Regional financial services giant Old Mutual Holdings Plc is embarking on an extensive divestment of its entire East African real estate portfolio, including the iconic 33-story Old Mutual Tower in Nairobi, as it seeks to exit a market plagued by “shaky returns.” The strategic shift comes as the insurer struggles with a significant drop in net earnings and persistently low yields from its property holdings.
Old Mutual Chief Executive Officer Arthur Oginga confirmed the aggressive push to offload assets, stating, “We have sales agreements for two properties in Kenya. The government of Rwanda has also paid us a deposit on a property, while in Uganda we are at the valuation stages.” He further emphasized the company’s readiness to dispose of its entire real estate arm if suitable offers materialize, adding, “We will be selling the Old Mutual Tower as a standalone unit and are currently in negotiations. If we get offers for all our properties, of course, we will sell them.”
The decision to shed its property empire, valued at KSh 19.4 billion at the end of 2024 (down from KSh 21.2 billion the previous year), develops from a decade of muted growth in asset values and a failure of rental yields to match market interest rates. “The problem is that the way you look at property is that it is a mix between rental yields and capital appreciation for purposes of determining whether it is a credible investment or not,” Mr. Oginga explained. “Yields never quite match market interest rates. Capital appreciation over the last 10 years has not been much, hence we have quite flat valuations. That’s the challenge until the market turns.”
The divestment program is extensive, spanning across East Africa. In Uganda, Old Mutual is selling three key properties: a plot of land, Nakawa House, and the flagship Nakawa Business Park, valued at KSh 4.37 billion (about UGX 126 billion). The park houses UAP Old Mutual’s general insurance, life insurance, and Old Mutual Investment Group operations. In Kenya, the portfolio up for sale includes some of Nairobi’s most recognizable commercial properties: the Old Mutual Tower (valued at KSh 5.5 billion), the Equity Centre, Telkom Place, Union House, NCBA Annex, and Kimathi House. Rwanda sees the divestment of a KSh 258.8 million parcel of land, for which a deposit has already been received. Even South Sudan is part of the sell-off, with assets including the Juba Apartments, the Equatoria Tower, and an additional plot of land on the market.
This strategic centre follows a challenging financial period for Old Mutual, which saw a staggering 99% drop in net earnings, from KSh 327 million to KSh 5 million, in the last financial year. This decline was primarily driven by lower interest income, fair value losses, reduced written premiums, and increased finance costs from a loan refinancing linked to its Ugandan properties. The company had previously considered consolidating its real estate assets into a Real Estate Investment Trust (REIT) but has now opted for outright sales.
Old Mutual East Africa Group, a leading provider of comprehensive financial services including insurance, investment, banking, and savings solutions, has a deep history in the region, with roots in Kenya dating back over 100 years.
Formed in 2015 following the acquisition of Faulu Microfinance Bank and Old Mutual Holdings Plc, the company operates across Kenya, Uganda, South Sudan, and Rwanda. The sale of these significant properties marks a decisive move to restructure its balance sheet and refocus on its core financial services offerings amidst a challenging economic vista.
