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Nedbank’s billion-rand debt financing deal with Kenya’s Centum

The bank’s financing pipeline in the rest of Africa has now grown beyond the R4.5bn mark.

Looking to the rest of Africa to grow its property finance loan book, Nedbank Corporate and Investment Banking (CIB) has provided financing of more than R1 billion to Kenya’s Centum Real Estate, part of Centum Investment Company plc.

Nedbank CIB’s property finance division – the largest commercial real estate financier in South Africa, reportedly with a 40% share of the market – said in a statement that the deal is linked to Centum’s Two Rivers mega-development in Nairobi.

The bank said it “played the role of lead arranger and financier in the Two Rivers transaction” – a 102-acre development in Nairobi’s diplomatic blue zone, where Centum has a 58.3% shareholding in addition to a 50% stake in the Two Rivers Mall. Besides the mall, Two Rivers is being developed into a mixed-use node with offices, hotels, residential towers, a hospital and a theme park.

Centum is the largest investment company in East Africa and is an affiliate of the Kenyan government-owned Industrial and Commercial Development Corporation. Listed on the Nairobi and Ugandan stock exchanges, Centum operates in the real estate, infrastructure, financial services, fast-moving consumer goods, power, agribusiness, education, healthcare and ICT sectors.

Read: Sub-Saharan Africa to stay on recovery path, rate cuts on the horizon

Nedbank is the latest South African company to become involved in the Two Rivers development. Old Mutual Properties is a joint shareholder with Centum in the 67 000m2 Two Rivers Mall, the anchor and first development in the node, reputed to be the largest shopping centre in sub-Saharan Africa outside South Africa. JSE-listed City Lodge Hotel Group also has a new 170-room hotel at Two Rivers.

Speaking to Moneyweb on Monday, Gerhard Zeelie, Nedbank CIB’s Africa divisional executive for property finance, confirmed that the bank’s total funding facilities to Centum Group exceed R1 billion.

“Nedbank provided the financing to consolidate Two Rivers’ debt facilities and is currently working on five deals with Centum, which includes developments in Kenya and Uganda. This is not Nedbank’s first property finance transaction in Kenya and we are busy with the final execution of several transactions well over $100 million (R1.4 billion). Most of the funding relates to projects in Nairobi although we are also implementing some transactions in Mombasa,” he says.

Financing pipeline of more than $300m

Zeelie notes that the deal with Centum is part of Nedbank’s recent move to grow its property finance business northwards, beyond South Africa. “The focus is on Ghana, Nigeria, Uganda, Kenya, Tanzania, Mozambique and Zambia. We are busy working on a number of transactions with a pipeline in excess of $300 million [R4.5 billion] and are also keeping a keen eye on opportunities in the Francophone countries in West Africa.”

He says most of the countries Nedbank CIB is focusing on have attractive growth rates, but still have largely undeveloped formal real estate markets. “Africa offers exciting opportunities but is not without its challenges. It is very important that investors and developers work with financiers that understand the macro, legal, regulatory, tax and market risk environments to ensure that financing solutions are project-specific and appropriate.”

Read: Growthpoint-Investec African JV secures its first two deals

Zeelie adds: “Nedbank CIB’s property finance division has maintained a leading market share over many years in SA. We are focused on maintaining that position and on growing business in key African jurisdictions to ensure revenue growth and diversification. We are working with a number of clients, ranging from domestic corporates and developers to Pan African investors, real estate investment trusts (Reits) and private equity funds.”

Nedbank’s moves into the rest of Africa on the real estate financing side come as several SA companies have expanded on the continent. In the retail space, the likes of Massmart, Shoprite, Woolworths and Mr Price have opened beyond SA’s borders, while property companies such as Atterbury, Hyprop, Resilient, Attacq, Grit and more recently Growthpoint Investec Africa Properties, have invested.

However, it has not been easy with some companies now exiting or pausing sub-Saharan African investments. Atterbury, Hyprop and Attacq are now selling out of several property investments in countries like Ghana, Nigeria and Mozambique.

“The rest-of-Africa business environment can be challenging and requires a keen understanding of micro and macro dynamics in each market,” says Zeelie.

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