InfraCo Africa, part of the Private Infrastructure Development Group (PIDG), has subscribed to the Acorn Holdings Ltd (Acorn) Real Estate Investment Trust (REIT) committing to support the delivery of affordable houses for students in Kenya.
The US$10m (Kenyan Shilling Equivalent) investment, made through InfraCo Africa’s dedicated investment vehicle, will enable Acorn to scale its business, building on the company’s track record of delivering purpose-built housing for students in Kenya, and helping to mobilise local capital markets.
InfraCo Africa’s CEO, Gilles Vaes noted, “This subscription marks our first investment into affordable housing and I am delighted to take this step with Acorn, a well-respected developer of high quality student accommodation. Expanding Acorn’s student housing offering will support Nairobi’s university students to achieve their ambitions, underpinning Kenya’s future economic development under its “Big 4” agenda. As the anchor investor in the Acorn REITs, our involvement will also strengthen local capital markets to support similar infrastructure initiatives in the future.”
As student numbers grow, Kenya is experiencing a chronic shortage of suitable student accommodation. Acorn is seeking to attract private sector investment from Kenya’s local capital markets in order to achieve its ambitious growth strategy.
The company has launched two REITs – a Development REIT to support development of housing projects, and an Income REIT for operational housing blocks.
Unlike traditional equity, REITs offer a tax efficient means of raising capital, enabling Acorn to achieve scale quickly. As an anchor investor into both REITs, InfraCo Africa’s involvement gave significant comfort to local private sector investors who were considering REITs for the first time and mobilised funds from local pension schemes, insurance companies and high net worth individuals.
Edward Kirathe, CEO of Acorn Holdings Ltd. said, “We are excited to be continuing to develop our Kenyan Capital Markets by bringing good quality asset-backed and regulated issuances to market that have attractive returns, strong international institutional backing and the highest standards of corporate governance.
The lack of such issuances has meant there are very limited alternative investment opportunities in Kenya. We are extremely pleased that we also secured an anchor investor – InfraCo Africa – who invested $10m in KES equivalent into the Acorn REITs.”
Delivered in two phases, the 11-block initiative will provide a total of 8,800 additional student beds over the next 5 years. The buildings will comply with IFC EDGE (Excellence in Design for Greater Efficiencies) standards for green building, building on the high standards developed to certify the first Green Bond in East Africa in 2019.
By offering a range of accommodation types, Acorn will ensure that students with a range of income levels can access affordable housing. All students will have access to 24 hour electricity, wi-fi, clean water and sanitation as well as social areas and safe transport to academic institutions.
Security will be paramount, with students accessing separate male and female accommodation using biometric cards. Acorn continues to develop tailored solutions to ensure safety and well-being of women students, contributing to SDG 5 Gender Equity. Female housekeeping and security staff will be employed to ensure that women feel safe in their student housing.
PIDG and its companies have worked together closely, providing key finance and expertise to support Acorn’s ambitions for growth.
GuarantCo provided a 50 percent credit guarantee to investors in Acorn’s KES 5 billion note programme that raised KES 4.3 billion in October 2019, a pioneering, green bond which was dual-listed on the Nairobi Securities Exchange (NSE) and London Stock Exchange (LSE).
Emerging Africa Infrastructure Fund invested KES 1.3bn (US$12.7m), anchoring the issue as the largest single investor in the successful note which raised a total of KES 4.3 billion. PIDG Technical Assistance increased the competitiveness of the financial instrument by providing Acorn with a part-returnable grant to support the costs of the loan note issue.
By supporting Acorn to scale its offering further, InfraCo Africa will enable more students to access safe, affordable housing for the duration of their studies.
Once operating at scale, Acorn plans to list the Income REIT on the NSE, deepening and widening the NSE’s product offering which, it is anticipated, will support other affordable housing initiatives in the future.