Nairobi student accommodation note is first affordable housing transaction for the EAIF
PIDG company, the Emerging Africa Infrastructure Fund (EAIF/the Fund) announced on 4th October that it has completed its first project in affordable housing in Africa. It is also its first transaction denominated in local currency, the Kenyan Shilling (KES).
- EAIF anchor investor in note issue
- First ever green bond issue in Kenya
- 5000 students to benefit
- 3 PIDG businesses contribute to note issue success
The Fund has invested KES 1.3 billion (US$12.7 million) in a privately placed note issue in Kenya that raised a total of KES4.3 billion. EAIF anchored the issue as the largest single investor in the note. The funds will be used to finance the construction of up to 6 green-certified student properties in Nairobi developed by Acorn Holdings Ltd, creating clean, safe and affordable accommodation for 5,000 students.
Acorn Holdings Ltd is a joint venture between Acorn Group Ltd, a property development and project management company operating across East Africa, and Accord Holdco (AHC). AHC is wholly owned by Helios Investment Partners, a London-based private equity investor with a broad portfolio of African interests. Helios and EAIF have a successful long-standing commercial relationship, particularly in the African telecommunications market.
Alastair Herbertson, a Director at Investec Asset Management, which manages EAIF operationally, says that successfully closing EAIF’s first transaction denominated in local currency is an important milestone for the Fund.
“We have shown we have the appetite and expertise to support projects in local currencies. The note is a tradeable instrument. That opens up the possibility of selling it to local investors and strengthening capital markets in Kenya. EAIF has a long track record of innovation in infrastructure finance and this transaction confirms our ability to support the building of infrastructure and rise to the challenges of project finance in emerging sectors.”
The KES note has achieved “green certification” which reflects that the new student accommodation buildings will meet international green building standards in construction materials, in water systems and in energy conservation and use. In addition to contributing to climate change reduction, the properties will have a lower carbon output than traditional buildings and reduced running costs. Half the accommodation is expected to be taken up by women students. High safety standards and good site security measures will be built in. Lifts and ramps will allow disabled student access. The construction phase is estimated to involve around 850 people.
EAIF’s owners – the governments of the UK, the Netherlands, Sweden and Switzerland – agreed earlier in 2019 to add affordable housing to the Fund’s list of sectors approved for investment.
EAIF Executive Director Emilio Cattaneo says:
“This is EAIF’s first investment in the affordable housing market in Africa. That 5,000 students in Nairobi will have high quality and technically advanced green accommodation is a great endorsement for EAIF’s future in the affordable housing sector. As the anchor investor in the Acorn note, EAIF has demonstrated its belief that the housing project and given private investors greater confidence in investing in the note and in the future for Kenya’s higher education sector.”
GuarantCo, another PIDG company, has provided investors with a partial credit guarantee to cover 50 percent of principal and interest due under the note programme. PIDG’s Technical Assistance Facility is providing Acorn with a part returnable grant to contribute towards the costs of the loan note issue, which has brought down the cost of the note issue process, thus adding to its competitiveness as a financial instrument.
Kenya currently faces a chronic shortage of student accommodation. Student numbers have grown from 27,000 students in 1990 to around 550,000 today. There are currently fewer than 40,000 beds available at the country’s universities. Acorn is the first purpose-built student accommodation provider in the country. Since 2015, it has built three student properties, proving over 1,600 beds, and is addressing the student housing deficit in Kenyan cities.
NOTE: The green certification was independently verified as meeting the Climate Bond Standard and Certification Scheme of the Climate Bonds Initiative and was funded by FSD Africa.