Sh. 14 million monthly rent Lonrho building put on sale at Sh. 1.9 billion
5th December 2020
The Lonrho Africa building that is situated at the Nairobi Central Business District has been put on sale. According to the sale advert, the building is going for Sh. 1.9 billion. It has been said to bring in Sh. 14 million monthly in come in form of rent.
The building whose construction ended in 1990 has 22 flours above ground and a height of 79.86 meters. It has 3No. podium parking levels of up to 145 parking bays, and typical offices from 6th to 20th floor.
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The iconic Lonrho Africa building situated between Standard Street and Kaunda Street in Nairobi’s CBD and has a typical built up area of 169,755 sq.ft.
Other buildings on sale within the Nairobi area include the Tikoo House which is up for sale at Sh. 280 million. This commercial building of 7 floors is located on Keekorok road.
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The Tikoo House has approximately 22,000 square feet of build up space which involves 7 floors of 2.500 square feet. There is also lift access that enables swift moving of goods from ground floor to the upper levels. This building is being sold by the Pam Golding Properties.
some quick maths 14m x12=168m
168m per year for a 1.9billion investment
168x100/1900= 8.84% gross assuming 100 per cent occupancy
assuming 20% managment maintenance tax and rates
net revenue 168m x0.8=134.4m
1900/134.4=14.1 yrs to regain your initial investment
in reality it will be worse because of occupancy and other fees very bad investment
Rent is likely to rise with inflation…same for occupancy…same for the value of the property.
Btw any firm/individual willing to fork that money is not interested in treasury bills. The longest t-bill is only 364 days. People with this amount of cash are interested in private bonds or investments that have a 30 year maturity. tbills only protect against inflation and are best suited for short-term investment of money whilst retaining liquidity.
But as a pauper, your thinking is confined to the spoils of your bedsitter/1br or 2 br rental space. It’s no surprise these things can be beyond your understanding.
The most likely buyer will be a firm with vast knowledge buying assets around the world. They also wouldn’t pay it in cash. They’d work on an arrangement that gets the full price settled in 5 or so years. These firms look at the feasibility of an asset to their global plans etc. Some firms are hard bargainers and will ensure that the last payment matches with the maturity of their investment. Yani wanaweka deposit kubwa and the rest is paid gradually with the last payment coming in on the 14th year (as per your calculations).
I am sure Chinese buyers are already looking at this asset as ties between Kenya and China strengthen. For such investments, these firms are willing to take a loss for even for 10 years. With Covid, I am sure there are many similar assets on sale around the world.