Bullish: Centum Real Estate Earns KSh 1.1 Bn On House Sales in HY

Centum Real Estate has signed an agreement to raise Sh17 billion from Luxembourg-based private equity firm GEM Global Yield LLC CSC through a partial share sale.

Centum Real Estate Limited has earned KSh 1.1 billion revenue from the sale of houses in the six months ended September 2021.

The strong sales helped Centum Real Estate to record a  KSh 144 million gross profit from residential units in the first half of the year. The company further recorded KSh 172 million in revenue from the sale of development rights.

“Our current projected pipeline has a profitability level of KSh 4 billion, out which we have recorded KSh 260 million in our income statement. The balance of KSh 3.7 billion will be recognized progressively moving forward, as we complete the projects and hand over the houses”, said the Centum Real Estate Managing Director, Samuel Kariuki.

The Company also reported that it has sold KSh 5.5 billion in development rights on its land banks to date against which it has collected KSh 3.6 billion in cash. “The realized cash profit from these sales is KSh 4.8 billion, which was largely recorded in prior years as revaluation gains. The sales effectively convert those revaluations into distributable revenue reserves”, noted Mr Kariuki. Subsequent to 30 September 2021, the Company announced that it has entered into further transactions of KSh 3.4 billion in the sale of development rights on its land banks.

Centum Real Estate was incorporated last year as the subsidiary housing the bulk of Centum Plc’s real estate.

The half-year numbers show Centum Real Estate’s balance sheet is now valued at KSh 40.9 billion, comprising  KSh 28.6 billion investment property, half a billion shillings’ worth of completed residential units, KES6.6 billion houses under construction,  KSh 1.4 billion cash and cash equivalents and KSh3.6 billion other assets.

“The two primary value drivers in our business are the sale of development rights within our land banks and development and sale of residential projects. We have made significant progress on both fronts in Kenya and Uganda as evidenced by the quantum and value of development rights sales, size of residential projects pipeline and sales, cash collections and the receivable on sales,” said Mr Kariuki.

Centum Real Estate is currently holding 8,400 acres out of a total holding of 10,639 acres in 2019, representing sales of 2,239 acres over the two years.

The transactions, Mr Kariuki noted, have been closed at prices higher than the book value, justifying the valuation of Centum Real Estate’s land holdings.

“Our unsold stock of development rights in Kenya and Uganda is currently valued at KSh 28.6 billion, which valuation is validated by transactions over the last two years,” said Mr Kariuki.

Centum Real Estate’s sales-led development model is based on pre-selling at least 30% of any project phase before groundbreaking.

Buyers pay 20% of the sale value as deposits while the balance is payable over the construction period.

The deposits are accounted on the balance sheet as deferred revenue.

Centum Real Estate currently has a pipeline of 2,374 housing units, with a cumulative profit potential of KSh4.01 billion.

Its properties are revalued annually by third-party firms, in accordance with IFRS.

Some of Centum’s ongoing real estate projects include the Riverbank apartments and the Loft Residences within the Two Rivers complex; and the luxurious Awali Estate villas and 1255-Palm Ridge apartments in the Coastal Vipingo Development Limited.

This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.

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