28 January 2013

Uganda: Complex Venture

Kigali City authorities on Jan.17 signed an agreement with Kigali Heights Development, a local company, for the construction of a mega commercial complex at the tune of US$16.9 million, signaling that the local contractors are increasingly winning trust in the market.

The deal was reached after a tendering process where Kigali Heights competed against a Chinese construction company for the development of an 11,000 square meter piece of land near the Kimihurura roundabout, in accordance with the Kigali Master Plan.

The Kigali City Mayor, Fidel Ndayisaba, said the city entered an agreement with Kigali Heights Development, after the company met all set requirements and also showed commitment to the project.

"The tendering process was transparent and involved all stakeholders- we are pleased to enter into partnership with Kigali Heights and Fusion Capital. They indicated that they are in line with the commitment to change the face of Kigali and turn it into a modern city," Ndayisaba said.

"This is a mutual benefit venture for the City and for the private investors; we will support their initiative as we encourage more to enter such important partnerships with us."

The complex, which will be built at the former Post Office premises just opposite the much awaited Kigali Convention Center, will house large shopping arcades, executive offices and recreation centers.

A Rwandan company winning the tender to develop this plot is a positive sign that local contractors have grown and are now being seen as capable of executing bigger construction projects unlike a few years ago where most of the work was left for international companies.

Increased access to finance is among the factors that construction analysts say has resulted in the increased participation of local companies in the sector compared to about three years ago.

Kigali Heights joins other local contractors like NPD Cotraco which won a tender in 2011 to develop over 34km of asphalt roads in Kigali after competing against Chinese companies which seemed to have monopolised the execution of asphalt road constructions in Rwanda.

"We estimate that the project will require over US$16.9 million (Rwf10.7 billion) to complete and we are ready to make it a reality," Dennis Karera, the Managing Director of Kigali Heights Development said at the signing of the deal.

According to the city of Kigali Master Plan, situating the mega commercial complex opposite the Convention Center is in the spirit to ensure that the area becomes self-sufficient with the entire required infrastructure.

While the Center is to be a collection of mega hotel services, Kigali Heights' complex is envisioned to provide extra services to the residents of the area.

This move of putting required structures close to one another is also seen as a way of counteracting the increasing traffic congestion some of which Kigali City authorities attribute to unnecessary movements that people make in search of services from one place to another.

Kigali Heights Development will undertake the construction of the multimillion dollar project in partnership with Fusion Capital Limited, a Kenyan equity company that will provide funding.

Fusion is a private equity firm that specialises in the Small and Medium Enterprises sector in Sub Saharan Africa. Established in 2006, Fusion operates in Kenya, Rwanda, Uganda, Tanzania and the United Kingdom.

"It will take approximately two years to put up this beautiful structure which will have two phases. The first phase will have nine floors whereas the other will have six. We will complete the paperwork in the first nine months of this year and immediately begin construction works," continued Karera.

During its construction, the building is expected to create over 300 jobs to both skilled and unskilled labor.

The project's financier, Fusion Capital Limited, recognized the deal as a major step towards better relations between Rwandan and Kenyan private sectors.

"We look forward to providing long-term local financial solutions that support the sustainable growth of the Rwandan economy," Luke Mwiti Kinoti, The Group CEO of Fusion Capital Limited said.

"Fusion Capital will be providing both equity and debt funding, and will actively facilitate the participation of local funds through syndication."

After undertaking projects in Uganda and Kenya, Fusion Capital Limited embarked on raising a US$160 million fund dedicated to supporting real estate projects in the region, with keen interest in Rwanda.

The first two floors of the super plaza will be reserved for large scale trading such as supermarkets and restaurants, while the upper floors will hold executive offices for mostly privates businesses.

Build and sell model

Different from the model commonly used in availing commercial complexes to the users where their owners rent portions out, the owners of the expected complex target to sell the different floors of the property to different interested parties such that the company would continue to develop more other properties.

"Our target is not to provide rental business places but we are rather envisioning to sale ownership of the property to different parties who will be interested,"Karera said.

With the build and sell model, companies or individuals without the capacity of building their own premises as per the city master plan or else who need smaller premises which they could not be able to situate in places like the Kimihurura, will have an opportunity to own their own premises and in plots meant for big multi task complexes.

"If some company X wishes to have let's say a premise as a size of one floor of the complex, then we will sell that to them and similarly for others who would want to own two floors," Karera noted.

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