Co-op Bank #ticker:COOP is lending Centum #ticker:CTUM up to Sh2 billion to finance the investment firm’s construction of apartments at its Two Rivers site in Nairobi County.
The loan agreement was signed by Centum’s fully-owned subsidiary Uhuru Heights Limited which is building one, two and three-bedroom apartments that are being sold at between Sh8.5 million and Sh24.5 million.
“Co-operative Bank of Kenya approved a Sh2 billion project finance facility during the year. The facility is earmarked for the completion of the Cascadia Apartments being developed by Uhuru Heights Limited,” Centum says in its latest annual report.
The three-year loan has an effective interest rate of 11.6 percent, including a four percent margin on the Central Bank Rate (CBR) which currently stands at seven percent.
Co-op Bank has already disbursed Sh137.1 million. The loan is secured by the collections from the sale of apartments and the project itself, Centum said.
The apartments target buyers seeking luxury accommodation at the Two Rivers complex which has a shopping mall, hotel, restaurants and other amenities. Centum says the apartments are also suitable for investors who stand to benefit from rental income and capital appreciation.
“For investors, Cascadia Apartments offers competitive entry prices into the Two Rivers mixed use community. This ensures compelling rental yields with reliable capital appreciation driven by an experienced urban management team,” the investment firm said.
This is the second significant credit facility Centum is receiving from Co-op Bank. The investment firm took an Sh8 billion loan from the bank as part of the funds it mobilised to develop the Two Rivers Mall.
Centum repaid the loan last year using a new credit facility from South Africa’s Standard Bank in a bid to lower its finance costs.
The investment firm said the interest rate on the Standard Bank loan was relatively lower than what it was incurring on the Co-op facility, adding that this reflected the fact that the mall project had become less risky than when the local lender first funded its construction.