Taaleritehdas Private Equity Funds (TTA), the leading foreign financier of real estate developments in the Eastern Africa region, and Cytonn Investments, the leading real estate development, finance and investment company in Kenya, have today announced a Kshs. 220 million exit of a structured real estate note – an innovative and flexible financing instrument for real estate. TTA was the lender, and Cytonn, which has now paid the note, was the borrower.
The note was structured as a mezzanine instrument that ranks senior to equity in the development vehicle. The note bridges the gap from the start of a real estate project up to the point when the development can attract conventional bank debt financing.
The note was structured at a market rate cost of funds of 18% plus participation in the capital appreciation achieved during the period the note was outstanding, bringing the total annualized return earned by TTA to 54%.
“This demonstrates the appetite for alternative financing sources for real estate developments needed in the rapidly growing Eastern Africa region. When we get a trusted partner such as Cytonn, we are able to come in early and commit capital based on the vision and concept. Once the land purchase is complete, concept development is done, statutory approvals secured and pre sales are strong, the project is able to strongly attract conventional replacement capital to get us out at a very attractive return. This works for everyone because for TTA, the 54% return is very attractive, for Cytonn they get efficient and very flexible early financing to execute their projects faster, and for the new investors, they get a dramatically de-risked project that fits the conventional financing structures” said Antti-Jussi Ahveninen, Head of Africa at TTA.
“This demonstrates the unique execution model at Cytonn where we are bringing together, onto one platform, global capital from aligned partners such as TTA, land owners seeking joint ventures and our development capability, to create high quality aspirational real estate projects. TTA has financed over Kshs. 2 billion of Cytonn projects and we are very glad to have demonstrated to them our capabilities in structured financing and commitment to our financiers by starting to return some of that capital in less than a year”, said Elizabeth Nkukuu, Chief Investment Officer & Partner of Cytonn Real Estate.
