Frequently Asked Questions

  • What is Vuka Investment Club?

 

Vuka is a home-grown Kenyan innovation that is regulated by the Capital Markets Authority  and is based on the popular investment club or chama model.

“VUKA” which means “Cross Over” in Swahili, gives for the first time, an opportunity to qualified retail investors to invest in the income generating Acorn Student Accommodation Income Real Estate Investment Trust (ASA I-REIT) and own a piece of Acorn’s income generating properties that are managed under the brands Qwetu and Qejani.

 

  • Why is Vuka Exclusive and Invite only?

 

Vuka is based on the investment club model and like any investment club, one must be invited to join by an existing member. In addition, there will only be a limited number of units available at any one time. These units will only be available to active members.

 

  • Who can become a member in Vuka?

 

A person over the age of 18 years who is Kenyan citizen with a National ID, or a Kenyan resident holding an alien card and a KRA PIN, can become a Vuka member.

Chamas can also join through their authorized representatives.

 

  • Who is qualified to become a member?

 

A qualified investor includes an Investment Club (Chama), Sacco or individual who has a source of income/ earnings equivalent Kes. 50,000 per month and is looking for a medium to long term investment with regular dividends and capital appreciation.

Please note that whilst you can invest for whatever duration you wish, Vuka is not suitable for short term investors (less than one year) as you will not be able to enjoy all the benefits for such short durations.

 

  • How can I become a member in Vuka?

 

To join the exclusive Vuka investment club, you need to receive an invite from an existing member. In case you don’t know anyone in the Vuka Club, you can share your profile on vuka.co.ke, or contact us by calling 0800730333, and we will assist you in securing an invite from one of our members, after we evaluate whether Vuka is a suitable product for you based on your profile.

 

Upon receiving an invite, you can create an account on the Vuka Portal by clicking the link in the invitation email and then follow these simple steps:

 

  • complete the KYC (Know Your Customer) by uploading the mandatory documentation and completing a quick video verification.
  • select the best subscription available based on the amount you wish to invest.
  • You will receive a welcome call from our contact center team who will validate your product understanding, share further details of the investment product, and explain to you how you can place your orders through the Vuka investment platform.

Voila! You can then start investing and buying units in the Acorn Student Accommodation Income Real Estate Investment Trust (ASA I-REIT) whenever they are available

 

  • What are the various categories of subscriptions available to a member?

 

We have created different membership categories to cater for our different members’ investment aspirations. Each membership category provides different priority in buying and selling opportunities based on the category one selects.

The categories for individual investors are: Silver, Gold, Platinum, Platinum+ and Diamond. Chamas can also become members through their authorized representatives by selecting “Chama” as their member category.

  • How can a member buy and sell units?

 

The Vuka Portal provides convenience and transparency in the whole buying and selling process.

After choosing your membership category and paying the joining and annual fee, you will be directed to your homepage on the Vuka Portal.

The homepage provides two wallets: the static wallet and the dynamic wallet. Each wallet serves a purpose in your investment journey. As the name suggests, the static wallet is used to buy and sell units while the dynamic wallet is used to load and withdraw money from the platform.

 

Buying Units

You can click the “add money” button displayed in your dynamic wallet and top up the amount you wish to invest from your bank account or your MPESA account.

Whereas the amount loaded from MPESA will reflect instantly, the bank transfer may take up to 2 working days to reflect in your account.

Once the money reflects in your dynamic wallet, you can choose the number of units you wish to buy. The system automatically calculates the money needed to buy the units based on the current value per unit along with the 3% service charge.

Upon order confirmation, the money moves from your dynamic wallet into the static wallet.

All buy orders received during the month are processed on the (Trading Day) which is the last working day of every month, on a First come First serve and priority category basis.

You will be able to see if your orders have been fully executed, partially executed or have not been executed based on the availability of units by 7th of the subsequent month.

Any amount that remains in your static wallet from the Trading Day is placed in a fixed deposit call account and will earn you the interest paid by the bank until the next Trading Day. This amount will keep rolling over in the Fixed Deposit and earning interest until units are available.

Should you wish to withdraw any amount in your Static Wallet, you will need to send the instruction from your member portal and on the next Trading Day, it will be withdrawn and reflect in your dynamic wallet by the 7th of the subsequent month.

Selling Units

Should you wish to sell your units, then you log in to your member portal and click on the sell units button. Once you state how many units you wish to sell, the system automatically calculates the withdrawal amount based on the current value per unit along with the 3% service charge.

All sell orders received during the month are processed on the (Trading Day) which is the last working day of every month, on a First come First serve and priority category basis.

You will be able to see if your units have been fully or partially sold (which depends on the buy orders received) by 7th of the subsequent month.

Any units not sold will then be reflected in your account until the sale is executed during subsequent Trading Days.

 

  • Liquidity Mechanism

 

The Vuka Manager, Acorn Investment Management Ltd, will endeavour to maintain more buy orders than sell orders at any one time in order to provide liquidity for members who wish to sell. This is however not a liquidity guarantee but rather a mechanism to provide members with liquidity within the club. Any units not sold will remain credited to the members account until sold.

 

  • How do the dynamic and static wallet work?

 

The static wallet is used to buy and sell units while the dynamic wallet is used to load and withdraw money from the platform.

  • How much is a unit and what governs its price?

 

As at August 2021, the IREIT unit holds at KES 20.62, which was held at KES 20 at the launch in February 2021. The increase in the valuation was a result of the performance of the underlying assets, which have benefited from rent escalation in April 2021.

The unit price will be updated twice a year at the announcement of the full-year results and the interim results. The unit price adjustments occur when rent adjustments happen in the underlying assets that change the Net Asset Value of the IREIT

 

  • Do I have flexibility over my investment in Vuka?

 

We understand that as an investor you look for freedom and flexibility to choose the amount you wish to invest. Unlike other real estate investments, which are often rigid and require high investments with a locked tenure to commit, the Vuka Investment club allows you to invest any amount during the year for your preferred amount of time.

As a Vuka member, you can easily increase or decrease your investment during the year and within the investment limits of the same membership category. Should you wish to invest more than your selected category investment limit, you can easily upgrade your membership category.

At any given point in time, or in the case of any emergency, you may liquidate part or all of your units. This liquidity will be made available through the internal trading taking place among the members on the platform and any “excess” would then be addressed by trading on the unquoted securities portal on the NSE.

However, it is important to point out again that Vuka is a product that is suitable for medium to long term investing and not short term or active trading. To enjoy the full benefits we recommend a longer investment period in order to maximize the probability of an increased capital appreciation and dividend yield.

 

  • What are the charges incurred when buying and selling units?

 

A 3% service charge will be charged for every buy or sell transaction. This charge covers the brokerage, administrative, custody and NSE fees.

 

  • What are the tax implications on my investment?

 

Due to the regulation in place, REITs are exempt and thus do not incur any income and capital gain tax. REITs also do not pay any stamp duty on transfer of assets. Dividends paid to Vuka members are however taxable in the hands of the investor. Members thus experience a lesser tax incidence.

 

  • Is buying and selling under Vuka a primary or secondary market transaction?

 

The buying and selling transactions will involve primary and secondary transactions. Initially, this will be secondary transactions as Acorn Holdings Limited (AHL) sells down the I-REIT units that it is holding over and above the regulatory threshold. However, the sell-down portion is not large and as such, soon we will move into primary transactions as the I-REIT has a number of new income-generating assets that it has to acquire from the D-REIT in the coming months.

 

  • Why does Acorn not list on the main board of the exchange? 

 

This is based on lessons from successful REITs globally.  For an IREIT it is important that it demonstrates a dividend payment and capital appreciation track record before it lists on a main board.

 

  • What are the anticipated returns under Vuka?

 

The Acorn I-REIT earns a 10-year return equivalent of 11.1% p.a*, which is comprised of approximately 7% p.a.* as dividend yield with the remaining 4.1%p.a.* amount coming from capital appreciation. Should you hold the units for a shorter period the returns may be lower as the dividend yield grows as the IREIT assets grow due to economies of scale

 

  • How does Vuka compare to other investments, e.g. government bonds, Fahari ILAM REIT?

 

Vuka is not intended to replace your investments in other securities such as bonds, unit trusts or equities. It is meant to help you diversify your portfolio from being concentrated in those securities and to cross you over from illiquid plots that are idle and not earning you a return to a more liquid way to own real estate investments (hence the name Vuka). We recommend adding Vuka as one of the investments in your current portfolio.

 

Investment

Returns

10 Year Govt Bond Yields 

11.52%

Equity Returns over 10 years

12.50%

Fahari ILAM REITs

7.34%

  • Can I upgrade my customer category during the subscription period?

 

As a member, you can upgrade your membership category to enhance your priority for buying and selling at any time. Upon reaching the higher investment limit of your current membership category, the Vuka platform will prompt you to upgrade your membership category to allow you to continue to invest and benefit from Vuka. To successfully upgrade your membership, follow the prompts on the platform and pay the difference in fees (joining and annual) for your current membership category and that of the desired membership category. We offer this upgrade to allow for a gradual process while increasing your investment.

 

  • Can I downgrade my customer category during the subscription period?

 

We encourage our members to select a membership category that best suits their financial investment goals.  Should you wish to downgrade from your current membership category, you can do so in the subsequent year by choosing a different membership category when renewing your annual membership.

 

  • How can I cancel my subscription?

 

A member’s annual subscription fee is non-refundable and is valid for a period of 12 months and automatically lapses after the said period of 12 months unless renewed upon expiry.

In the case of a member’s failure to renew their annual subscription, they will continue to hold their units in their Vuka account and be able to sell them at their discretion. They will however, not be able to purchase any additional units.

Should the member wish to sell and withdraw their entire investment, they can do so anytime during the investment period. 

  • How can I invite a friend to join the Vuka Investment Club?

     

    Being an exclusive invite-only club, only a member can invite an individual by logging into the Vuka portal, selecting the ‘invite friend’ tab and sending an invite to their friend’s email address.

    The invited friend will then receive a unique invitation code on email that will prompt them to follow the necessary steps to become a member. This code can only be used once and expires after 4 days.

    Once the invited friend joins Vuka as a member, you will earn a referral token as per the membership category your friend has selected and paid for.

    The current referral amount differs per membership categories as follows:

    Silver – KES 500, Gold – KES 1,000, Platinum – KES 2,000, Platinum+ - KES 3,000, Diamond – KES 4,000.

    The referral token will be paid to your MPESA or bank account as per your request.

     

  • What is the Acorn Student Accommodation Income REIT (“Acorn I-REIT”)?

 

The Acorn I-REIT is structured as a common law unincorporated trust divided into units and is established through a Trust Deed dated 16th December 2020.  It invests in the acquisition of stabilized, income-generating purpose-built student accommodation (“PBSA”).

 

 What are its investment objectives?

 

The investment objectives of the Acorn I-REIT are as follows:

  • the acquisition for long-term investment, of income generating eligible real estate investments for student accommodation
  • provision of the most sought after, quality and secure PBSA within the Nairobi Metropolitan area (Nairobi County and its neighbouring counties)
  • retention and management of the real estate assets of the Acorn I-REIT with the objective of providing income to investors in the form of regular, stable cash distributions to achieve an attractive distribution yield;
  • realize capital appreciation from proactive investment and asset management;
  • provision of an attractive investment alternative for investors seeking to allocate a portion of their long-term investment portfolios in a well-structured, regulated and professionally managed real estate backed security;
  • the undertaking of incidental or connected activities and activities related to the assets of the Acorn I-REIT; and
  • any other such activities as may be authorized by the Regulations.

 

 What is a Real Estate Investment Trust, or REIT?

 

In general, a REIT is an entity that:

  • combines the capital of many investors to acquire or provide financing for a diversified portfolio of real estate investments under professional management;
  • is not subject to corporate income taxes on its net income that is distributed, which substantially eliminates the “double taxation” treatment (i.e., taxation at both the corporate and stockholder levels) that generally results from investments in a corporation; and
  • pays distribution to investors of at least 80% of its annual ordinary taxable income.

 

 Why should I invest in real estate investments?

 

Allocating some portion of your investment portfolio to real estate investments may provide you with portfolio diversification, reduction of overall risk, a hedge against inflation, and attractive risk-adjusted returns. For these reasons, real estate has been embraced as a major asset class for purposes of asset allocations within investment portfolios. Although institutional investors can invest directly in real estate investments and on substantially different terms than individual investors, we believe that individual investors can also benefit by adding a real estate component to their investment portfolios. You should determine whether investing in real estate would benefit your investment portfolio. Please see the “Risk Factors” section for a discussion of the recent economic slowdown, the impact of the pandemic and disruptions in the capital and credit markets.

 

  • How would you describe your real estate property acquisition and operations process?

 

The Acorn I-REIT shall invest in superior purpose-built student accommodation with the aim of delivering strong steady capital growth and dividends over the medium to long term. The mandate of the Acorn I-REIT is to accumulate a portfolio of high-quality, affordable PBSA assets in Nairobi and its environs – then actively manage the portfolio to generate steady, dependable returns for security holders, through a stable and increasing cash flow that offers the potential for long-term capital appreciation.  Additionally, Acorn is committed to promoting sustainability and so the Acorn I-REIT will aim to follow and to promote good sustainability practices, to reduce the environmental impact of its activities and to help customers do the same.  The Acorn I-REIT may only invest in eligible real estate which can demonstrate an annual yield of at least six per cent. (6%) and the maximum investment amount per property will be, in principle, not more than forty per cent (40%) of the total Net Asset Value of the Acorn I-REIT.

With the business model focused on rental housing, Acorn has established operational excellence as a core value. Emphasizing the importance of property and facility management, Acorn delivers unparalleled service, asset management, energy efficiency and the reduction of real estate investment risk.

Acorn’s commitment to the importance of property management is exemplified by the development of a customized software program to manage building operations. This software enables us not only to manage leasing, tenant renewals and rent collections but also, expenses and resolution of maintenance issues, including any complaints raised by tenants.

 

  • What is Vuka?

 

Vuka is an aggregator platform for retail investors to provide them access to otherwise restricted offerings within the capital markets, starting with the Acorn Student Accommodation I-REIT.  It is clear that retail investors would like an avenue to invest into opportunities like the Acorn REITs.  However, this is not currently feasible as the regulations deem that an unlisted I-REIT should have “a minimum subscription or offer parcels of five million shillings”.  This condition is restrictive to the participation of the retail investor and so the Vuka platform enables this participation by making Acorn Capital Partners LLP (“ACPL”) the investment entity, funded by multiple retail investors.

 

  • Will the Acorn I-REIT units be in the name of each investor on the Vuka platform?

 

The units will be held in ACPL’s account.  The units attributable to each member would then be recorded within the system being established by AIML.  The units would be allocated on the basis of the fulfilled subscriptions by the members on the Vuka platform.  Every time a transaction within the Vuka platform is closed, investors will receive the relevant contract note providing them with the record of their completed subscription. 

 

  •  How can I be assured of the correct recording of my units on the Vuka platform if the units will be held in ACPL’s account?

 

Members will receive confirmations of the transacted units after a trade is completed, providing them the details on the number of units transacted and the amount of cash spent or raised.  This confirmation will be through a contract note on the Vuka platform.  The transacted units will be based on the disclosed NAV, taking into account the predetermined transaction fee of 3%.  All fees and charges along with the basis for the allotment of units has been disclosed in the marketing materials related to Vuka.

We also are appointing Zamara to fulfil administration roles and they would then also act as an auditor to the investment accounting being done by the AIML system. 

 

  •  How can I be assured that AIML will not act as a market-maker and will avoid conflict of interests?

 

AIML is a licensed REIT Manager and the general partner in the proposed Vuka structure.  As a regulated entity, it is under the strict oversight of the CMA to conduct itself with due care and integrity, especially with regards to dealings with its investors.  All trades will be undertaken on the disclosed NAV as at that time.  AIML will not be transacting on the basis of any other NAV to benefit or disadvantage any stakeholder. In addition, AIML is required to issue regular reports to the CMA containing important information including the member details and units held on a regular basis

Risks associated with the Acorn I-REIT
a. Operational risk
Financial loss can be due to lack of adequate human capital, systems, and internal controls, and is a significant risk to the business.
  • Human capital –staff who do not have the requisite experience and expertise can present risks to the operations of the business;
  • Systems – All organisations rely heavily on information technology and failures can result in losses for the business, both in terms of downtime and fraud; and
  • Internal Controls – lack of proper procedures can create a conducive environment for fraud
Mitigating factors: The Group has put in place a number of measures to mitigate operational risks including but not limited to:
  • Detailed operational procedures across all the functions;
  • Instituting a strong culture of continuous improvement through the implementation of Lean Six Sigma to improve, streamline and standardise operations across the business; and
  • Utilizing advanced IT systems to provide optimal support for the business which are periodically reviewed to ensure the needs of the business are continuously met.
  • Proactive approach to maintenance of all operational properties and ensuring timely response to reactive maintenance issues raised by students
b. Concentration risk
The Acorn I-REIT’s development activities are focused in Nairobi with no immediate plans to expand outside the Nairobi Metropolitan Area. The Acorn I-REIT’s financial performance is therefore affected by changes in regulations and legislation implemented by the County Government of Nairobi as well as by general microeconomic conditions within Nairobi. A deterioration in the regulatory, legislative or economic environment in Nairobi may therefore affect the performance of the Acorn I-REIT. Mitigating factor: The Group is the first institution to actively invest in the local PBSA market. Despite the fact the Group is focusing on PBSA, there is a massive gap between demand and supply of PBSA in the market. The total number of available beds across the country is approximately c.280,000 against a requirement of 600,000. In addition, the Group’s 3 existing properties achieved over 90% occupancy within 15 months of operation, which highlights the strong demand for their products. Nairobi’s economy remains robust in a Kenyan context and Acorn maintains relationships with the relevant regulatory agencies in Nairobi, built over a 20+ operating history, to ensure compliance with all relevant regulations and a good understanding of the prevailing regulatory climate.
c. Investment risk
The Acorn I-REIT's ability to evaluate, purchase and operate properties has to fit within parameters that satisfy market demand. PBSA is a fairly new asset class in Kenya with no historical financial performance for investors to benchmark against. In addition, performance is dependent on quality of the investment decision and ability for the organisation to execute on investment decisions. Mitigating factors: The Acorn I-REIT has in place policies that ensure consistent due diligence, reviews, and board reports that are reviewed, discussed, and approved prior to the acquisition of its properties. Acorn has already established a track record of robust investment decisions throughout its history, including its 3 operating PBSA properties, Jogoo Road, Ruaraka and Prospective Property 1, which have all achieved over 90% occupancy. These occupancy benchmarks are not seen in advanced markets such as South Africa. JLL’s report on PBSA in Africa highlights that a typical PBSA property in South Africa achieves 90% occupancy after 36 months on average vs. within 15 months for the Acorn Group’s properties to date. The SKP (Simon Kucher and Partners – A world’s leading market research firm) report also details the huge market demand for PBSA in Kenya which is largely underserved in Kenya. The Acorn I-REIT's’ ability to evaluate, purchase, construct, and operate properties has to fit within parameters that satisfy market demand for student accommodation.
d. Country and Industry risk factors
I. Country macroeconomic environment and political
Kenya’s economy is one of the more stable, developed and diversified economies in the region. It is nevertheless undergoing rapid economic development and political transformation. These factors can result in political and policy changes which could affect such matters as economic growth, currency stability and macroeconomic fundamentals. A severe economic downturn in Kenya may lead to a reduction in demand for student housing and/or defaulting or late payment of rent on the part of one or more tenants or result in the reduction of rental income. In addition, a deterioration in the political climate could lead to losses as a result of civil strife. Mitigating factor: Given the history of the country, Kenya has managed to retain a relatively favourable macroeconomic environment which remains one of the more stable, developed and diversified economies in the region. Additionally, the Trustee and the Acorn I-REIT Manager will ensure that all properties have adequate insurance policies against potential damages related to civil strife caused by a deterioration in the political environment.
II. Changes in the regulatory and taxation environment
Kenya’s central and county governments impose regulatory and tax requirements on entities that are in the real estate sector. Current taxes include but are not limited to:
  • Stamp duties payable to the central government;
  • Capital gains taxation on the sale of properties payable to the central government;
  • Land rates payable to county governments; and
  • Corporate income tax
Regulatory requirements include but are not limited to:
  1. Environmental regulations imposed by the National Environmental Management Agency (“NEMA) and the Water Resources Management Authority (“WARMA”);
  2. Building regulations imposed by the county governments.
These legal and regulatory requirements continue to evolve as the Government develops and implements tax raising policies. Such changes to laws, regulations or government policies or practices could cause the Acorn I-REIT and the projects it holds to incur additional costs or liabilities or implement business practices that could directly or indirectly reduce cashflows of the Acorn I-REIT and the Investee LLPs products and in turn adversely affect its business. Mitigating factor: The Acorn I-REIT recognises the important role it plays in the real estate sector, as a taxpayer and an agent for collection of indirect taxes, and actively engages with the relevant government bodies directly. The engagement is geared towards reducing the impact of drastic increases in taxes and to mitigate against unfavourable fiscal policies which would make the real estate sector unattractive.
e. Health and safety risk
The Acorn I-REIT’s operations are subject to various health and safety risks, particularly in relation to construction operations and particularly carry the risk of injury. On-site injuries may lead to legal action being taken against it and resulting in claims that could affect the ability of the Issuer to maintain its operations and service its obligations. Mitigating factors: Acorn contracts out the construction risk to third party contractors who take liability for any construction risks including life, injury, fire, property risks. Acorn also ensures that Contractors have full insurance cover for this risks. In addition to taking a number of measures to mitigate the risk to staff and members of the public as below, the Acorn I-REIT ensures that they take adequate workplace injury polices that can alleviate any potential risks from injuries at the workplace.
  • Maintaining compliance with all relevant Kenyan laws and regulations;
  • Conducting regular safety inspections and audits;
  • Providing high quality safety equipment to Group employees and external service providers;
  • Maintaining high on-site safety standards through training of Group employees and external service providers; and
  • Adhering to international Environmental, Health and Safety standards, including IFC EDGE[1] accreditation.
f. Increased competition
Increased competition and oversupply in student accommodation may cause loss of market share or reduce the Acorn I-REIT’s profitability and cash flows through reducing occupancy or rents at its properties, which could adversely affect its financial performance. Mitigating factor: In addition to its natural first-mover advantage, the Issuer has taken a number of steps to mitigate risks posed by competition, including but not limited to:
  • Acquiring prime sites closest to target universities to develop its projects;
  • Cost optimisation through economies of scale and innovation;
  • Constant monitoring of the market environment to identify potential competitors;
  • Maintaining a target limit of only 35% of the total addressable market for the Group’s products to allow space for competitors; and
  • Maintaining rental rates in-line with the market to ensure occupancy growth.
To the best knowledge of the Acorn I-REIT, as of the date of this Offering Memorandum, the Group is the only entity with operational PBSA properties in Kenya. While competitors have expressed interest in the space, it still remains to be seen how soon they will break ground. The Group already has 3 operational properties which achieved over 90% occupancy, highlighting the strong demand and need for the Group’s products. Valuable information has been garnered over the last four years of operation within the PBSA space and this knowledge is constantly being reviewed and applied to improve all current and new operations. In addition, there continues to be a large gap between demand and supply of PBSA in the market. The total number of available beds across the country is approximately c.280,000 against the total number to university students of approximately 600,000. Mitigating factor: At the moment, the Acorn I-REIT is the only entity focused on the construction of PBSA in Kenya. The Acorn I-REIT does not expect significant competition in this segment in the near term.
  • Risks associated with investing in REITs
    • a. Risks associated with pricingThe price obtainable on sale of a Unit on the OTC can go up or down and may differ from the reported net asset value per Unit. The price of the Units will generally reflect prospective investors’ confidence in Kenya’s economy, the property market and its returns, the I-REIT management and interest rates.
    • b. Risk of future dilutionIt is likely that the Acorn I-REIT will issue additional Units in the future to finance the acquisition of additional properties. This could result in dilution of Security Holder's holdings in the Acorn I-REIT.
  • Risks associated with a pandemic

    • a. Enrolment risk
      Student enrolments are not expected to decrease. However, certain universities might decide to offer online courses. As a result, students can study from their homes without the need to relocate to university cities. However, physical learning in Kenyan universities has resumed. Hence, we expect limited impact on the Kenyan student accommodation sector.

    • b. Demand Preferences risk
      Student preferences might change due to Covid-19 prioritizing health and safety. They might prefer staying in their family homes over student accommodation. Students prefer to study at their own accommodation instead of staying at their parents' home since the family home is not an ideal learning environment due to distractions. This is compounded by poor electricity supply across Kenya and broadband Internet being inaccessible in many areas and weak in others. Students and young adults are social beings who want to experience university life, which includes staying away from parent supervision.

    • c. Health & Safety risk
      Parents and students will have concerns about health and safety standards in student accommodation properties and this might therefore impact occupancy levels. Public Health Authorities have set stringent guidelines for the reopening of universities and accommodation, which are likely to be in place for 12-18 months. So, it is expected that there will be a severe shortage of Student Accommodation in the short to medium term. Acorn implemented all the guidelines and all its properties were approved by the Public Health Authorities for reopening in June 2020.

    • d. Valuation risk
      Real estate valuation might be affected due to lower NOI and higher cap rates. Valuations should be based on normalized conditions assuming willing buyers & sellers. The current situation is temporary since we do not expect structural changes in demand and supply of student housing due to Covid-19. Hence, we do not expect valuers to markdown valuations based on outliers in terms of current NOI and liquidity.

For further assistance, you can send an email to care@vuka.co.ke from your registered email address, or contact us toll-free at 0800 730 333 and select option 2 on the IVR (Interactive Voice Response) to speak to our Vuka customer care team.

Frequently Asked Questions

  • What is Vuka Investment Club?

 

Vuka is a home-grown Kenyan innovation that is regulated by the Capital Markets Authority  and is based on the popular investment club or chama model.

“VUKA” which means “Cross Over” in Swahili, gives for the first time, an opportunity to qualified retail investors to invest in the income generating Acorn Student Accommodation Income Real Estate Investment Trust (ASA I-REIT) and own a piece of Acorn’s income generating properties that are managed under the brands Qwetu and Qejani.

 

  • Why is Vuka Exclusive and Invite only?

 

Vuka is based on the investment club model and like any investment club, one must be invited to join by an existing member. In addition, there will only be a limited number of units available at any one time. These units will only be available to active members.

 

  • Who can become a member in Vuka?

 

A person over the age of 18 years who is Kenyan citizen with a National ID, or a Kenyan resident holding an alien card and a KRA PIN, can become a Vuka member.

Chamas can also join through their authorized representatives.

 

  • Who is qualified to become a member?

 

A qualified investor includes an Investment Club (Chama), Sacco or individual who has a source of income/ earnings equivalent Kes. 50,000 per month and is looking for a medium to long term investment with regular dividends and capital appreciation.

Please note that whilst you can invest for whatever duration you wish, Vuka is not suitable for short term investors (less than one year) as you will not be able to enjoy all the benefits for such short durations.

 

  • How can I become a member in Vuka?

 

To join the exclusive Vuka investment club, you need to receive an invite from an existing member. In case you don’t know anyone in the Vuka Club, you can share your profile on vuka.co.ke, or contact us by calling 0800730333, and we will assist you in securing an invite from one of our members, after we evaluate whether Vuka is a suitable product for you based on your profile.

 

Upon receiving an invite, you can create an account on the Vuka Portal by clicking the link in the invitation email and then follow these simple steps:

 

  • complete the KYC (Know Your Customer) by uploading the mandatory documentation and completing a quick video verification.
  • select the best subscription available based on the amount you wish to invest.
  • You will receive a welcome call from our contact center team who will validate your product understanding, share further details of the investment product, and explain to you how you can place your orders through the Vuka investment platform.

Voila! You can then start investing and buying units in the Acorn Student Accommodation Income Real Estate Investment Trust (ASA I-REIT) whenever they are available

 

  • What are the various categories of subscriptions available to a member?

 

We have created different membership categories to cater for our different members’ investment aspirations. Each membership category provides different priority in buying and selling opportunities based on the category one selects.

The categories for individual investors are: Silver, Gold, Platinum, Platinum+ and Diamond. Chamas can also become members through their authorized representatives by selecting “Chama” as their member category.

  • How can a member buy and sell units?

 

The Vuka Portal provides convenience and transparency in the whole buying and selling process.

After choosing your membership category and paying the joining and annual fee, you will be directed to your homepage on the Vuka Portal.

The homepage provides two wallets: the static wallet and the dynamic wallet. Each wallet serves a purpose in your investment journey. As the name suggests, the static wallet is used to buy and sell units while the dynamic wallet is used to load and withdraw money from the platform.

 

Buying Units

You can click the “add money” button displayed in your dynamic wallet and top up the amount you wish to invest from your bank account or your MPESA account.

Whereas the amount loaded from MPESA will reflect instantly, the bank transfer may take up to 2 working days to reflect in your account.

Once the money reflects in your dynamic wallet, you can choose the number of units you wish to buy. The system automatically calculates the money needed to buy the units based on the current value per unit along with the 3% service charge.

Upon order confirmation, the money moves from your dynamic wallet into the static wallet.

All buy orders received during the month are processed on the (Trading Day) which is the last working day of every month, on a First come First serve and priority category basis.

You will be able to see if your orders have been fully executed, partially executed or have not been executed based on the availability of units by 7th of the subsequent month.

Any amount that remains in your static wallet from the Trading Day is placed in a fixed deposit call account and will earn you the interest paid by the bank until the next Trading Day. This amount will keep rolling over in the Fixed Deposit and earning interest until units are available.

Should you wish to withdraw any amount in your Static Wallet, you will need to send the instruction from your member portal and on the next Trading Day, it will be withdrawn and reflect in your dynamic wallet by the 7th of the subsequent month.

Selling Units

Should you wish to sell your units, then you log in to your member portal and click on the sell units button. Once you state how many units you wish to sell, the system automatically calculates the withdrawal amount based on the current value per unit along with the 3% service charge.

All sell orders received during the month are processed on the (Trading Day) which is the last working day of every month, on a First come First serve and priority category basis.

You will be able to see if your units have been fully or partially sold (which depends on the buy orders received) by 7th of the subsequent month.

Any units not sold will then be reflected in your account until the sale is executed during subsequent Trading Days.

 

  • Liquidity Mechanism

 

The Vuka Manager, Acorn Investment Management Ltd, will endeavour to maintain more buy orders than sell orders at any one time in order to provide liquidity for members who wish to sell. This is however not a liquidity guarantee but rather a mechanism to provide members with liquidity within the club. Any units not sold will remain credited to the members account until sold.

 

  • How do the dynamic and static wallet work?

 

The static wallet is used to buy and sell units while the dynamic wallet is used to load and withdraw money from the platform.

  • How much is a unit and what governs its price?

 

As at August 2021, the IREIT unit holds at KES 20.62, which was held at KES 20 at the launch in February 2021. The increase in the valuation was a result of the performance of the underlying assets, which have benefited from rent escalation in April 2021.

The unit price will be updated twice a year at the announcement of the full-year results and the interim results. The unit price adjustments occur when rent adjustments happen in the underlying assets that change the Net Asset Value of the IREIT

 

  • Do I have flexibility over my investment in Vuka?

 

We understand that as an investor you look for freedom and flexibility to choose the amount you wish to invest. Unlike other real estate investments, which are often rigid and require high investments with a locked tenure to commit, the Vuka Investment club allows you to invest any amount during the year for your preferred amount of time.

As a Vuka member, you can easily increase or decrease your investment during the year and within the investment limits of the same membership category. Should you wish to invest more than your selected category investment limit, you can easily upgrade your membership category.

At any given point in time, or in the case of any emergency, you may liquidate part or all of your units. This liquidity will be made available through the internal trading taking place among the members on the platform and any “excess” would then be addressed by trading on the unquoted securities portal on the NSE.

However, it is important to point out again that Vuka is a product that is suitable for medium to long term investing and not short term or active trading. To enjoy the full benefits we recommend a longer investment period in order to maximize the probability of an increased capital appreciation and dividend yield.

 

  • What are the charges incurred when buying and selling units?

 

A 3% service charge will be charged for every buy or sell transaction. This charge covers the brokerage, administrative, custody and NSE fees.

 

  • What are the tax implications on my investment?

 

Due to the regulation in place, REITs are exempt and thus do not incur any income and capital gain tax. REITs also do not pay any stamp duty on transfer of assets. Dividends paid to Vuka members are however taxable in the hands of the investor. Members thus experience a lesser tax incidence.

 

  • Is buying and selling under Vuka a primary or secondary market transaction?

 

The buying and selling transactions will involve primary and secondary transactions. Initially, this will be secondary transactions as Acorn Holdings Limited (AHL) sells down the I-REIT units that it is holding over and above the regulatory threshold. However, the sell-down portion is not large and as such, soon we will move into primary transactions as the I-REIT has a number of new income-generating assets that it has to acquire from the D-REIT in the coming months.

 

  • Why does Acorn not list on the main board of the exchange? 

 

This is based on lessons from successful REITs globally.  For an IREIT it is important that it demonstrates a dividend payment and capital appreciation track record before it lists on a main board.

 

  • What are the anticipated returns under Vuka?

 

The Acorn I-REIT earns a 10-year return equivalent of 11.1% p.a*, which is comprised of approximately 7% p.a.* as dividend yield with the remaining 4.1%p.a.* amount coming from capital appreciation. Should you hold the units for a shorter period the returns may be lower as the dividend yield grows as the IREIT assets grow due to economies of scale

 

  • How does Vuka compare to other investments, e.g. government bonds, Fahari ILAM REIT?

 

Vuka is not intended to replace your investments in other securities such as bonds, unit trusts or equities. It is meant to help you diversify your portfolio from being concentrated in those securities and to cross you over from illiquid plots that are idle and not earning you a return to a more liquid way to own real estate investments (hence the name Vuka). We recommend adding Vuka as one of the investments in your current portfolio.

 

Investment

Returns

10 Year Govt Bond Yields 

11.52%

Equity Returns over 10 years

12.50%

Fahari ILAM REITs

7.34%

  • Can I upgrade my customer category during the subscription period?

 

As a member, you can upgrade your membership category to enhance your priority for buying and selling at any time. Upon reaching the higher investment limit of your current membership category, the Vuka platform will prompt you to upgrade your membership category to allow you to continue to invest and benefit from Vuka. To successfully upgrade your membership, follow the prompts on the platform and pay the difference in fees (joining and annual) for your current membership category and that of the desired membership category. We offer this upgrade to allow for a gradual process while increasing your investment.

 

  • Can I downgrade my customer category during the subscription period?

 

We encourage our members to select a membership category that best suits their financial investment goals.  Should you wish to downgrade from your current membership category, you can do so in the subsequent year by choosing a different membership category when renewing your annual membership.

 

  • How can I cancel my subscription?

 

A member’s annual subscription fee is non-refundable and is valid for a period of 12 months and automatically lapses after the said period of 12 months unless renewed upon expiry.

In the case of a member’s failure to renew their annual subscription, they will continue to hold their units in their Vuka account and be able to sell them at their discretion. They will however, not be able to purchase any additional units.

Should the member wish to sell and withdraw their entire investment, they can do so anytime during the investment period. 

  • How can I invite a friend to join the Vuka Investment Club?

     

    Being an exclusive invite-only club, only a member can invite an individual by logging into the Vuka portal, selecting the ‘invite friend’ tab and sending an invite to their friend’s email address.

    The invited friend will then receive a unique invitation code on email that will prompt them to follow the necessary steps to become a member. This code can only be used once and expires after 4 days.

    Once the invited friend joins Vuka as a member, you will earn a referral token as per the membership category your friend has selected and paid for.

    The current referral amount differs per membership categories as follows:

    Silver – KES 500, Gold – KES 1,000, Platinum – KES 2,000, Platinum+ - KES 3,000, Diamond – KES 4,000.

    The referral token will be paid to your MPESA or bank account as per your request.

     

  • What is the Acorn Student Accommodation Income REIT (“Acorn I-REIT”)?

 

The Acorn I-REIT is structured as a common law unincorporated trust divided into units and is established through a Trust Deed dated 16th December 2020.  It invests in the acquisition of stabilized, income-generating purpose-built student accommodation (“PBSA”).

 

 What are its investment objectives?

 

The investment objectives of the Acorn I-REIT are as follows:

  • the acquisition for long-term investment, of income generating eligible real estate investments for student accommodation
  • provision of the most sought after, quality and secure PBSA within the Nairobi Metropolitan area (Nairobi County and its neighbouring counties)
  • retention and management of the real estate assets of the Acorn I-REIT with the objective of providing income to investors in the form of regular, stable cash distributions to achieve an attractive distribution yield;
  • realize capital appreciation from proactive investment and asset management;
  • provision of an attractive investment alternative for investors seeking to allocate a portion of their long-term investment portfolios in a well-structured, regulated and professionally managed real estate backed security;
  • the undertaking of incidental or connected activities and activities related to the assets of the Acorn I-REIT; and
  • any other such activities as may be authorized by the Regulations.

 

 What is a Real Estate Investment Trust, or REIT?

 

In general, a REIT is an entity that:

  • combines the capital of many investors to acquire or provide financing for a diversified portfolio of real estate investments under professional management;
  • is not subject to corporate income taxes on its net income that is distributed, which substantially eliminates the “double taxation” treatment (i.e., taxation at both the corporate and stockholder levels) that generally results from investments in a corporation; and
  • pays distribution to investors of at least 80% of its annual ordinary taxable income.

 

 Why should I invest in real estate investments?

 

Allocating some portion of your investment portfolio to real estate investments may provide you with portfolio diversification, reduction of overall risk, a hedge against inflation, and attractive risk-adjusted returns. For these reasons, real estate has been embraced as a major asset class for purposes of asset allocations within investment portfolios. Although institutional investors can invest directly in real estate investments and on substantially different terms than individual investors, we believe that individual investors can also benefit by adding a real estate component to their investment portfolios. You should determine whether investing in real estate would benefit your investment portfolio. Please see the “Risk Factors” section for a discussion of the recent economic slowdown, the impact of the pandemic and disruptions in the capital and credit markets.

 

  • How would you describe your real estate property acquisition and operations process?

 

The Acorn I-REIT shall invest in superior purpose-built student accommodation with the aim of delivering strong steady capital growth and dividends over the medium to long term. The mandate of the Acorn I-REIT is to accumulate a portfolio of high-quality, affordable PBSA assets in Nairobi and its environs – then actively manage the portfolio to generate steady, dependable returns for security holders, through a stable and increasing cash flow that offers the potential for long-term capital appreciation.  Additionally, Acorn is committed to promoting sustainability and so the Acorn I-REIT will aim to follow and to promote good sustainability practices, to reduce the environmental impact of its activities and to help customers do the same.  The Acorn I-REIT may only invest in eligible real estate which can demonstrate an annual yield of at least six per cent. (6%) and the maximum investment amount per property will be, in principle, not more than forty per cent (40%) of the total Net Asset Value of the Acorn I-REIT.

With the business model focused on rental housing, Acorn has established operational excellence as a core value. Emphasizing the importance of property and facility management, Acorn delivers unparalleled service, asset management, energy efficiency and the reduction of real estate investment risk.

Acorn’s commitment to the importance of property management is exemplified by the development of a customized software program to manage building operations. This software enables us not only to manage leasing, tenant renewals and rent collections but also, expenses and resolution of maintenance issues, including any complaints raised by tenants.

 

  • What is Vuka?

 

Vuka is an aggregator platform for retail investors to provide them access to otherwise restricted offerings within the capital markets, starting with the Acorn Student Accommodation I-REIT.  It is clear that retail investors would like an avenue to invest into opportunities like the Acorn REITs.  However, this is not currently feasible as the regulations deem that an unlisted I-REIT should have “a minimum subscription or offer parcels of five million shillings”.  This condition is restrictive to the participation of the retail investor and so the Vuka platform enables this participation by making Acorn Capital Partners LLP (“ACPL”) the investment entity, funded by multiple retail investors.

 

  • Will the Acorn I-REIT units be in the name of each investor on the Vuka platform?

 

The units will be held in ACPL’s account.  The units attributable to each member would then be recorded within the system being established by AIML.  The units would be allocated on the basis of the fulfilled subscriptions by the members on the Vuka platform.  Every time a transaction within the Vuka platform is closed, investors will receive the relevant contract note providing them with the record of their completed subscription. 

 

  •  How can I be assured of the correct recording of my units on the Vuka platform if the units will be held in ACPL’s account?

 

Members will receive confirmations of the transacted units after a trade is completed, providing them the details on the number of units transacted and the amount of cash spent or raised.  This confirmation will be through a contract note on the Vuka platform.  The transacted units will be based on the disclosed NAV, taking into account the predetermined transaction fee of 3%.  All fees and charges along with the basis for the allotment of units has been disclosed in the marketing materials related to Vuka.

We also are appointing Zamara to fulfil administration roles and they would then also act as an auditor to the investment accounting being done by the AIML system. 

 

  •  How can I be assured that AIML will not act as a market-maker and will avoid conflict of interests?

 

AIML is a licensed REIT Manager and the general partner in the proposed Vuka structure.  As a regulated entity, it is under the strict oversight of the CMA to conduct itself with due care and integrity, especially with regards to dealings with its investors.  All trades will be undertaken on the disclosed NAV as at that time.  AIML will not be transacting on the basis of any other NAV to benefit or disadvantage any stakeholder. In addition, AIML is required to issue regular reports to the CMA containing important information including the member details and units held on a regular basis

Risks associated with the Acorn I-REIT
a. Operational risk
Financial loss can be due to lack of adequate human capital, systems, and internal controls, and is a significant risk to the business.
  • Human capital –staff who do not have the requisite experience and expertise can present risks to the operations of the business;
  • Systems – All organisations rely heavily on information technology and failures can result in losses for the business, both in terms of downtime and fraud; and
  • Internal Controls – lack of proper procedures can create a conducive environment for fraud
Mitigating factors: The Group has put in place a number of measures to mitigate operational risks including but not limited to:
  • Detailed operational procedures across all the functions;
  • Instituting a strong culture of continuous improvement through the implementation of Lean Six Sigma to improve, streamline and standardise operations across the business; and
  • Utilizing advanced IT systems to provide optimal support for the business which are periodically reviewed to ensure the needs of the business are continuously met.
  • Proactive approach to maintenance of all operational properties and ensuring timely response to reactive maintenance issues raised by students
b. Concentration risk
The Acorn I-REIT’s development activities are focused in Nairobi with no immediate plans to expand outside the Nairobi Metropolitan Area. The Acorn I-REIT’s financial performance is therefore affected by changes in regulations and legislation implemented by the County Government of Nairobi as well as by general microeconomic conditions within Nairobi. A deterioration in the regulatory, legislative or economic environment in Nairobi may therefore affect the performance of the Acorn I-REIT. Mitigating factor: The Group is the first institution to actively invest in the local PBSA market. Despite the fact the Group is focusing on PBSA, there is a massive gap between demand and supply of PBSA in the market. The total number of available beds across the country is approximately c.280,000 against a requirement of 600,000. In addition, the Group’s 3 existing properties achieved over 90% occupancy within 15 months of operation, which highlights the strong demand for their products. Nairobi’s economy remains robust in a Kenyan context and Acorn maintains relationships with the relevant regulatory agencies in Nairobi, built over a 20+ operating history, to ensure compliance with all relevant regulations and a good understanding of the prevailing regulatory climate.
c. Investment risk
The Acorn I-REIT's ability to evaluate, purchase and operate properties has to fit within parameters that satisfy market demand. PBSA is a fairly new asset class in Kenya with no historical financial performance for investors to benchmark against. In addition, performance is dependent on quality of the investment decision and ability for the organisation to execute on investment decisions. Mitigating factors: The Acorn I-REIT has in place policies that ensure consistent due diligence, reviews, and board reports that are reviewed, discussed, and approved prior to the acquisition of its properties. Acorn has already established a track record of robust investment decisions throughout its history, including its 3 operating PBSA properties, Jogoo Road, Ruaraka and Prospective Property 1, which have all achieved over 90% occupancy. These occupancy benchmarks are not seen in advanced markets such as South Africa. JLL’s report on PBSA in Africa highlights that a typical PBSA property in South Africa achieves 90% occupancy after 36 months on average vs. within 15 months for the Acorn Group’s properties to date. The SKP (Simon Kucher and Partners – A world’s leading market research firm) report also details the huge market demand for PBSA in Kenya which is largely underserved in Kenya. The Acorn I-REIT's’ ability to evaluate, purchase, construct, and operate properties has to fit within parameters that satisfy market demand for student accommodation.
d. Country and Industry risk factors
I. Country macroeconomic environment and political
Kenya’s economy is one of the more stable, developed and diversified economies in the region. It is nevertheless undergoing rapid economic development and political transformation. These factors can result in political and policy changes which could affect such matters as economic growth, currency stability and macroeconomic fundamentals. A severe economic downturn in Kenya may lead to a reduction in demand for student housing and/or defaulting or late payment of rent on the part of one or more tenants or result in the reduction of rental income. In addition, a deterioration in the political climate could lead to losses as a result of civil strife. Mitigating factor: Given the history of the country, Kenya has managed to retain a relatively favourable macroeconomic environment which remains one of the more stable, developed and diversified economies in the region. Additionally, the Trustee and the Acorn I-REIT Manager will ensure that all properties have adequate insurance policies against potential damages related to civil strife caused by a deterioration in the political environment.
II. Changes in the regulatory and taxation environment
Kenya’s central and county governments impose regulatory and tax requirements on entities that are in the real estate sector. Current taxes include but are not limited to:
  • Stamp duties payable to the central government;
  • Capital gains taxation on the sale of properties payable to the central government;
  • Land rates payable to county governments; and
  • Corporate income tax
Regulatory requirements include but are not limited to:
  1. Environmental regulations imposed by the National Environmental Management Agency (“NEMA) and the Water Resources Management Authority (“WARMA”);
  2. Building regulations imposed by the county governments.
These legal and regulatory requirements continue to evolve as the Government develops and implements tax raising policies. Such changes to laws, regulations or government policies or practices could cause the Acorn I-REIT and the projects it holds to incur additional costs or liabilities or implement business practices that could directly or indirectly reduce cashflows of the Acorn I-REIT and the Investee LLPs products and in turn adversely affect its business. Mitigating factor: The Acorn I-REIT recognises the important role it plays in the real estate sector, as a taxpayer and an agent for collection of indirect taxes, and actively engages with the relevant government bodies directly. The engagement is geared towards reducing the impact of drastic increases in taxes and to mitigate against unfavourable fiscal policies which would make the real estate sector unattractive.
e. Health and safety risk
The Acorn I-REIT’s operations are subject to various health and safety risks, particularly in relation to construction operations and particularly carry the risk of injury. On-site injuries may lead to legal action being taken against it and resulting in claims that could affect the ability of the Issuer to maintain its operations and service its obligations. Mitigating factors: Acorn contracts out the construction risk to third party contractors who take liability for any construction risks including life, injury, fire, property risks. Acorn also ensures that Contractors have full insurance cover for this risks. In addition to taking a number of measures to mitigate the risk to staff and members of the public as below, the Acorn I-REIT ensures that they take adequate workplace injury polices that can alleviate any potential risks from injuries at the workplace.
  • Maintaining compliance with all relevant Kenyan laws and regulations;
  • Conducting regular safety inspections and audits;
  • Providing high quality safety equipment to Group employees and external service providers;
  • Maintaining high on-site safety standards through training of Group employees and external service providers; and
  • Adhering to international Environmental, Health and Safety standards, including IFC EDGE[1] accreditation.
f. Increased competition
Increased competition and oversupply in student accommodation may cause loss of market share or reduce the Acorn I-REIT’s profitability and cash flows through reducing occupancy or rents at its properties, which could adversely affect its financial performance. Mitigating factor: In addition to its natural first-mover advantage, the Issuer has taken a number of steps to mitigate risks posed by competition, including but not limited to:
  • Acquiring prime sites closest to target universities to develop its projects;
  • Cost optimisation through economies of scale and innovation;
  • Constant monitoring of the market environment to identify potential competitors;
  • Maintaining a target limit of only 35% of the total addressable market for the Group’s products to allow space for competitors; and
  • Maintaining rental rates in-line with the market to ensure occupancy growth.
To the best knowledge of the Acorn I-REIT, as of the date of this Offering Memorandum, the Group is the only entity with operational PBSA properties in Kenya. While competitors have expressed interest in the space, it still remains to be seen how soon they will break ground. The Group already has 3 operational properties which achieved over 90% occupancy, highlighting the strong demand and need for the Group’s products. Valuable information has been garnered over the last four years of operation within the PBSA space and this knowledge is constantly being reviewed and applied to improve all current and new operations. In addition, there continues to be a large gap between demand and supply of PBSA in the market. The total number of available beds across the country is approximately c.280,000 against the total number to university students of approximately 600,000. Mitigating factor: At the moment, the Acorn I-REIT is the only entity focused on the construction of PBSA in Kenya. The Acorn I-REIT does not expect significant competition in this segment in the near term.
  • Risks associated with investing in REITs
    • a. Risks associated with pricingThe price obtainable on sale of a Unit on the OTC can go up or down and may differ from the reported net asset value per Unit. The price of the Units will generally reflect prospective investors’ confidence in Kenya’s economy, the property market and its returns, the I-REIT management and interest rates.
    • b. Risk of future dilutionIt is likely that the Acorn I-REIT will issue additional Units in the future to finance the acquisition of additional properties. This could result in dilution of Security Holder's holdings in the Acorn I-REIT.
  • Risks associated with a pandemic

    • a. Enrolment risk
      Student enrolments are not expected to decrease. However, certain universities might decide to offer online courses. As a result, students can study from their homes without the need to relocate to university cities. However, physical learning in Kenyan universities has resumed. Hence, we expect limited impact on the Kenyan student accommodation sector.

    • b. Demand Preferences risk
      Student preferences might change due to Covid-19 prioritizing health and safety. They might prefer staying in their family homes over student accommodation. Students prefer to study at their own accommodation instead of staying at their parents' home since the family home is not an ideal learning environment due to distractions. This is compounded by poor electricity supply across Kenya and broadband Internet being inaccessible in many areas and weak in others. Students and young adults are social beings who want to experience university life, which includes staying away from parent supervision.

    • c. Health & Safety risk
      Parents and students will have concerns about health and safety standards in student accommodation properties and this might therefore impact occupancy levels. Public Health Authorities have set stringent guidelines for the reopening of universities and accommodation, which are likely to be in place for 12-18 months. So, it is expected that there will be a severe shortage of Student Accommodation in the short to medium term. Acorn implemented all the guidelines and all its properties were approved by the Public Health Authorities for reopening in June 2020.

    • d. Valuation risk
      Real estate valuation might be affected due to lower NOI and higher cap rates. Valuations should be based on normalized conditions assuming willing buyers & sellers. The current situation is temporary since we do not expect structural changes in demand and supply of student housing due to Covid-19. Hence, we do not expect valuers to markdown valuations based on outliers in terms of current NOI and liquidity.

For further assistance, you can send an email to care@vuka.co.ke from your registered email address, or contact us toll-free at 0800 730 333 and select option 2 on the IVR (Interactive Voice Response) to speak to our Vuka customer care team.