Mi Vida Homes' Ksh5bn D-Reit initiative

Mi Vida Homes, a leading real estate developer in Kenya, is seeking approval from the Capital Markets Authority to raise Ksh5 billion through a new Development Real Estate Investment Trust (D-REIT). The affordable housing agenda has become a key focus in many African cities, including Nairobi, where there is a significant deficit in housing. The CEO of Mi Vida Homes, Samuel Kariuki, highlighted the long-term and deep demand driven by the need for rental properties in urban areas. To address the constraint of funding, Mi Vida Homes aims to leverage the capital markets to scale quickly and seize the market opportunity. Mi Vida Homes has made significant progress in obtaining the necessary licenses and approvals for the D-REIT initiative. The company has already been licensed as a rates manager and is now working on completing the documentation required for approval from the CMA. With a pipeline of 3,300 residential units in Nairobi, Mi Vida Homes is well positioned to capitalize on the demand for affordable housing in the city. The projects are already in progress, with some units already pre-selling and generating customer interest. The flagship development for Mi Vida Homes is at Garden City, a 47-acre mixed-use development owned by Actis, one of the company's shareholders. The pipeline includes 1,800 residential units, with projects underway in Garden City and two additional sites in Nairobi. The D-REIT aims to focus on green affordable housing with a potential mix of mid-market products to cater to a wide range of buyers. One of the key features of the D-REIT is a redemption mechanism that allows investors to recoup their capital once a project is completed and sold. In terms of returns, Mi Vida Homes is targeting a 30% internal rate of return (IRR) for investors participating in the D-REIT. The company plans to combine the capital raised with customer deposits to create a capital-light operating model that enhances the return on equity. While the D-REIT does not have a fixed maturity period, investors can expect to receive distributions from completed projects annually, with the entire pipeline expected to take around seven years to fully develop and sell. Addressing the risks associated with the D-REIT, Kariuki emphasized the market risk and development risk. Mi Vida Homes follows a pre-sale model, ensuring that at least 50% of a project is sold before commencing construction, mitigating market uncertainty. The company also leverages the expertise of its shareholder, Shapoorji Palonji Real Estate, to manage construction risks effectively. Additionally, the D-REIT offers a redemption feature to provide investors with a guaranteed exit mechanism and protect against downside risks. Looking ahead, Mi Vida Homes is not only focused on the current pipeline of projects but also exploring opportunities in other cities and towns in Kenya. With the successful implementation of the D-REIT initiative, the company aims to expand its presence beyond Nairobi and tap into new growth markets. The strategic approach to real estate development and innovative financing mechanisms position Mi Vida Homes as a key player in revolutionizing the real estate market in Kenya.