Laptrust sets Sh5m minimum investment in fund

Pension scheme Laptrust has locked out retail investors from its newly created real estate investment trust by setting a minimum investment of Sh5 million for each party that may want to buy into the property fund in the future.

Laptrust has received the Capital Markets Authority (CMA) approval to package its real estate assets into a fund called Laptrust Imara I-Reit and which will be listed on the Nairobi Securities Exchange.

The properties that will be held under Imara include CPF Metro Park, CPF House, Pension Towers, Freedom Heights Mall and Service Plot, Man Apartment and Nova Eldoret.

“The Laptrust Imara I-Reit will be listed as a close-ended fund at Sh20 per unit (share) based on the net asset value of the scheme as at the time of listing, with a total of 346,231,413 units,” the regulator said in a statement.

“The valuation of the I-Reit, at the listing, will thus be Sh6.9 billion. The units may only be transferred to persons who qualify as professional investors and at a minimum trade size of Sh5 million.”

A closed-end fund’s shares are traded on the exchange but no new units will be created and no new money will flow into the investment vehicle.

This means that Laptrust, which fully owns Imara, will decide how many units of the property fund it will sell to the high-net-worth investors who will be required to buy a minimum of 250,000 units at Sh20 each.

Laptrust’s move follows Acorn Student Accommodation Income Real Estate Investment Trust (Acorn I-Reit), which also set a minimum investment of Sh14 million when it brought on board new investors in January last year.

Acorn’s property fund is not listed on the NSE but trades on the over-the-counter market in transactions starting from Sh5 million per trade.

A high investment threshold is aimed at restricting the offer to a relatively smaller group of “professional investors” who are deemed to be more likely to understand and handle the risks and opportunities of the fund.

Such investors will include high-net-worth individuals and institutions such as pension firms and insurers.

NSE-listed Ilam Fahari I-Reit is the only property fund to embrace small investors, setting a minimum investment of Sh20,000 when it raised funds in November 2015.

Fahari’s trading on the bourse has no restrictions, allowing minimum investments of about Sh700 for 100 units based on the current market price. It was not immediately clear when Laptrust’s Imara may sell units in the fund to outside investors.

An I-Reit is a real estate trust that primarily derives its revenues from rental income. At least 80 percent of the trust’s net profit from normal operations must be distributed to investors.

REITs are exempt from multiple taxes, including withholding and income taxes, making them a more efficient vehicle for holding real estate assets.

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