22 nd September, Issuance of 14% per annum, Medium-Term Note Programme Issued by Acorn Group / Siyara Properties LLP

Transcription

1 22 nd September, 2014 Issuance of 14% per annum, Medium-Term Note Programme Issued by Acorn Group / Siyara Properties LLP

2 Table of Contents I. Introduction to Acorn Group II. What does a Developer do? III. Real Estate Investment Opportunity IV. Project Karen Ololua Ridge V. Transaction Overview VI. Q & A 2

3 I. Introduction to Acorn Group

4 Introduction to the Issuer - Acorn Group Limited Acorn is the leading Real Estate Developer & Project Manager in the Region Leading real estate developer and project manager in the East African Region 2011 having been involved is some of the most iconic projects in the last decade such as Coca-Cola East & Central Africa Headquarters, Deloitte East Africa Head Office, 2012 Equity Centre, Britam Tower, Acorn House among others Largest deal pipeline with over KES 40 Billion of projects Integrated and differentiated key capabilities in real estate : Development, Project Management, Property & Facilities Management, Sales & Letting, Market Research Experience with delivering institutional investment grade real estate developments 4

5 Acorn s Flagship Projects Acorn is the leading Real Estate Developer & Project Manager in the Region Coca-Cola Headquarters East and Central Africa Deloitte East Africa Head Office Role of Acorn: Project Management No. of Storeys: Three Total built-up area: 6,214 m 2 Total gross floor area: 4,100 m 2 Total Lettable area: 3,853 m 2 Start Date: Oct 2007 Practical Completion: Sep 2008 Construction Cost: KES 1,000 Mn Role of Acorn: Project Management No. of Storeys: Four Total built-up area: 8,291 m 2 Total gross floor area: 3,608 m 2 Total Lettable area: 3,067 m 2 Start Date: July 2008 Practical Completion: May 2010 Construction Cost: KES 850 Mn 5

6 Acorn s Flagship Projects Acorn is the leading Real Estate Developer & Project Manager in the Region Acorn House Equity Centre Role of Acorn: Developer No. of Storeys: Three Total gross floor area: 6,905 m 2 Total Lettable area: 6,284 m 2 Start Date: Feb 2011 Practical Completion: Oct 2012 Project Cost: KES 700Mn Project IRR: 36.4% Role of Acorn: Project Management No. of Storeys: Ten Total built-up area: 14,500 m 2 Total Lettable area: 7,900 m 2 Completed 2008 Project Cost: KES 900Mn 6

7 Acorn s Flagship Projects Britam Towers Role of Acorn: Project Management No. of Storeys: Thirty Total built-up area: 68,751 m 2 Total Gross Floor area: 60,617 m 2 Total Lettable area: 31,591 m 2 Start Date Nov 2012 Estimated Practical Completion July 2016 Construction Cost: KES 7,000Mn

8 Acorn s Track Record is A Strong 37.5% Annualized Return Strong record of executing projects across various real estate themes with 37.5% IRR (all figures in millions of KES) 2011 Project Description Role of Acorn Project Size Equity Size Equity IRR Project Duration (Months) 2012 Forest Edge Residential (Town-houses) Project Managers & Development Partners % 38 Tiara Properties Commercial Mixed Use Project Managers & Development Partners 1, % 108 Gumba Investments Prism Properties Commercial Mixed Use Retail Office Park Project Managers & Development Partners Project Managers & Development Partners % % 49 Stables Development Retail Office Park Project Managers & Owners % 35 Grand Total 2, % 57 8

9 Real Estate Investment: We Take A Thematic Approach High Economic Growth Growth of SMEs and Informal Sector Growing Middle Class Midscale Hotels Suburban/Outlet Malls Youth Bulge Rapid Urbanisation leading to Urban Sprawl Mixed Use Developments Commercial Offices Masterplan Developments Site and Service Schemes 9

10 10 II. What does a Developer do?

11 A Real Estate Developer Acorn is the leading Real Estate Developer, but not everyone can be a Developer 2011 A real estate developer is a multi-faceted business that coordinates various high risk activities that convert ideas on paper into Real Property in a profitable manner 2012 Examples of Institutional Real Estate Developers are: EMAAR one of the most successful developer in the Middle East, Liberty Properties South Africa, Lend Lease Australia, Swire Properties Hong Kong KB Homes USA 11

12 The Core Competencies Of A Real Estate Developer Acorn embodies key competencies that are critical in the role of a Real Estate Developer 1. Market Knowledge - Experience in the Real Estate Industry is critical, as well as understanding the Market 2011 Pulse, Demographics and Trends 2. Finding Suitable Sites For Development - to assess a wide variety of sites against a future vision for a 2012 successful project 3. Creating Powerful Concepts - Creating a strong concept matched with exceptional architecture and aesthetic appeal Negotiating Planning And Other Statutory Approvals - Developers also need to be highly creative and work with planners to present their applications in an appropriate and strategic way 5. Resolving Legal Issues - Real Estate Development comes together with a myriad of legal issues ranging from title and ownership documentation issues & various legal challenges 12

13 The Core Competencies Of A Real Estate Developer, Continued Acorn embodies key competencies that are critical in the role of a Real Estate Developer 6. Developing A Strong Business Case - a strong business case demonstrates strong financial and market 2011 viability, and is a prerequisite for funding 7. Sourcing, Negotiating And Structuring Funding - For a development to succeed, it is very important to 2012 Structure all sources of funding (Equity, structured finance and Debt) properly 8. Delivering The Project On Time, Budget And Quality - Execution and Completion delays, cost over runs and poor quality are the biggest risks associated with development Marketing And Creating Strong Brands - Institutional Developers Build Branded Real Estate Products, which are then packaged and promoted 10. Letting And Selling Of Properties - Unlike most other products, 70% of the Decision to buy or Let a Property is made at the Point Of Sale, hence a strong Team is needed for Sales 11. Property And Facilities Management - Many of the leading developers understand that the attractiveness of developments depends on how well the properties are maintained and managed 13

14 III. Real Estate Investment Opportunity 14

15 Real Estate Investment: We Take A Thematic Approach High Economic Growth Growth of SMEs and Informal Sector Growing Middle Class Midscale Hotels Suburban/Outlet Malls Youth Bulge Rapid Urbanisation leading to Urban Sprawl Mixed Use Developments Commercial Offices Masterplan Developments Site and Service Schemes 15

16 Thematic Approach: A Practical Application Each of the 5 themes was carefully chosen to target a solution to a real problem The Problem The Solution The Opportunity 1 Nairobi and most urban centers are suffering Decant the growing floating middle class into from urban sprawl (the development of adhoc master planned communities unstructured, un-serviced and unplanned urban centers) Master Planned Communities & Mixed Use Developments 2 The demand for retail and entertainment by the Middle Class and Youth is growing faster with limited options currently available Construction of decent and aspirational shopping malls which service the middle class outside the urban sprawl and allows high traffic and provides retail, entertainment and food outlets Suburban / Outlet Malls The demand for commercial space for growing middle to small businesses that wish to occupy entire buildings To provide small commercial offices for SME s and Commercial Mixed Use (Retail, informal sector together with rental residentials Offices & Residential) for the Youth 4 Requirement for efficient and functional office Experience in office development creates the Commercial Office Parks space to cater for SME growth and their ability to replicate the product for varying markets transition into Medium and Large corporates 5 Lack of affordable and well-placed budget hotels which cater to the growing business clientele Provision of affordable, decent accommodation suiting the needs of a growing business clientele Budget hotels 16

17 Prior Projects Demonstrate Attractive 67% Appreciation Coming in early into projects has provided a 67% upside opportunity In Kenya, and especially Nairobi, demand for residential property is forecast to outstrip supply in 2014, 2011 largely in the middle to upper price range Nairobi has recorded sustained growth in property prices over the past 5 years. More specifically, the 2012 recent flagship developments of gated communities in middle and upper income areas have demonstrated capacity to generate attractive short term returns to early stage investors Projects Inception Date Location Description Month Value Appreciation (%) Mbagathi Ridge 2012 Karen Site & Service (1 Acre) 118% Karen Hills 2012 Karen Site & Service (1 Acre) 79% Miotoni Ridge 2011 Karen 5-bed Town Houses 53% Tiara Properties 2010 Lavington 4-bed Town Houses 57% Green Park (Phase 2) 2012 Athi River 3-bed Bungalow 67% Phenom Estate (Phase 3) 2011 Langata 4-bed Maisonette 31% Average 67% Median 67% 17

18 Per annum Return, 5 Year Average Return Comparison by Asset Class RE is Highest & Most Stable Real Estate has been the highest performing and projected to continue over the next 5 to 10 years Traditional investments in public markets (fixed income and equities) have returned roughly 10%, 2011 compared to 24% for real estate, whose return performance is projected to continue; and are more stable and uncorrelated with listed markets % 23.50% 20.00% 15.00% % 11.30% 9.70% 8.00% 5.00% 0.00% Real Estate Bonds 91 Day T-Bill Equities (NSE 20) 18

19 Coupling up a Developer & Funding Partner Acorn, alongside Genghis and Cytonn are bridging the Supply and Demand gap in the Real Estate market For many years, the supply and demand have been largely disconnected in the Kenyan Real Estate 2011 market, characterized by adhoc forays by players on both sides Partnerships, such as those of Acorn with Genghis and Cytonn, couple up a developer with a funding 2012 partner to provide institutional grade real estate products for investment Supply Side Institutional Players Demand Side Large Sized Acorn Actis Centum/ Athena UAP Pension Funds ICEA / LION Medium sized Home Afrika AMS Properties Acorn & Genghis + Cytonn Insurance Companies ICEA/ LION Financial Institutions Cytonn & Genghis HF Stanbic KCB S&L Mortgages Shelter Afrique Pension Funds (Lap Trust) Asset Managers Private Equity Funds 19

20 20 IV. Project Karen Ololua Ridge

21 Karen Ololua Ridge Location The site is located within reach of social,convenience and institutional facilities 2.0KM 2.5KM 29.4 Acres 21

22 Karen Ololua Ridge Concept A beautiful 29.4 Acre plot (2 parcels to be amalgamated) with a 400 metre frontage of Mbagathi River Subdivided into 46 fully serviced plots of varied sizes and 46 duplex cottages Ultimate buyers:- home owners and investors Located near key conveniences; Karen shopping centre, medical facilities, fine dining, top tier schools Perimeter wall topped with electric fence, CCTV, fiber optic cable backbone, electricity, borehole to supplement water supply, landscaping along driveways, street lights Commercial centre with a gym, entertainment, convenience shop(s), boutique offices Ease of access upgrade of Ngong Road and the newly done Southern Bypass Design code to ensure that the whole estate remains aesthetically pleasing whilst allowing individual freedom in design as well as maintaining a consistent design theme in the scheme Estimated completion June

23 Karen Ololua Ridge Master-Plan Facilities on the well laid out Master-Plan include Fully serviced plots, a Club House, Convenience store and a Gym among many others 23

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27 A Prior Successful Story Mbagathi Ridge is a similar, well executed site & service been undertaken by Acorn Group: 9 acres, Completed in 2014, Fully sold, 80% capital Appreciation 27

28 28 V. Transaction Overview

29 Key Features Highlighted are the key features of the Transaction Issuer Transaction Description Issue Amount Siyara Properties LLP, a wholly owned subsidiary of Acorn Group Limited Issue of Secured Structured Notes KES Bn Note Currency Note Denomination (lot size) Note Rate Kenya Shillings (KES) Kenya Shillings Four Million (KES 4,000,000/-) Fourteen Percent Per Annum (14% p.a.) Fixed Rate Collateral (i) Assignment of sales proceeds from the Ololua Project (ii) Negative Pledge on the Property (iii) First Demand Guarantee by Acorn Group Ltd Real Estate Conversion Mechanism Noteholders will be entitled to redeem 8 notes to be converted into any of the available serviced plots until maturity at a Call Option Price Equivalent of KES 37.5m for a 0.5 acre plot (MAX of 10 options to be triggered on a first come first serve basis) 29

30 Key Transaction Parties Strong parties have come together in the structuring and issuance of the Note Transaction Advisors Legal Advisor Receiving Bank Note Trustee Registrar CoSec. 30

31 Transaction Rationale The Siyara Notes have been structured in order to deliver the following core benefits to the Issuer and Investors Note Holders 1 Contribute to the overall funding diversification strategy in view of the current pipeline of projects. 1 Attractive mid-term yield on a fully secured instrument 2 3 Tailored mid-term funding solution with enhanced Pricing Strategy leveraging (i) Low Pre-Sales Requirement and (ii) Optimized Project Turnaround. Enhance the Company s market visibility ahead of cash calls via DCM / ECM transactions (Listing, Bond issuance, etc.) Superior Returns to be generated via the real estate conversion mechanism Liquidity Mechanisms (OTC platform) from Month 6, once the Concept & Master Plan have been finalized and approved Pre-emption Rights on the sale of new plots (from Month 6 to Month 9) 31

32 Q&A 32