Centum Real Estate Limited, a subsidiary of the Nairobi Securities Exchange-listed Centum Investment Company plans to float KSh 4 billion corporate bond to finance its housing developments.
The subsidiary 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.
The three-year, zero-coupon bond will come at a discount rate on the three-year Treasury bond and a market-determined margin.
The Centum subsidiary will also have a greenshoe option of taking up to KSh 2 billion more if the bond is oversubscribed.
“We are keen on addressing existing gaps in the linkage between Kenya’s real estate sector and the capital markets,” said Samuel Kariuki, the Centum Real Estate Managing Director.
“Currently, all our projects are debt-free and are funded using internally generated resources. Of the projects under construction, we have achieved an aggregate pre-sale level of 75% and deposit collections of over Ksh 2.6 billion, which validates our sales-led development model,” added Kariuki.
The bond will be secured by the projects with deposit collections flowing into a sinking fund. “The sinking fund is an innovative solution to protect bondholders’ money and finance the bond redemption,” noted Mr. Kariuki.
“We have a receivable of KSh6.8 billion from the sold units, which more than covers the bond redemption value. The bond is therefore a bridging finance solution to finance the construction of the presold units”, he added.
The bond will be carried out in Centum Real Estate’s books and not on the parent company, Centum Investment, to allow the parent to stick to its policy of holding a debt-free balance sheet.
Centum Real Estate Limited is the holding company for the Group’s Vipingo Development Limited in the Kenyan Coast, Pearl Marina Estates Limited in Uganda, Uhuru Heights Limited in Nairobi, and Centum Development Kenya Limited.