Fusion Capital seeks private funding after D-REIT flop

Private equity firm Fusion Capital will engage private investors to raise Sh2.3 billion after its development real estate investment trust (D-REIT) sale failed to attract bidders.

The firm launched the D-REIT in June targeting wealthy investors, but only managed to raise Sh873 million, well below the 50 percent threshold.

Fusion will now seek alternative funding to finance the construction of the Meru Greenwood City, a mixed development project comprising of both commercial and residential spaces.

“We will go on to fund this development privately. The project has been ongoing throughout the whole process and we continue to attract more investors taking up space at the mall and apartments. We believe D-REITs are key for the development of the Kenya REIT market, and we are keen to list a fully funded D-REIT in the near future,” Fusion Capital Group Chief Executive Luke Kinoti, said.

Signs of a flopped sale were on the cards, after Fusion Capital twice extended the sale of the D-REIT with slow investor uptake.

According to the Nairobi Securities Exchange, there is still lack of understanding of how real estate investment trusts work.

NSE Chief Executive Officer Geoffrey Odundo said there needs to be further stakeholder engagement to create awareness of how the investment tool works.

“The NSE will continue to provide investor education on this new product and will involve key stakeholders including the Kenya Property Developers Association, fund managers, insurance companies, private equity firms amongst others,” Mr Odundo said.

Mr Kinoti said the firm would carry on with the Meru Greenwood City project with private financing.

“The project has continued in construction having achieved 35 per cent in construction and 25 per cent in letting of the shopping mall as well as 50 per cent sale of the apartments,” he said.

Fusion Capital intends to develop medium-size projects in eight counties, focusing on mixed use developments in the center of the towns.

Fusion Capital has previously funded over 12 projects with funds from private investors who include both local and international investors such as the Sh3.7 billion Kigali Heights project in Rwanda, set to open in September.