State-run pension scheme-National Social Security Fund (NSSF) has offered a glimpse into the lucrative property market, after revealing the value of several iconic buildings it owns around Nairobi.
The returns from buildings in Nairobi Central Business District (CBD) beat both the stock market and government paper over a five-year period.
Top on the list is the NSSF complex valued at Sh8.8 billion, comprising blocks A, B, C and a parking silo on Nairobi’s Bishop Road.
The fund puts the value of Bruce House, which hosts its city centre branch at Sh2.97 billion, while the iconic View Park Towers’ price tag is Sh2.6 billion.
Hazina Trade Centre and View Park Tower are valued at Sh1.59 billion and Sh2.6 billion, respectively, according to the NSSF’s financial statements for the year ended June 2024.
The value of five of the buildings increased by Sh1.5 billion since 2019, while the fund earned rent and parking fees of Sh2.2 billion over the period, translating to a return of 19.7 percent.
At 19.7 percent, the office blocks outperformed the returns from the Nairobi Securities Exchange (NSE), which posted a negative return of 23.6 percent when viewed from the worth of shares in 2019 and last year.
The buildings also dwarfed the returns of between 11.5 percent and 14.5 percent fetched from government bonds issued in 2019, with a five-year maturity.
Housing has been one of Kenya's fastest-growing sectors over the last decade, with returns from real estate outpacing equities and government securities.
But increased investments by high-net-worth investors like pension schemes and insurance, triggered an oversupply of office spaces.
These saw buildings, especially in the Upper Hill, struggle with occupancy.
Besides renting office space in the buildings, NSSF collects millions from the properties for leasing space for telco installations like mobile phone masts and parking charges.
The 15-storey Bruce House on Standard Street generated the highest income from leasing at Sh819.96 million over the five years.
This offered a return of 30.7 percent after accounting for the rise in the value of the building, whose worth stood at Sh2.97 billion last year from Sh2.9 billion in 2019.
This was followed by the 20-storey View Park Towers, which fetched Sh591.7 million in rent, as its value rose to Sh2.6 billion from Sh2.5 billion, translating to a return of 25.1 percent.
The 15-storeyed Hazina Trade Centre raised Sh443 million in earnings as its worth grew to Sh4.4 billion from Sh3.2 billion, delivering a return of 50.9 percent.
Hazina Towers raised the least revenue during the five years at Sh363.97 million,n while its value rose marginally to Sh1.59 billion up from Sh1.56 billion in 2019.
The NSSF has in the past announced plans to divest from View Park Towers and Hazina Centre through sales, but has been unsuccessful due to lack of offers that matched their valuation.
The Fund holds Sh35.4 billion worth of property, developed and undeveloped like land, accounting for 8.8 percent of its total net assets of Sh400.1 billion as at June.
This falls in line with the pension industry’s regulations that cap real estate holdings at 30 percent of the total investment portfolio.
An increase in NSSF holding of shares at the Nairobi bourse in blue chip firms such as Safaricom, Jubilee Holdings, KCB Group, East Africa Breweries Limited (EABL) and Bamburi Cement has squeezed the share of real estate, which in the late 1990s was above the regulatory limit.
Shares at Sh61.2 billion in June last year accounted for 15.2 percent of its assets.
Treasury bonds top the list of asset classes that NSSF has invested in, to generate returns for its members.
The fund’s assets in bonds stood at Sh253 billion last year, a 127.9 percent growth from Sh111.03 billion in 2019.
