News Column

Ambani in fresh Sh189m Kenyan real estate deal

February 20, 2014

John Gachiri, jgachiri@ke.nationmedia.com -1



Indian tycoon Mukesh Ambani has reported another gain of Sh189 million from part-sale of his Kenyan real estate holdings amid the ongoing shift of his local business interests.

Delta Corp, a subsidiary of the Ambani-owned conglomerate Reliance Industries, reported the gain from its Kenyan operations in its third-quarter results for the period ended December 2013.

"A gain of Rupee 1,344.85 Lacs (Sh186 million) from the proceeds of partial liquidation of Kenyan subsidiary is included in the financial results under the head exceptional items," said the Delta Corp statement.

Last month the company's chief finance officer Hardik Dhebar said real estate projects in Kenya had returned Sh2 billion profit.

The company last year decided to wind up its local real estate division having made billions of shillings in profits since entry about six years ago, revealing that it would shift its focus to the gaming and hospitality industries.

"We have done exceedingly well in Kenya and we almost doubled our money. We had invested 70 crore (Sh974 million) in 2007 and total inflow from Kenya is in the region of 140 to 145 crore (Sh1.95 to Sh2 billion)," said Dhebar in an interview with CNBC.

Delta Corp entered Kenya's real estate through its subsidiary Delta Corp East Africa Limited (DCEAL).

The latest statement by the company did not identify which properties were sold, but the firm's annual statement shows that it has sold most of it major holdings in Kenya.

In 2011 it sold Delta Centre located in Upper Hill to the World Bank Group for Sh2 billion. It also constructed and sold off Delta Corner to PwC and the University of Nairobi's Staff Pension Scheme for Sh4 billion.

The 21-story twin-tower is located in Nairobi's affluent Westlands suburbs. Delta Riverside, a gated complex of four office blocks targeting small and mid-size companies had also been sold off, but Delta has not disclosed how much it made from the project.

The firm also said that it had completed construction of Delta Plains, a mid-to low-cost residential complex at Athi River near Jomo Kenyatta International Airport, but did not indicate if it has sold the units.

READ: Ambani reports Sh2bn profit from Kenya real estate

Delta was to develop a luxury hotel in the central business district on a four-acre plot but the plan was dropped after a tussle with the National Social Security Fund (NSSF) over the land.

Data from annual reports show that other projects that had been planned are Delta Point, a commercial complex that was to be built on a 53,820 square foot parcel in Upper Hill, and Delta Chambers on 4th Ngong Avenue where a similar complex was to be put up on a 43,432 square foot parcel.

Doubled its investment

Delta said that it has nearly doubled its investment since it entered Kenya in 2007. At the time the firm said that its reason for entering Nairobi's property market was to feed high demand for office space.

"Most businesses in Nairobi, especially larger organisations, are relocating from the Central Business District the commercial hub of the city (due to overcrowding) to satellite areas such as Upper Hill, Westlands, Kilimani and Mombasa Road which are fast developing into commercial centres," says its 2008 to 2009 annual report.

Property experts say there is still high demand for office space amid low supply nearly a decade after firms such as Delta opened shop in Nairobi attracted by the lucrative opportunity.

"They have done well in adding stock to the market but the demand is still there," said Knight Frank (Kenya) chief executive Ben Woodhams in an interview.

Demand for high-end office space has been mainly driven by multinational corporations' choice of Nairobi as their regional headquarters.

In the short-term areas such as Upper Hill may get a reprieve from the expected extra space once companies such as Britam and Fusion Group complete their projects in the area, said Mr Woodhams.

Britam is constructing a 30-storey headquarters in Upper Hil, Nairobi, while Fusion is developing two properties in the same area.


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Source: Business Daily (Kenya)


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