Markets & Finance
Acorn taps Sh6.7bn Absa loan for 12,000-bed student hostels
Wednesday February 08 2023
Acorn’s Qwetu Hostels in Nairobi’s Ruaraka area. PHOTO | NMG
Property developer Acorn has received Sh6.7 billion from Absa Bank Kenya to fund 10 students’ hostel projects with a combined bed capacity of 12,000.
Chief executive at Acorn, Edward Kirathe, said on Wednesday that Absa funding would be added to Sh4.3 billion raised by investors in the Acorn Student Accommodation Development real estate investment trust (D-REIT) to fund the total project value of Sh11 billion.
“There are 10 projects here. Every project within that portfolio will be sold to the income Reit (I-Reit) when it is completed, full of students and therefore earning revenue,” said Mr Kirathe.
The projects, which will take Acorn’s investment in student hostels to about 21,000 beds, will mainly target students from the University of Nairobi, Kenyatta University, Jomo Kenyatta University of Agriculture and Technology (Jkuat) and other private universities.
Absa Kenya interim chief executive Yusuf Omari said the funding would help further Acorn’s purpose-built student accommodation, which started about seven years ago.
“The successful conclusion of this Sh6.7 billion financing will support the development of additional purpose-built student accommodation in Nairobi and its outskirts. The deal underscores Absa’s passion for promoting Environmental, social, and governance-focussed investments,” said Mr Omari.
Official data shows the student population in post-secondary education institutions, including universities and vocational centres, crossed the one million mark in 2020— a 31 percent growth in five years.
Private sector players are stepping up to solve the housing deficit, especially after the State scaled down budgetary support to institutions such as public universities, making them drop student accommodation from their priorities.
The young generation, which makes up most of the student population, demands modern facilities and furnishings that many mass-market houses do not offer.
Mr Kiraithe told the Business Daily that Acorn has already broken ground for four projects— one in Hurlingham, two at Kenyatta University and one at Jkuat— while four more would start later this year.
“The ones we are breaking ground currently will be complete in two years’ time and be ready for occupation by early 2025,” said Mr Kirathe.
The property developer has maintained its tradition of funding projects with a mix of about 65 percent debt and 35 percent equity.
Acorn currently has 11 properties with a capacity for 11,013 beds—either under development or operational—serving students from about 140 universities and colleges.
Last year, the firm received Sh1.78 billion from selling a student hostel built near the United States International University (USIU) to an income-focused real estate fund, helping to repay debt worth Sh800.2 million.
Read: Acorn sells USIU-A hostel for Sh1.7 billion
Acorn secured Sh5.7 billion through a medium-term green bond, out of which the company used Sh4.2 billion to put up several student hostels including at USIU, Chiromo, and Hurlingham.
