Acorn Holdings is looking to raise about US$700 million in blended finance over 18 years to support the development of affordable purpose-built student accommodation (PBSA) in Kenya.

During President William Ruto’s landmark visit to Washington in late May, the US’ Development Finance Corporation (DFC) signed a US$180 million financing deal with the property developer. The commitment is intended to help secure a further US$380 million in financing jointly arranged by Standard Bank Group and MiDA Advisors, and crowd in more than US$315 million from the Kenyan capital markets including domestic pension funds and asset managers.

The funding will support the construction of 35 certified green student housing projects over the next 10 years, delivering a combined 48,000 beds, making it the single largest investment into student housing in Africa. The initiative is also expected to create a about 15,000 direct jobs and 35,000 indirect jobs.

Acorn Holdings develops PBSA properties using Real Estate Investment Trusts (REITs). It launched two REITs in 2021: the Acorn Student Accommodation Development REIT (ASA D-REIT) and the Acorn Student Accommodation Income REIT (ASA I-REIT).

The D-REIT acquires land and develops the student housing, while the I-REIT buys the operational asset as a long-term investment, thereby replenishing the D-REIT to launch more projects. At the time of the launch, Acorn Holdings said the REITs were expected to give long-term investors a blended return of 18% on a 10-year hold basis.

Up to US$90 million from the DFC financing deal will go to the D-REIT for the construction of the new PBSAs. This amount will be recycled up to two times during the term of the loan, facilitating up to US$270 million in financing through redeployment.

The other US$90 million will go towards the I-REIT to finance the acquisition of stabilised PBSAs from the D-REIT. The financing will be repaid over a period of 18 years and shall provide a long-term and sustainable financing solution for Acorn Holdings.

Speaking at the signing ceremony in Washington, Acorn Holdings’ CEO, Edward Kirathe said, “All projects under this facility will carry the International Finance Corporation’s Excellence in Design for Greater Efficiencies (IFC EDGE) ADVANCED Certificate – contributing a 40% reduction in energy and water utilisation, as well as materials with less embodied energy compared with conventional buildings.”

We are pleased to announce the signing of a USD 180 million (KES 23.6 billion) financing deal with @DFCgov for the expansion of our Purpose-Built Student Accommodation (PBSA) program. This is the largest deal by an East African firm involved in provision of affordable housing pic.

Acorn Holdings was the first issuer of a D-REIT in Africa and also the first issuer of a green bond in Kenya. The firm already has about 22,000 student beds in its project development pipeline.

The current student housing deficit in Kenya is estimated at 300,000 beds, with at least 200,000 needed in Nairobi.