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By Phyllis MUCHOKI
The Acorn Student Accommodation Development REIT (ASA D-REIT) and the Acorn Student Accommodation Income REIT (ASA I-REIT) delivered a strong performance in the half-year ended June 30, 2024, to post a 24 percent increase in profitability and deliver a combined operating profit of KES 586 million compared to KES 474 million over a similar period last year.
Both REITs overcame a challenging macro-economic environment to sustain a strong performance over the period, posting a 21.4 percent in net profit growth to KES 345 million up from KES 284 million last year.
ASA I-REIT
The ASA I-REIT maintains an upward growth trajectory, driven by rental escalations, increased occupancy across its operational assets and the successful new acquisitions of Qwetu Aberdare Heights II in Q1 2024 as well as Qwetu Hurlingham in September last year, resulting in an increase in the total asset value of the ASA I-REIT by 44% to KES 10.6 billion as at June 2024 from KES 7.3 billion in June 2023.
The NAV per unit consequently increased to KES 22.21 per unit, up from KES 22.03 per unit at start of the year, reflecting a 0.8% growth and a 11% growth in the NAV per unit price since its launch in 2021.
The I-REIT continues its strong distribution track record by announcing its 7th consecutive distribution payment of KES 0.30 per unit which totals KES 99 million, and which underscores its commitment to delivering consistent and reliable returns to its investors.
The occupancy across the portfolio remains strong underpinning the quality of the offering and the strength of the portfolio.
Looking ahead, the ASA I-REIT plans to further enhance its portfolio with the targeted acquisition of its 8th and 9th assets from ASA D-REIT later in the year, upon those properties attaining the stabilization threshold.
Reduction in the cost of debt within the portfolio remains a top priority for the REIT Manager to improve the distributable income and overall yield to investors.
This will be addressed by utilising the recently secured long-term debt facility with the US Development Finance Corporation (DFC) and other debt reduction mechanisms at its disposal, yielding higher returns for investors.
The USD 180mn facility will fund the development of 35 affordable student housing units in Kenya delivering 48,000 additional beds to the portfolio.
ASA D-REIT
The total asset value of the ASA D-REIT increased by 11.5% to KES 12.6 billion from KES 11.3 billion in June 2023. The NAV per unit consequently increased to KES 25.35 per unit, up from KES 24.54 per unit at the start of the year, reflecting a 3.3% growth and a 27% growth in the NAV since its launch in 2021.
This performance highlights the strength and quality of the developments as existing projects at various stages of development track to completion and the embedded value get realised.
The long-term borrowings decreased because of reclassification of the Acorn Green Bond to short-term borrowings as the medium-term note (MTN) will be maturing in the last quarter of the year.
The MTN funded 8 development projects, 4 of which have been sold to the ASA I-REIT. The four remaining projects Qwetu and Qejani Karen and Qwetu and Qejani Chiromo will be exited once stabilized later in 2024 and in the first half of year 2025
Combined Impact
Collectively, the ASA I-REIT and ASA D-REIT are contributing to the growth of the quality and affordable student accommodation in Kenya while delivering stable, robust and predictable returns for investors.
By combining the strengths of both REITs, Acorn Investment Management Limited is positioned to continue driving innovation and creating sustainable value in the Purpose-Built Students Accommodation (PBSA) subsector and the wider real estate market.
Commenting on the results, Acting Executive Director, Acorn Investment Management Limited, Mathew Maina said:
“We are delighted to report a strong half-year performance with notable growth in total assets and the net asset values for both the ASA D-REIT and ASA I-REIT.
Despite a challenging macro-economic environment locally and globally, this performance underscores the resilience of the PBSA asset class, the prudent asset management approach and a strategic focus to delivering quality student accommodation.
The interim distribution of KES. 0.30 per unit by the ASA I-REIT, which is the 7th straight dividend paid by the REIT, reflects our unwavering commitment to delivering returns to our investors.
“As we advance through 2024, our focus will remain the delivery of ongoing projects on time and within budget while utilising mechanisms within our disposal to reduce the cost of debt across the operating portfolio to further enhance investor returns”.