Togo-owned Ecobank is set to reap from the decades-long property boom in Kenya from the sale of its office tower in downtown Nairobi.
Disposal of the 19-floor block could help the West African owners recoup losses accrued from the banking business that has struggled to return profits in the past. The lender has invited bids from prospective buyers for the tower that was acquired from the East Africa Building Society in 2008 at Sh1.5 billion.
“This (sale) is in line with the bank’s business strategy to focus on its core business,” Ecobank said yesterday, citing that the motivation of the sale was partly to move the head office from the City Centre.
Ecobank would be joining other lenders that have relocated their head offices to outside of the Central Business District. An unprecedented rise on property prices in the last decade has seen values rise more than three-fold in some segments of the property market.
Current selling prices for high grade commercial space is anywhere about Sh10,000 per square foot, which could place the value of the building at several billions. Selling prices for entire buildings are however significantly lower compared to when the property is sold to small buyers.
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But that surge in prices has also attracted mega investments in the development of big projects, with supply already running ahead of demand, especially in shopping malls and high-end residential segment.
For more than 10 years, developers have increased the supply of commercial buildings speculatively and not particularly in response to specific demand, according to one of the most prominent property experts in Nairobi.
Business hotel
Ecobank Towers could be cushioned from the supply glut that has hit various business nodes, where developers have reported sustained low occupancy levels. Among the prospective uses of the building, as proposed by the selling agents is to convert it to a business hotel right at the heart of the CBD.
Universities have been behind most of the property acquisitions in the CBD, with the sale of ICEA building to the Jomo Kenyatta University of Agriculture and Technology last year for Sh1.85 billion being among the biggest transactions.
The lender has not set a reserve price for the property, which it says attracts nearly Sh92 million in annual rental income. Ecobank Kenya reported Sh90 million in net profits last year, overturning a Sh320 million loss booked in 2014.
It expects to remain as a tenant in the building, occupying the floors that are the present premises of its banking halls and ATM lobbies.
The office block was originally developed in 1983 by the East African Building Society, before the 2008 acquisition that started with a 75 per cent take over by Ecobank Transnational Incorporated.
Ecobank Towers is owned by the Pan-African Corporation through a different subsidiary, making the property and banking business as separate entities.
