The redemption offer for ILAM Fahari Real Estate Investment Trust, a real estate investment trust listed on the Nairobi Securities Exchange (NSE), has been oversubscribed by 13.08 percent. This development now clears the path for the next stage of strategic restructuring for this investment vehicle.
Dislosures show that throughout the offer period, the REIT Trustee received applications for the redemption of 41,371,604 units, representing a subscription rate of 113.08 percent.
Additionally, the REIT received applications for topping up additional units, totaling 421,945, from Non-Professional Investors.
In announcing the results of the offer, Mr. Einstein Kihanda, CEO of ICEA LION Asset Management (ILAM), stated that the offer had received redemption applications from non-professional investors who sought to redeem up to 36,585,134 units currently listed on the NSE.
ILAM restructuring the REIT
These units were offered at a premium of over 82 percent over the trading price at the time of the offer announcement.
Mr. Kihanda reiterated that ILAM has been working to restructure the REIT to ensure its sustainability and enhance its capacity to generate returns for unitholders.
A recent strategic review recommended the implementation of an operational restructuring plan, which laid the groundwork for this transaction.
“This transaction provides a viable path to restructure the REIT. We are clear that the REIT needs to grow substantially in size to achieve economies of scale, which can only be done by acquiring additional assets,” Kihanda said.
“Following the close of the offer period, ILAM, in consultation with the respective transaction advisers, has provided the offering results to the Capital Markets Authority,” Kihanda said.
He added, “We are now on course to complete the redemption process and proceed to the strategic restructuring of the ILAM Fahari I-REIT as we seek to position it for growth. The next step will be the Extra-Ordinary General Meeting in November.”
ILAM Fahari I-REIT
The ILAM Fahari I-REIT, a month-long offer worth Kes402 million that commenced on September 6, and concluded on October 6, aimed to redeem up to 36,585,134 units, which equates to 20.22 per cent of the issued shares of the ILAM Fahari I-REIT as part of an operational restructuring initiative.
As part of the offer, the target unit holders had the option to either redeem their units at a Redemption Offer Price of Kes11 per unit, increase their holdings to reach the Kes5 million threshold for professional investors as prescribed by regulatory provisions, or choose to be consolidated within a nominee account that holds all non-professional investors who did not take up the redemption offer.
The Trustee redeemed up to 301,400 units from each unitholder who submitted their application.
In addition to the operational restructuring of the REIT, Mr Raphael Mwito, CEO of ILAM Fahari I-REIT, reiterated that the company has continued to carry out strategic and operational functions in managing the property portfolio and cash reserves to ensure effective long-term REIT management, deliver attractive investor returns, and maintain compliance with regulatory and legislative requirements.
Consistent income and capital growth
“ILAM Fahari I-REIT aims to provide consistent income and capital growth in the long term. Our active management approach targets quality properties within carefully chosen economically growing nodes,” said Mwito.
The transaction has led to ICEA LION Asset Management Limited increasing its unitholding to 22.74 percent post-redemption. IFIR will remain under the regulation of the CMA and is registered as a REIT with the Kenya Revenue Authority, thereby continuing to enjoy statutory tax advantages.
Payments to unitholders will be processed on October 24, 2023, and the suspension of trading in ILAM Fahari units at the NSE will be lifted on October 25.
The ILAM Fahari I-REIT has invested in a portfolio of high-quality investment real estate properties that offer sustained returns and strong operating performance.