Centum Investment Company Plc plans to sell part or all of its shareholding in its property development subsidiary Centum Real Estate Limited that was valued at Sh16.6 billion in the year ended March.
The proposed transaction is expected to result in major capital gains for the Nairobi Securities Exchange-listed firm besides reducing the concentration of its assets in the real estate sector.
“We are open to selling part or all of our stake in Centum RE. We are doing this to rebalance our portfolio which is currently concentrated in real estate,” James Mworia, Centum’s chief executive, told Business Daily.
“The money raised will be reinvested in marketable securities (stocks and bonds) and private equity to reach our allocation target in these two segments.”
The company recently consolidated most of its most of its real estate ventures into Centum RE, comprising land and properties being developed in Nairobi County, Kilifi County and Uganda.
The investment firm, however, continues to hold Two Rivers Development Limited (TRDL) directly. TRDL in turn holds a controlling stake in Nairobi’s Two Rivers Mall.
Centum held 63.5 percent of its Sh47.5 billion worth of assets in the year ended March in real estate, overshooting its target maximum of 55 percent.
“We have gone above the target not because of increased investment in real estate but because of the gains in the land and properties,” Mr Mworia said.
The company invested Sh7.8 billion in acquiring and developing the assets making up the portfolio of Centum RE, signaling the major capital gains it could unlock from sale of the subsidiary that is now valued at Sh16.6 billion.
Centum’s allocation in private equity and marketable securities on the other hand stood at 20.5 percent and 16 percent, trailing the target of 40 percent and 20 percent respectively.
Centum RE paid the parent company Sh4.5 billion in the year ended March, representing interest and shareholder loan repayments.
“This business is on track to making additional distributions in the year to March 2022 on the back of a robust sales pipeline for both residential projects and development rights and is well-positioned for a possible exit,” Centum says in its latest annual report.
Among the additional payouts Centum is eyeing from the real estate subsidiary is Sh1 billion from the unit’s sale of Sh2 billion worth of development rights to third parties.
The proposed sale of Centum RE signals the company’s confidence of improved economic performance and investor confidence compared to last year when it suspended asset disposals amidst the outbreak of the Covid-19 pandemic.