Old Mutual Holdings Plc says it is considering packaging its properties segment into a real estate investment trust (Reit) with the view of better managing its exposure to the sector.
Reits are vehicles, owned by a group of investors, that hold properties for income. By packaging its assets into such vehicles, the insurer could be looking to offload part of its ownership to other investors.
The firm says it has received regulatory approval from the Capital Markets Authority (CMA) to establish the Reit and notes the move will serve to improve the Group’s returns from its investment in properties.
“We have a big property portfolio which sits in different businesses, some owned by shareholders while some back policyholder liabilities. Running properties requires professional management to ensure the best returns,” Old Mutual Holdings CEO Arthur Oginga told the Business Daily in an interview on Friday.
By establishing the Reit, Old Mutual says it seeks to create a third segment of its business which currently covers insurance and asset management.
The disclosure by the firm comes in the same week when it disclosed a planned sale and transfer of its 31-storey Old Mutual Tower, which is carried in its book at a valuation of Sh5.5 billion.
Subject to shareholder and other requisite approvals, Old Mutual says the tower would form part of the assets under the Reit with other properties including Equity Centre, Telkom Place, Union House, Kimathi House and the NCBA Annex.
Presently, the Old Mutual Tower is 100 percent leased and 94 percent occupied while other properties including Equity Center and NCBA Annex which serve as the headquarters of Equity and NCBA Group respectively are also fully occupied.
As of December 2022, Old Mutual valued its properties portfolio at Sh19.2 billion inclusive of assets in Uganda and South Sudan.
Carved out separately, Old Mutual property investment portfolio in Kenya, which would form part of the Reit, has a carrying of over Sh11 billion.
Despite planning the Reit, the investments firm notes it would be open to offers for the Old Mutual Tower and any other of its properties.
“We are an insurance company and not a property company. If someone comes and gives you an offer that makes sense, we will look at it. We have people coming and giving us offers not just for this property (the Old Mutual Tower) but nothing has looked interesting to us so far,” added Mr Oginga.
Oginga notes that Old Mutual would progressively make a decision on the potential listing of the planned Reit at the Nairobi Securities Exchange (NSE).
Beyond establishing the Reit, Old Mutual has sought the vote of its shareholders for the conversion of part of its shareholder loans into equity with the view of deleveraging its balance sheet to set itself up for future growth.
