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Kenya: Tea Farmers Venture Into Real Estate And Equity Markets
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Business Daily (Nairobi)
14 May 2008
Posted to the web 14 May 2008
Solomon Mburu
Tea farmers are seeking to diversify their incomes by investing in real estate and the stock market.
Through the KTDA Farmers Company, the farmers are seeking new investment opportunities as a way of increasing earnings.
The company which has 218,000 shareholders has just bought 12 new luxury villas in Palm Valley Estate in Nairobi's Lavington area in a new drive to improve dividends for shareholders.
The villas which cost Sh90 million are expected to earn the company about Sh10 million annually.
"The units are new and we are targeting to rent them out to NGOs at Sh70,000 so as to bring in Sh10 million annually," said Mr Muchiri Kogi, a director with the company representing the Nyeri zone.
According to Mr Kogi, the company has been under increasing pressure from shareholders to give them better dividends.
"Our shareholders are very many and they want better dividends and that is why we are investing," said Mr Kogi.
Other properties which the company owns include the building housing KTDA headquarters, which was acquired in 1995 at a cost of Sh212 million and the KTDA Mombasa warehouse which was bought in 2000 at Sh180 million.
Before the new acquisitions, the company had been earning Sh41 million annually from all its properties.
The farmer's company which was formed in 1994 has lately started investing in the stock market. The group recently invested in shares worth Sh2 million in the just concluded Safaricom IPO. This is in addition to Sh3 million invested in various quoted companies like Barclays, Centum, Kenol and Housing Finance.
KTDA Farmers Company has been under the management of KTDA which has been charging a managing agency fee of Sh2.6 million. But due to the growing need for increased revenue generation, the company has been seeking independence from KTDA.
A feasibility study on whether the company can operate on its own has already been carried out, said Mr Kogi.
"From the study, we have found out that the money we use to pay KTDA can start and run our own offices," he said.
An agreement signed between the company and KTDA in 2000 expires next month and the directors are planning to delink from the mother company after the contract ends.
In what is seen as the first sign of a breakaway, the company hired the services of Villa Care Ltd, an estate management and development consultant, to manage the new acquisitions.
"Formerly, we had been under KTDA but we are now seeking independence and that is why we hired the services of Villa Care to manage our properties," said Mr Kogi.
With a new investment drive, the company has become the target of several finance institutions, which are wooing it."Banks are approaching us a lot and they want us to invest with them," said Mr Kogi.
The company is, however, weighing its options so as to identify the strongest institutions where they can get the best support.
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"We want to make big investments in the future so that we can get substantial dividends for shareholders," he said. In future, the company hopes to be listed on the Nairobi Stock Exchange.
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