CMA Approves ILAM FAHARI I-REIT Operational Restructuring Offer

Nairobi

Monday, September 4, 2023

KNA by Michael Omondi

The Nairobi Securities Exchange (NSE) listed real estate investment trust ILAM Fahari Real Estate Investment Trust (NSE: FAHR), has received regulatory approval from the Capital Markets Authority (CMA) to convert its unrestricted ILAM Fahari Income Real Estate Investment Trust (IFIR) into a restricted I-REIT.

The approval follows a cautionary statement issued early last year 24th March 2022, indicating that the REIT was undergoing a strategic review that would involve an operational restructuring of IFIR. 

The proposed Sh402 million transactions will allow IFIR’s Non-Professional Investors to redeem up to 36,585,134 Units at a Redemption Offer Price of Sh 11 per unit.

ILAM Fahari I-REIT currently owns four real estate properties (a shopping center, an office building, and two semi-office/light industrial buildings), all held through special-purpose vehicles.

Speaking when he welcomed CMA’s approval of the proposed transaction, ICEA LION Asset Management (ILAM) Chief Executive Officer (CEO) Mr. Einstein Kihanda said the proposed conversion is part of ILAM Fahari REIT’s ongoing restructuring strategy and reflects its commitment to enhancing its investment offerings while adhering to regulatory standards.

The restructuring to a Restricted I-REIT, Kihanda noted, will be the initial step in the process of moving the listing of the I-REIT from the Unrestricted Main Investment Segment of the NSE to the Unquoted Securities Platform (USP) administered by the NSE where it will still trade.

“The conversion to a restricted REIT will allow us to offer more specialized investment opportunities to our stakeholders, providing increased flexibility and potential for growth. The new structure aligns with ILAM Fahari’s strategic vision to optimize its investments and provide investors with innovative avenues to diversify their portfolio,” stated Kihanda.

He added that a restricted REIT is only for professional investors and this explains why the redemption offer is for Non- Professional Investors.

The CEO explained that the Redemption Offer Price of Shs11 per unit represents a premium of 82.72 percent above the current market price of Sh6.02 per unit.

According to Kihanda, the decision to convert and restructure stems from the ILAM Fahari I-REIT’s comprehensive strategic review in 2021, which sought to understand the challenges the I-REIT faced and develop potential strategies to improve the returns and market performance.

Further, he revealed that the long-term plan will elevate returns and market performance through asset optimization and growth of Assets Under Management (AUM).

“Our strategic review outcome indicates that moving from UMIMS would enable us to restructure the I-REIT, reduce costs, attract new investment, and acquire additional properties to reach a sustainable asset base size,” Kihanda reiterated, adding that the possibility of moving IFIR back to the main board of the NSE will be reviewed after three years following the successful execution of a growth strategy.

Alongside the operational restructuring of the REIT, ILAM Fahari I-REIT CEO Mr Raphael Mwito said that the firm has continued to perform strategic and operational functions in managing the property portfolio and cash reserves to ensure effective long-term management of the REIT, deliver attractive investor returns and ensure compliance with regulatory and legislative requirements. 

“ILAM Fahari I-REIT aims to provide consistent income and capital growth in the long term and our active management approach targets quality properties within carefully chosen economically growing nodes,” voiced Mwito.

IFIR will remain regulated by the CMA and is registered with the Kenya Revenue Authority (KRA).

Last year, ILAM Fahari I-REIT’s distributable earnings increased by 39 percent to Sh141.9 million compared to Sh102 million the previous year. 

The ILAM Fahari I-REIT’s concept is globally recognized and operates in line with international standards, allowing the REIT to own and manage income-generating real estate for the benefit of its investors.

The REIT provides regular distributions to investors, underpinned by commercial leases.

Courtesy ; K. N. A