Centum raises Sh3 billion from real estate bond

A subsidiary of Centum Investment Plc has raised Sh3 billion from a project bond intended to finance construction of its ongoing housing projects.

Centum Real Estate Limited says the bond, which closed on Wednesday this week, will pay investors a return of 12.5 per cent for the plain vanilla bond and 12-14 per cent for the Equity Linked Note.

The bond will be listed for trading on the Nairobi Securities Exchange (NSE) once regulatory approval is secured.

The subscription level is 50 per cent above the minimum target of Sh2billion.

Centum Real Estate Managing Director Samuel Kariuki said the company was seeking to raise Sh4 billion in total over the next three years to fund its ongoing projects. 

The minimum target raise in this issue was Sh2 billion against which the Sh3 billion was raised, exceeding the minimum target by 50 per cent.

The bond is structured as a medium term note where the company may opt to re-open the offer prior to maturity to raise subsequent tranches in line with construction funding needs, which are spread out over a period of time.

The three-year paper matures on December 16, 2023.

Economic slowdown

The corporate bond attracted a diversified investor profile from the banking sector, pension funds, asset management and individual investors.

Mr Kariuki said the Medium-Term Zero-Coupon Bond is the first such structured instrument to be issued by a corporate in Kenya and the firm was pleased with the outcome, despite the very bearish corporate bond market, tight liquidity and a difficult economic environment.

Centum Real Estate has a portfolio of 1,482 housing units under construction, out of which 1,202 units are already pre-sold.

"Despite the economic slowdown caused by the Covid-19 pandemic, we have recorded over Sh1 billion in customer deposits collections since April 2020 and closed Sh3 billion in land sales," noted Mr Kariuki.

All customer deposits received from beneficiary projects post the bond settlement date will be channeled into a sinking fund over which bond holders have a fixed charge, an innovative way to protect bond investors.

Centum Real Estate completed and handed over two projects in Vipingo and Pearl Marina in Entebbe, Uganda in October 2020. The third affordable housing in Vipingo is due for handover in January next year.

Private Wealth Capital CEO Kabaki Wamwea noted that investors have started regaining confidence in corporate bonds, after the market’s poor performance in 2019.

“We expect trading to be vibrant in the secondary market given the attractive structure of the bond,” Mr Wamwea said.

Additional reporting by Peter Mburu