc as the Trustee.
At the launch, the Acorn Student Accommodation D-Reit will have an estimated fund size of KSh 4.0 Billion with an expected return of 34.1% and will be traded at the Over the Counter platform at the Nairobi Securities Exchange (NSE) with intended main board listing after a few years.
It will invest in the development of student accommodation properties. The Acorn Student Accommodation I-REIT will invest in income-generating student accommodation properties developed by Acorn Holdings Limited (initial properties) and Acorn D-REIT.
The initial size of Acorn I-REIT will be KSh 4.1 Billion with an expected rate of return of 11%.
Despite the challenging Capital Markets environment in Kenya over the last few years, Acorn insists that the successful launch of its Corporate Green Bond has demonstrated that the demand exists for well structured asset-backed issuances.
“We expect this to grow as part of a general flight to quality and capital preservation by institutional investors,” said Acorn.
In this promotion of its REITs, Acorn has listed Faida Investment Bank, Rennaissance Capital, Kestrel Capital (East Africa) Limited, Standard Investment Bank (SIB) and SGB Securities as placement agents.
It also engaged the Retirement Benefits Authority (RBA) to familiarize them with the Acorn REITs proposition.
RBA allows for a 30% allocation to Listed REITs. However, the RBA Investment Regulations and Policies do not provide for a specific guideline on the allocation of unlisted REITs.
RBA formally communicated that since the Investment Guidelines do not provide for an asset class for ‘Unlisted REITS’, the Acorn REITS will fall under “Any Other Assets” classification, which has a maximum exposure of 10%.
Acorn said its I-REIT will be an opportunity to draw in retail investors in the medium-term and offer them access to stable and consistent returns through participation in the country’s rental housing sector.
In its three year plan, Acorn plans to set up the D-REIT and I-REIT, anchored by InfraCo Africa, where institutional investors will be offered an initial stake with a blended return.
The following year, it will offer dividends to investors once rental growth has been proven. In the third year onwards, I-REIT will be listed and offered to retail investors.
Over the past four years, Acorn- which specializes in student hostels- has deployed approximately US$ 50 million towards the development of three pilot developments in Nairobi.
