US, UK Finance Groups Invest In Kenyan Warehouse Development

By Dana Sanchez Published: March 12, 2017, 1:01 am
invest in Kenyan warehouse developmentWorkers in a Nairobi warehouse. Photo: nairobinews.nation.co.ke

Finance development groups based in the U.S. and U.K. say they’ll be filling an important gap in logistics infrastructure by investing up to $35 million in a Nairobi-based warehouse developer.

The U.S.-based International Finance Corporation plans to invest $10 million, and the U.K.’s CDC Group plans to invest $25 million in Africa Logistics Properties Holding (ALP), a warehouse developer and manager, according to a CDC press release.

Driving the rising demand for logistics space is Africa’s growing consumer market and manufacturers seeking to expand their operations, according to Knight Frank’s Logistics Africa Report.

“There is a dire shortage of warehouse facilities,” said Ben Woodhams, Kenya managing director for global real estate consultancy Knight Frank, in a report in How We Made It In Africa:

Kenya’s real estate industry has boomed in recent years, yet stakeholders argue that industrial property has often been overlooked as an investment opportunity.

But this is gradually changing. New industrial developments are emerging just outside Nairobi’s city center, targeting manufacturers and logistics operators.

Scarcity of quality warehouses in Nairobi presents opportunities for investors and developers, said Peter Welborn, head of Africa at Knight Frank, in a Standard Media report.

Space is not easy to come by. Most existing warehouses are old and mainly based in industrial areas.

“We see locations near ports and along transport corridors connecting ports with inland commercial cities as particularly important for operators developing logistics property networks in Africa,” Welborn said.

Out of 20 cities surveyed across sub-Saharan Africa, Luanda, Angola, has the most expensive rents for logistics space at $21 per square meter per month owing to limited supply. Abuja, Nigeria, comes second at $12 followed by Ghana’s Accra ($10) and Maputo ($10). In Nairobi, tenants are willing to pay about $6 per square meter per month, Standard Media reported.

The U.S.-based International Finance Corporation is a member of the World Bank Group. It invests in private sector development in developing countries. The largest development bank in the world, it provided $61 billion in loans and assistance to developing and transition countries in 2016.

The U.K.’s CDC Group (formerly the Commonwealth Development Corporation, and before that, the Colonial Development Corporation) is a development finance institution owned by the U.K. government. In 2016, it invested $867 million in promising businesses in developing countries, and boasts an average annual return on net assets of 7.8 percent over the last five years.

East Africa has a shortage of quality international-standard warehousing space, which has held back business growth and economic development, the CDC statement said. Quality warehousing improves operational efficiency by reducing waste, speeding up product delivery and improving product security.

 

ALP is backed by Maris, a Nairobi-based private investment business focused on sub-Saharan Africa which will invest US$8 million. IFC and CDC are also joined in the project by Mbuyu Capital Partners, an Africa-focused, U.K.-based asset manager with an investment of up to $5 million, among others. ALP will be led by founder Toby Selman, an experienced emerging markets warehousing developer, and a Nairobi based team with African and international experience.

“CDC is backing ALP because we know that logistics is a critical, yet often overlooked, part of economic development,” said Ilaria Benucci, CDC’s investment director. “Investment in agriculture needs to be supported by an adequate supply chain to get produce to market. Essential medication won’t work if it cannot be transported and stored in the right conditions. Our investment will support a company that’s making trade easier in Kenya, and we hope that it can be the start of an expansion into other African cities.”

 

 

 

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