Centum Real Estate plans to issue a Sh4 billion bond to finance ongoing housing projects, marking its first major borrowing since turning into a cash-generating unit in 2018.
The firm, a subsidiary of the Nairobi bourse-listed Centum Investment Company #ticker:CTUM, said it is prepared to take as high as Sh6 billion should investors’ appetite exceed the targeted sum.
Centum Real Estate managing director Samuel Kariuki said the three-year bond with zero coupon will first be issued as a private placement, but later on introduced at the NSE for trading.
“Proceeds from the bond will be allocated exclusively to the subsidiary’s ongoing affordable, middle-income and high-end housing projects in Kenya,” said Mr Kariuki.
Centum said the bond is undergoing regulatory approvals, with issuance expected in the coming weeks.
The bond issuance comes at a time the firm has approved a project pipeline of 4,426 residential units, with the first phase of 2,000 units being either under construction or pre-selling.
Centum Investment Group reorganised its business into private equity, marketable securities and real estate subsidiaries.
Centum Real estate is the holding company for Vipingo Development Limited at the Kenyan Coast, Pearl Marina Estates Limited in Uganda, Uhuru Heights Limited in Nairobi and Centum Development Kenya Limited.
The company said investors will buy the bond at discounted rate of a three-year Treasury bond, plus a market-determined margin, allowing them a return on maturity.
“The zero coupon means that for the three years that the bond will be in place, it will not be paying any quarterly or half year interest. The income the investors are making is the discount that the bond will be issued at,” said Mr Kariuki.
The bond will be secured by the ongoing projects, with deposit collections flowing into a sinking fund as an innovative solution to protect bond holders’ money and finance the redemption.“We have a receivable of Sh6.8 billion from the sold units, which more than covers the bond redemption value. The bond is therefore a bridging finance solution to finance the construction of the pre-sold units,” said Mr Kariuki.