Interesting thread from @ephraimnjegafans on Twitter.
@ephraimnjegafansWHY @CMAKenya NEEDS TO RETHINK I-REITS ENTIRELYPerusing through the 2021 audited financials of ILAM Fahari I-REIT raises a lot of questions. Out of the KShs 298 million rental income, ICEA LION Asset Management Limited was paid KShs 70 Million as Asset Management Fees
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Cooperative Bank of Kenya was paid KShs 26 million as Trustee, Custodial and other administrative fees.
Thus ICEA Lion Asset Management and Cooperative Bank earned a combined KShs 96 Million or 32% of the rental income.
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This is more than the KShs 90 Million paid to the unit holders as the distribution for the year.
What exactly does ICEA do to warrant being paid KShs 70 Million? The total assets for the REIT amount to KShs 3.7 Billion.
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Out of this property constitutes KShs 3.3 Billion. Investment securities amount to KShs 247 Million. Interest income was KShs 22 Million. If these investment securities are the assets managed by ICEA does it make sense to be paid KShs 70 Million to generate KShs 22 Million?
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As if this is not enough, Knight Frank Kenya Limited a company associated with ICEA was paid KShs 14 Million as property management fees.
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How does the REIT which controls KShs 3.7 Billion worth of assets only yield KShs 102 Million as distributable earnings? Does this make economic sense?
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@CMAKenya needs to rethink this whole issue of I-REIT. There are just too many entities involved earning money without any clear value addition.
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This idea would make sense if the only party involved is the property management company which should be paid a commission from the rent collected.
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