According to the latest market data, investors of Fahari Income Reit (I-Reit) purchased a record 24.3 million shares valued at Kshs 204.1 million at an average price of Kshs 8.4 over the past week as they strategically positioned themselves for potential gains from the proposed buyout of the listed property fund by the Reit Manager, ICEA Lion Asset Management (ILAM).
Read: ILAM Fahari I-REIT Net profit for the Half Year 2023 Remains Relatively Unchanged
ICEA Lion, through a memo dated 25th August, announced that it had received approval from the Capital Markets Authority (CMA) to convert ILAM Fahari I-Reit from an unrestricted to restricted I-Reit, and a redemption offer of up to 36.6 million units at a price of Kshs 11 per unit from non-professional investors holding units valued at Kshs 5 million and below. The redemption offer price represents a premium of 82.7 percent above the initial market price of Kshs 6.0 per unit and a book gain of 22.2 percent from the current market price of Kshs 9.0 per unit, as of Friday last week. The strategic review forms part of the ongoing operational restructuring put in place by the Reit manager. The approval comes a year and a half following the issuance of a cautionary statement regarding the same in March last year.
Since the announcement, Fahari I-Reit’s share price has spiked by 49.5% to reach a record high of Kshs 9.0 as of last Friday, from the closing price of Kshs 6.0 recorded the previous week. Subsequently, volumes of the Reit’s shares traded on the Nairobi Securities Exchange (NSE) increased from 5,900 recorded on 25th August to 7.3 million realized last Friday, with a volume high of 10.2 million achieved on 31st August.
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Currently, Fahari I-Reit ranks sixth on the NSE, in terms of year-to-date performance having gained 32.7% in its share price from Kshs 6.8 per share recorded in the beginning of the year, as at 3rd January. The proposed buyout by ICEA Lion significantly boosted the property fund’s stock price to levels not witnessed since 2020, surging from as low as Kshs 6.0 on the day preceding the material announcement. Fahari’s share price had slumped since its listing in 2015, consistently trading below its Net Asset Value (NAV), standing at Kshs 18.7, as per its half-year financial results.
Mr. Einstein Kihanda, Chief Executive Officer of ICEA Lion Asset Management, welcomed CMA’s approval of the proposed transaction, highlighting that the transition away from the Unrestricted Main Investment Market Segment (UMIMS) would allow for the restructuring of the I-REIT, lower expenses, draw in new investments, and acquire more properties to achieve a sustainable asset base size. Kihanda also noted that the potential relocation of the Reit back to the main board of the NSE, would be considered after three years of successful execution of their growth strategy.
The 24.2 million shares traded last week amounted to 66 percent of the 36.6 million that ICEA Lion Asset Management plans to buy back under the conversion process. The significant offloading of the large volumes of shares in the open market just before the buyout suggests investors’ rush to exit and underscores potential apprehension due to the uncertainty surrounding the proposed transaction. Markedly, Fahari’s conversion will limit its investing to only high net worth individuals who meet professional investors threshold of holding units worth at least Kshs 5 million, as defined in the CMA’s Collective Investment Schemes Regulations, 2013, thereby knocking out potential retail investors.
The offer will run from this week, Wednesday, 6th September, to Friday, 6th October, after which Fahari I-Reit’s units will be suspended from trading until 25th October when trading will resume on the Unquoted Securities Platform (USP), an over the counter market segment of the NSE. Other Reits trading on the platform include Acorn Student Accommodation (ASA), Income Reit (I-Reit) and ASA Development Reit (D-Reit) launched in 2021.
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