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22 June, 2020
Covid-19
  1. FAQs on the loan restructuring communication

Faqs On Chys & Cpn Loan Restructuring Communication

  1. Which are the three extension frameworks that a client may consider?
  1. A twelve (12) month extension from the date of your current maturity.
  2. The option to convert the client’s investments to Real Estate Units at the current market price and project terms; OR
  3. Enter a stand-still agreement- where no withdrawals are made for two (2) years and with a one-off renegotiation fee.

  1. What is the renegotiation fee and how much is the amount to be paid per client?

The renegotiation fee shall be for those clients who wish to enter into a standstill agreement for a period of two years. The client shall receive 1% of the investment amount

  1. Is the renegotiation fee part of the interest earned within the two years?

It depends and this can be negotiated to be either a fee payable or be added as part of the interest 

  1. What is the unit price of the real estate projects that the clients will take up?

The Unit Price shall be the current market price’

  1. Can clients access interest earned in both the first and third options?

In the first option- the twelve (12) month extension, yes, but under the partial/recapitalization interest amounts. The stand-still agreement means that no payments shall be made within the two years. For CPN clients, interest payment cycles remain with the earliest being quarterly remittance.

  1. What is the pay-out period for the interest earned?

Dependent on inflows, there shall be a partial interest payment or recapitalization of interest. The interest amounts payable for Clients shall take the whole working month.

  1. Will clients in the standstill option get an additional rate?

No, they shall get the one-off renegotiation fee

  1. Can a client choose to roll over their funds for a period longer than one year and earn at an additional rate?

Yes, this can be negotiated

  1. For clients who opted to extend their funds for a period longer than the three months, will they be affected by these three option?

Yes, as these affect all the funds that were in the firm as at March 11th, 2020

  1. If the economic situation in Kenya improves, Will the company revert to the initial maturity date?

We would hope that the economy improves sooner rather than later, and as we care about our clients’ financial well-being, the earlier we return to a better liquidity position, the sooner we can look at making funds available to clients. We shall however not revert to an investment initial maturity date.

  1. What criteria was used to determine the extension period should be one year?

It is in line with the World Health Organisation (WHO) research on the period of finding a cure or vaccine to Covid-19. We are projecting that within this period there will be a return to normalcy and therefore the challenges we are facing on the economic front will have been sorted out.

  1. Can a client capitalize on their full interest?

Yes, it is possible for a client to capitalize on their interest

  1. Does the current 3-month extension count in the 12-month extension?

No, it is a new extension beginning from the date of your current maturity

  1. What happens to those who need their funds as they invested based on a specific tenure and cannot wait

The extension would still apply based on the current circumstances of the Fund

  1. What is the process to convert into Real Estate units, is this open for all projects?

Yes, the process is open to all projects and the sales process shall be followed. Please note that the units shall be offered at their current sale prices 

  1. I don’t usually receive monthly interest, can I start receiving a portion of my interest monthly?

This is not possible as it shall lower the efforts of the Fund to getting back to its desired liquidity level.

  1. Why is the extension for 12 months instead of 6 months as provided in the Investment agreement? 

The contract allows that in the instance of Force Majeure, the Principal Partner can recommend and execute a  6 months extension. We executed a 3-month extension and as it comes to an end in June 2020, we noted that the economic environment had not changed significantly and under the guidance of the Board and in line with the WHO guidelines, have recommended a 12months extension as part of the options available to Investment Partners and which provision of options is the next steps after an extension as provided under the Force Majeure clause.  The other 2 options are the conversion of investment funds to Real Estate and as well a 2-year standstill agreement.

  1. What is the portion of interest to be capitalized and when does the portion of interest capitalization begin? 

From June 2020 accrued interest amount and which is to be paid out from July 2020. This shall last throughout the period of the extension. The capitalized interest amount is 50% of the current interest amount.
  1. Impact of COVID-19 Pandemic on Real Estate Funds

The COVID-19 pandemic started more as a global health crisis and has now triggered severe economic recessions as the impact of the pandemic continues to be significant. We have been analyzing the impact of the pandemic on various sectors, where we looked at the Potential Effects of COVID-19 on Money Market Funds. We then wrote about the Impact of COVID-19 on Kenya’s Real Estate Sector, focussing on the impact of the pandemic in the residential, office, retail, and, hospitality sectors and then the Impact of COVID-19 has had on Real Estate Funds. Please read to understand more.
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