Business Daily (Nairobi)
Morris Aron
3 March 2008
More than 500 motorists in Nairobi were last Friday left stranded for lack of parking space after they found their usual lot out of bounds.
The parking lot was sealed off by Nairobi City Council inspectorate officers leaving the motorists groping in the dark over what was going on.
The Business Daily has established that the 3.3 acre plot has been sold to Mr Mukesh Ambani and Arrow Webtex, a Mumbai-based real estate firm, for Sh1.4 billion.
The deal, which has not been concluded, is the biggest in the property sector so far this year, reflecting renewed investor confidence in the country.
Mr Ambani and Arrow Webtex will own the plot, which is opposite the Grand Regency Hotel on Uhuru Highway, on a 60:40 basis through an entity called Delta Resources. They are planning to build a hotel and shopping mall on the site.
The motorists who have been using the plot as a parking bay will have to wait and see whether Delta Resources will continue using it as a parking lot before construction of the five-star hotel and a shopping mall begins.
The move by Delta Resources is the latest development in which an increasing number of international property developers are strategically moving to cash in on the lucrative retail, office and industrial real estate business.
A source from Delta Resources Limited, who did not want to be identified, told the Business Daily that they were following in the footsteps of a number of multinationals who have transferred their regional bases to Nairobi.
Delta is also intent on exploiting Business Process Outsourcing (BPO) opportunities in the country.
"Despite the uncertainty over the last two months, many companies still believe that Nairobi is the springboard on which to enter the East and Central African Region," said the source.
A number of companies have entered into real estate investment since a report by Regent Management-a property firm-found out that occupancy rates in most buildings were above the 85 per cent threshold level.
Only late last year, Rutley- the investment arm of KnightFrank, a property firm- established a US$300 million property fund in conjunction with KnightFrank and ICEA Asset Managers to explore ways of investing in real estate through listing at the Nairobi Stock Exchange.
Other funds that have come up since then include Bora Capital, which plans to do the same through private placement.
Other major transactions expected to be concluded this month in Nairobi include a property transfer transaction of a plot near Kengeles on Koinange Street to an international developer.
Real estate companies have been working behind the scenes to position themselves as they wait for the listing of the first Real Estate Investment Trust (REITs) at the stockmarket before May.Delta Resources has hit the ground running with plans already under way to acquire Teams Management Services (TMS), a construction management company to help it roll out construction.
"The firm has a lot of architects and designers.They will become part of Delta soon. Arrow Webtex already has a team in Kenya," said a source.
Delta's first project could be the construction of a hotel in the heart of Nairobi along with a shopping and commercial complex. The company has bought seven other properties in Nairobi.
Nairobi is witnessing a heavy influx of BPO firms, and property prices could rally to match some of the best real estate investment destinations. Google, HP, Nokia, Ericsson and Cisco are among companies that have moved their regional offices to Kenya.
A number of investors had developed cold feet and postponed their investment plans after the post-election violence and news of such transactions may help bring back to life interest in Kenya's real estate business.
Despite political instability, the Kenyan economy grew at 6.1 per cent in 2006, and is expected to touch 10 per cent in the next three years, according to international property consultants KnightFrank.
NSSF legal advisor Saide Shitembwe said that they had carried out three valuations of the plot and arrived at an approximate market value. "We are quite confident that the price we have set represents the fairest market trends," said Shitembwe.
Valuers had approximated that due to its prime location and its accessibility from three fronts, the plot could have fetched as high as Sh1.5 billion per acre, a figure that a section of real estate players say could be varied.
It is also emerging that the closure of the park by the City Council arose from failure to meet environmental standards. The council had asked the park's operator to pave it as a check against health hazards associated with dust.
This is the second investment that Mr Ambani -who owns Reliance Industries Limited (RIL) is making in Kenya, having bought 50 per cent of the Mauritius based East African fuel retailer, Gulf Petroleum Corporation (GAPCO), which has outlets all over East Africa.
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