Real Estate Moment

This last post on Kenyan real estate produced a ton of great feedback, hence another one.

Home Expo
The 2008 Home Expo took place over the weekend at KICC, which was nice to attend, though it was strange that there was a simultaneous one (for home interiors?) as Sarit Center over the same weekend/period

Financers
– Standard Chartered: Up to 90% finance, Up to 20 year loans, decision in 48 hours. Also offer equity release loans
– Barclays: 14.5% interest rate, 10% down payment (reduced from 15%), and loans up to 20 years
– Housing Finance: have Start up plan (12 to 20 years),
House plan (5 to 12 years) and Ace plan (<5 years) loans for owner occupied, investment residential, equity release & top up, construction loans, residential plots, buy a plot & build.
– S&L: interest of 14% variable or 15% fixed, loans for individuals can be up to 25 years, while for companies & investment/rentals is 10 years, and estate development , just 2 years. In major towns they finance up to 90% for owner occupied and 80% for income generating properties (i.e. 20% down payment); while for rural properties it is 70% for owner occupied and 60% for income generating

Savings: S&L and the banks have various savings plans, while Bora real estate investment management (BREIL) were also represented with a plan starting at Kshs. 10,000 ($135)

Insurance: AIG Kenya were notable marketing home insurance packages that escalate to match the appreciating cost of home repair, include a domestic employee cover (DYK employers are liable in their house maids are injury or die?) and also cover the cost of trauma in the event of an attempted home theft.

Home Internet: Zuku (from Wananchi) vs. net@home vs. Broadband hotspots from Safaricom

Solar heating: at a time of record domestic electricity bills for consumers, alternative energy (mainly solar) products were on offer from Davis & Shirtliff, Solar Exide, and Sharp.

From the Blogs
– Funny Money Kenyan Entrepreneur questions the growing debt burden in Kenya, some of which is rel estate real estate, arguing that the numbers don’t add up. Meanwhile, there’s an offline article in the East African by Joachim Buwembo that attributes the rapidly growing and appreciating real estate markets in east Africa in part to hot money that previously used to fly to Swiss bank accounts
– John McCain has 7 homes: I’m partial to Fahari Estate but this post by MainaT raises an interesting point about other towns (e.g. Nyeri, Kericho, Malindi) worthy of real state investment, for work or retirement.

Scangroup Sellout Part II

More details on the Scangroup sale of a controlling stake to the WPP Group (UK) are out now. The mechanics will involve:

  • Investment of Kshs. 1.325 billion [~$18.2 million] into Scangroup (with Kshs. 400 million for working capital, Kshs. 650m for acquisitions, and 30% for in-house improvements including new ‘office space’)
  • Existing shareholders approving an increase in share capital from Kshs. 180 million to 240.7 million [~$3.82 million]
  • Creation of 60.7 million new shares which will be offered to Cavendish Square Holdings (WPP subsidiary) at Kshs. 22 per share (Scangroup currently at 28.50). This will dilute existing shareholders stakes by about 8% each
  • WPP get the right to nominate two directors and are locked in until 2012
  • WPP will become the largest shareholder at 27.5% followed by MD Bharat Thakrar 20.6% and Chairman Andrew White 11.93%
  • Retail bail?; Scangroup now has about 39,000 shareholders, down from 44,000 earlier this year.

To Coop or Not?

The big debate now is if the Co-Op Bank IPO should go ahead this month or if it should be postponed. The Chairman of the Nairobi Stock Exchange has issues conflicting statements on the matter but appears to have bowed to the arrangers and the stockbroking community line that it should go ahead.

IPO’s in London and New York are beign deferred as they are unlikely to be warmly taken up, and here, the dearth of IPO’s in the pre-Kengen was guided by the sentiment that they would not perform well in the then deflated markets. Even the giant IPO of Safaricom – was postponed till after the 2007 elections.

The timing is just not right, with two collapsed stockbrokers still being sorted out, Safaricom refunds not fully reconciled, and the Diaspora who were so enthusiastic about Safaricom still (i) worried about repercussions of the US financial markets turmoil (ii) real estate and (iii) feeling suckered by Safaricom’s post-IPO performance which they heavily invested in.

Though the funds raised are targeted towards, mortgage finance, ICT and branch expansion, the Co-Op IPO should be postponed to at least next year. It withstood the 1998 Nairobi bomb blast and has turned round a Kshs. 3 billion loss to a similar profit in 6 years and a few more months won’t make a difference. But as a fall guy of Safcom, I’ll revert to my IPO bypass plan when the Co-op IPO arrives.

Need for Capital; Co-op is a fast growing bank with a retail and branch base like KCB and Equity that requires capital to be shored up. The two banks that were most in need of regulatory capital – KCB and Housing Finance have already had rights issues in 2008, and other shareholders should prepare for the same at CFCStanbic, Prime, CBA, among other smaller banks.

NSE/CMA to note; In the wake of Crown Berger and Portland Cement share collapses, it should be noted that irregular share trades happen – even to Google – but the prices were re-adjusted and trades made at erroneous prices were then canceled.

Opportunities

Barclays graduate program: The Barclays Graduate Emerging Managers (GEM) is open

US Visa The DV 2010 diversity visa (US green card) lottery kicks off today and runs till December 1

TED Global 2009: Registration for TED Global 2009 at Oxford is open.

Random Photo

Athi River Train Station – October 2007

Bad News Bears

Correction Window: At the beginning of the month it was Crown Berger shares that did a swan dance on some pedestrian financial results and last week it was the turn for Portland cement (EAPC) shares to take a drastic dip in value with the announcement of reduced profits.

This has generally been a tough year for manufacturing stocks and the next few days should see year end results of both Kengen and KPLC who have been battling over tariffs and leaving consumers suffering and manufacturing companies & industries threatening to shut down or decamp owing to high electrical costs.

There are some shares on the NSE that are perceived to be under-valued and some that are over-valued (don’t pay dividends, appreciate on speculation, limited trading activity) – and the announcement of financial results (with the waiver of the 10% daily share price rule) gives the market the chance to correct/adjust share prices. But will these share drop? Do they have any reason to? Their P/E ratios are already so low.

Already Safaricom CEO Michael Joseph has said that the price dip of Safaricom shares have no impact on the company’s performance (their quarterly results will also be tricking in soon)