Listing that could see small investors own housing projects

As friends would do, a team of four people shared the aspiration of venturing into property investment five years ago. They mobilised each other with a view to start a company that would provide affordable housing in Kenya.

The four friends invited more of their acquaintances to start a firm and to their surprise, they surpassed the 49 membership limit required for establishing a private company that is now Home Afrika, which on Monday this week, became the first home-grown entity to list on the Nairobi Securities Exchange (NSE)’s Growth Enterprise Market Segment (GEMS) that was unveiled earlier this year.

“We wanted to have only 49 members to form a private company, but we got 65 people willing to register with us,” Home Afrika’s chairman Lee Karuri told Money.

Adding: “Within six months of launching our company, we had reached the threshold of a second private company but we still had more people interested in joining us. We had to form a third company. Within one year, we had a total of 128 shareholders,” Mr Karuri noted of a firm that started operations on July 26, 2008.

Many of the friends they invited were professionals and business people who wanted to do something on the side that could generate income in the long-term and also fulfil their passion of constructing homes and commercial property for sale.

They created shares which cost shareholders Sh2 million each, with each subscriber limited to a maximum of five.

“We wanted to raise Sh200 million working capital within a year, but we realised about Sh350 million from the 128 shareholders after one year,” he said, adding that they decided to collapse the extra two companies as subsidiaries under Home Afrika, a public company that is now eyeing to venture into the property market in other parts of the continent.

The company’s first project — Morning Side — an office park on Ngong Road, in which they partnered with a land owner to develop a 33-room self-contained office suite with a business centre, 214-vehicle parking lot, green roof and restaurant was “very successful” and sold out, generating Sh1 billion in revenues.

Riding on the success of Morning Side, Home Afrika decided to go into large-scale property development. It settled on Migaa, a 774-acre piece of land under coffee in Kiambu County on which the company is now developing a Sh20 billion project that will comprise 3,000 homes, an 18-hole golf course now nearing completion, road and water supply network, a recreational park, a coffee museum, a country club, a business park, schools among other facilities.

The project is scheduled for completion in three years.

The firm has also lined up other projects in the “Go County Programme” where it sees a lot of opportunities in the housing and property development sector. In Kisumu County, Home Afrika is planning to develop Lakeview Heights — a residential estate. In the Coast region, it plans to set up a gated residential estate in Tiwi. In this drive, Machakos County is also set to benefit from between one- and four-bedrooms residential housing project to be build on a 1,000-acre farm in Athi River — Kikwetu project. The houses will go for between Sh1 million and Sh15 million each.

This week, Home Afrika, valued at about Sh9 billion according to Mr Karuri, made a debut on the stock market to raise capital and to allow members of the public to buy its shares.

“In the next five years, our plan is to grow the company’s portfolio to over Sh85 billion ($1 billion),” he said, adding that the firm’s valuation hit Sh1 billion in its first year of business.
According to Home Afrika director Dan Awendo, the company’s move to list on the GEMS segment was based on the need to discover its value.

“The listing will create liquidity for the shareholders so that they are able to trade amongst themselves and also allow in new investors,” Mr Awendo said during the interview with Money.

With the listing, he noted, shareholder confidence in the firm would improve due to the regular reporting, disclosure and compliance standards that are a prerequisite when planning for a cash call in future.

The firm’s listing on the bourse’s GEMS segment is also set to challenge other small and medium enterprises to follow suit.

Home Afrika has now rolled out a pan African expansion drive starting this month. It has mapped out the continent into four regions — Eastern and Central, Southern, Western and Northern Africa where it is currently conducting feasibility studies as it also scouts for potential partners with whom to join hands with in setting up large-scale affordable housing projects.

“Over the next 10 years, we plan to build one million homes in Africa,” said Mr Karuri.

The company plans to develop about 100,000 homes in Kenya in the next 10 years. The country faces a demand of 200,000 housing units annually with supply estimated at only 35,000 units in urban areas.

The housing crisis in the country has been made worse by the high cost of homeownership including expensive credit, land and mortgages, which are virtually out of reach for many Kenyans.