Stanlib Fahari I-reit net profit jumps to Sh193 million

NAIROBI, KENYA: STANLIB Fahari I-REIT has reported Sh193 million net profit for the period ended December 31, 2018, a 13 per cent jump compared to same period the previous year.

The results by the first and only real estate investment trust in Kenya listed on the Nairobi Securities Exchange – were buoyed by a net revaluation gain on its investment property of Sh 65 million.

However, despite the increase in net profit, distributable earnings declined by 14 per cent to Sh 127.9 million because of increases in vacancies. The smallest and single- tenanted property in the portfolio, known as Highway House, remained vacant for nine months in 2018 following the exit of the tenant at the expiry of the lease. Although not material in size, it did put a dampener on the current year’s earnings.

Rental and related income increased by 11 per cent to Sh309.8 million while interest income decreased by 43 per cent to Shs56.4 million in line with the utilisation of excess cash to purchase an A-grade three storey office building situated in Lavington, Nairobi.

Property expenses increased by 13 per cent to Sh 108.9 million in line with the incorporation of the expenses from the new property acquisition. Most of these expenses are funded out of the service charge income. Irrecoverable withholding tax expenses also increased as more tenants were appointed as withholding tax agents by KRA in 2018. This tax leakage at a property subsidiary level is expected to be resolved through the anticipated update of the tax legislation to expressly exempt REIT owned subsidiaries from income tax. The tax leakage contributed to the fall in distributable reserves by KShs 13.5 million in 2018.

Fund management expenses decreased by 4 per cent to Sh 130.2 million in line with the downward review of the REIT Manager’s fee, which took effect from 1 July 2017 and was implemented for the full year in 2018.

Fund’s acting CEO Nozipho Makhoba announced that the REIT Manager’s Board recommended and the Trustee has approved a final dividend of KShs 0.75 per unit, which will see the distribution remaining flat year-on-year despite the reduced distributable earnings.

“This move underlines management’s confidence in the REIT’s current fundamentals as well as future prospects.”