Chief Guest, Cabinet Secretary, Ministry of Land, Housing and Urban Development, Prof. Jacob Kaimenyi
Dr. Philip Goodwin, Chairman, Fusion Capital Limited
Mr. Luke Kinoti, Group Chief Executive, Fusion Capital Limited
Member of the Board and Management of Fusion Capital Limited present,
Invited Guests, Ladies and Gentlemen:
All protocols observed
1. Today is the culmination of a truly historic journey. The launch of the first Development REIT in Kenya is a
significant milestone in the delivery of the 10 Year Capital Markets Master Plan and the Vision 2030. The Development REIT
is a product that was born out of Kenyan innovation and our capital market industry's commitment to the identification of
products that can have a transformative impact on promoting economic development while being wholly relevant to the
realities of our economy. Whereas globally, Income REITs such as the Stanlib Fahari REIT launched in late November 2015
have been well established since the mid-eighties, the Development REIT was conceptualized in Kenya in 2012 to ensure we
could channel public investment into real estate development and not only established income generating property. This
product offers a genuine opportunity to democratize participation in the lucrative real estate development sector that is
otherwise subject to extremely high barriers due to the costs of traditional financing for project development. It is
particularly appropriate that the Cabinet Secretary for Lands is officiating this occasion as the proper embracing of
Development REITS and Income REITS can have a catalytic effect on funding the challenges of housing at all levels as well
as urban development.
2. The D-REIT we are launching today targets to raise KES 2.3 billion but I believe that this is only the beginning and we
can look forward to more and larger real estate investment trust funds as we build our familiarity with this product.
3. Ladies and Gentlemen: Join me in congratulating Fusion Capital Limited for this bold move of being the first to test
the market with this product. Being the first to launch a product requires determination, courage and above all,
pragmatism. I trust that the successful launch and listing of this D-REIT on the Restricted Main Investment Market segment
of the NSE will stimulate interest from other capital market participants to bring to the market more similar products.
The structure in place was designed to ensure the highest level of transparency on the value and performance of the
underlying real estate assets so investors can rest assured by the quality of the assets invested in. This being the first
that has been a long journey of learning for all parties involved and I would like to appreciate Fusion for their patience
and commitment in seeing this day coming to fruition.
4. We note that through this offer, FRED – Commercial will add value to both the investors in this D-REIT as well as
bridge the gap in the real estate supply within the country. As most of you may be aware, it is the objective of the
Capital Markets Master Plan to make Kenya a center of excellence for real estate investments, and indeed today’s launch
marks a key milestone towards achieving that dream. This is in line with the objectives of the country’s blue print, the
Kenya Vision 2030 of making Kenya a Globally Competitive and Prosperous Nation with a High Quality of life by 2030. Making
Kenya a center of excellence for real estate has the potential of promoting Nairobi as an international financial center
since many savers and investors will converge in Nairobi looking for business opportunities to raise funds to finance real
estate as well as investors who will be looking for investment returns from real estate.
5. Ladies and Gentlemen: Successful offering and subsequent listing of FRED-Commercial will bring the total funding raised
through the Real Estate Investment Trusts in Kenya slightly below KES 6 billion. You will all agree with me that real
estate worth KES 6 billion has enormous positive externalities in terms of; Employment creation particularly for the
youth; spurring other business activities; revenue generation to the exchequer through taxable activities among other
6. We note that implementation of devolution has come with more resource requirements that can hardly be met through
traditional tax revenue collections. Innovative vehicles such as REITs will therefore go a long way in supplementing the
government’s efforts in meeting county government infrastructural requirements. The Authority therefore calls upon the
national and county government to entrench REITs as well as other innovative products such as Asset Backed Securities as a
key components in channeling lower cost long term financing into housing and commercial real estate development to support
accelerated urban development and the provision of adequate real estate infrastructure within the counties.
7. Ladies and Gentlemen: The Capital Markets Authority (Kenya) was last year recognized as the most innovative regulator
on the continent. This award was achieved through collaborative efforts between the Authority and all stakeholders. But in
the face of such recognition, the fundamental question continue to ask is what is there for Kenyans in this award. How do
we ensure our efforts towards innovation are translating to the improvement of quality of life for wananchi. The country’s
cumulative diaspora inflows in the 12 months to April 2016 was in excess of KES 160 billion. These are funds that we
should be targeting as we roll out innovative products such as REITs. We have to put in place consultative measures to
ensure that a chunk of these inflows find a home in the newly created Restricted Main Market segment at the NSE.
8. Allow me at this juncture to take this opportunity to laud the Ministry of Lands for their very constructive and
supportive manner they engaged with us in the development of the REIT framework, all the stakeholders who provided
critical inputs, the RBA for its responsiveness and facilitation to promote access by pensions and the Nairobi Securities
Exchange who have ensured the creation of an appropriate listing segment for this and other more complex yet impactful
9. Ladies and Gentlemen: As we introduce new products we cannot lose sight of the need for the highest levels of market
integrity in terms of good corporate governance, transparent financial reporting as well as continuing reporting practices
which are all key prerequisites for attracting the requisite capital. The National Treasury has been particularly
supportive on this front as witnessed with the recent gazettement of the Code of Corporate Governance Practices for
Issuers of Securities to the Public, 2016 and Guidelines on the Prevention of Money Laundering and Terrorism Financing in
the Capital Markets, 2016. These reforms are informed by the need to respond to the changing business environment and the
desire to align local standards to global best practice to promote institutional strengthening for listed companies.
10. Let me take this opportunity to convey my gratitude to the Government through the National Treasury for its consistent
support to the development of capital markets through an enabling policy and regulatory framework and further reiterate
our appreciation for its keen interest in the development of the capital markets. I just wish to underscore the following
key reforms implemented by the National Treasury that has brought forth the benefits we are witnessing today:
a). Removal of stamp duty on all transfers of assets during structuring of REITs as well as Asset Backed Securities;
b). Preferential corporate tax rate of 25 percent for companies listing on the Exchange by introduction;
c). Removal of 75 percent capping for foreign ownership in listed companies;
d). Exemption of listed securities from Capital Gains Tax;
e). Allowing private equity and venture funds to access up to 10 percent of pension funds; and
f). Amending and re-casting the investment guidelines for the pension funds to cater for Private Equity and Venture
Capital; REITs – both D-REIT and I-REIT; as well as the emerging global depository notes and receipts; Exchange
traded funds; Exchange derivative contracts all approved by CMA.
11. Ladies and Gentlemen: in this context, we note there are still important reforms to be implemented to support real
estate Investment products. Of particular importance is the strengthening of the systems to ensure sanctity and
reliability of title. Through the Capital Markets Master Plan implementation process we have identified key reforms to
complement market development and look forward to communicating those to the Ministry of Lands through the National
12. On our part as Capital Markets Authority, I wish to reaffirm our commitment, with the support of the Government, to
providing a facilitative environment for issuers, investors, and market players to participate and thrive in the capital
markets industry. The Authority remains focused and committed to ensuring the capital markets play their rightful role in
facilitating the realization of the Vision 2030 objectives.
13. On behalf of the Authority’s Board, Management, and the entire capital markets fraternity, I wish Fusion Real Estate
Development Trust aka the FRED – Commercial success in their business expansion plans. In conclusion, let me take this
opportunity to thank everyone in this room here today for taking the time to witness this great moment. This is just the
beginning of great things to come.