Centum Real Estate, a subsidiary of the NSE-listed Centum Investment Company, has opened a Sh 4bn project bond issue to finance its ongoing housing projects. The Capital Markets Authority-approved paper opened on November 13, 2020 and is set to close on December 2, 2020.
The bond will be secured by the projects, with deposit collections flowing into a sinking fund. All current Centum housing projects are debt free and are funded using internally generated resources. Investors who invest in the bond will have an option of investing in an equity-linked component of the paper, opening a window for future ownership of housing units.
Liquidity on investments
There are plans to list the bond on the Nairobi Securities Exchange at a later date, offering buyers liquidity on their investment with easier entry and exit options. Global Credit Rating recently issued A2(KE) short term issuer credit rating for Centum Real Estate, with a stable outlook. Centum Investment Company this year paid off all its long-terms debts totalling Sh 14.4bn, in keeping with its strategy of maintaining a debt-free balance sheet. Its subsidiaries have built a cash generating capacity to leverage their projects, on their balance sheet.
Proceeds from the bond will be allocated exclusively to the subsidiary’s ongoing affordable, middle-income and high-end housing projects in Kenya. Centum Real Estate has approved a project pipeline of 4,426 residential units, of which the first phase of 2,000 units is either under construction or pre-selling. Recently, the Company handed over 96 high end homes in its Uganda and Vipingo developments. Investors who buy the bond will have an option of investing in an equity-linked component.
3-year Treasury bond
“The bond offers an opportunity for investors to get a piece of Kenya’s real estate pie without taking the risk of getting involved in actual development of the projects,” said the Centum Real Estate Managing Director, Samuel Kariuki.
The projects under construction have achieved an aggregate pre-sale level of 75% and deposit collections of over Sh 2.8bn, as per the company’s pre-sales-led development model. In the last six months, the Company has launched three new projects, including affordable apartments in Ruaraka and Kasarani and high end duplexes at Two Rivers.
Of these collections, over Sh 700m has been collected from April 2020 to date, demonstrating the resilience of the business, despite the COVID-19 impact. The 3-year, zero coupon bond will be issued at a discount rate on the 3-year Treasury bond, plus a market-determined margin. The Centum subsidiary will also have a green shoe option of taking up to Sh 2bn more if the bond is oversubscribed.
