Private equity firm Helios Investment Partners is making equity investments of up to $100 million (Sh10 billion) in property developer Acorn Holdings, which is building branded student hostels in Nairobi.
This will add to the Sh3 billion worth of loans that the London-based firm had already provided to the company.
“Helios has committed $100 million (Sh10 billion) to Acorn to provide the equity funding necessary to support the substantial development programme,” the property developer said in the information memorandum that guided its recent Sh5 billion bond issuance.
Of the equity capital being provided by Helios, about Sh2.6 billion will be combined with the bond proceeds to build the hostels.
This means that bondholders will fund 65 percent of the projects while Helios shoulders the balance, with the debt-to-equity ratio of 65:35 to be maintained at all times as part of the debt covenants.
Acorn is the first to offer branded, private student accommodation on a large scale. Its Qwetu and Qejani hostels offer a study room, Wi-Fi, and a gym among other features.
Tenants at the properties are charged a monthly rent of between Sh7,000 and Sh33,000 depending on location and amenities provided.
“The group has rolled out three purpose-built student accommodation (PBSA) properties with over 1,500 beds,” Acorn said in the information memorandum.
“Demand for the group’s product has outstripped management expectations, with its first two properties on Jogoo Road and Ruaraka, achieving over 90 percent occupancy levels in 15 months and less than 12 months respectively.”
Acorn’s third property in Parklands opened in March last year. The company plans to build other hostels to serve students at institutions such as United States International University Africa, Catholic University and Strathmore University.
The company says there continues to be a large gap between demand and supply of PBSA in the market.
Beds available across the country are approximately 280,000 against the total number of university students of about 600,000, according to Acorn.