Old Mutual Tower Up for Grabs in Sh19bn Asset Purge

Old Mutual Holdings Plc is selling off its entire Sh19.4 billion real estate portfolio in East Africa, underscoring the challenges faced by institutional investors in the property market.

The insurer, which has long been a prominent landlord in Nairobi and other regional capitals, says weak yields and stagnant asset values have made property an unattractive investment. 

The planned disposals will include some of its most recognisable buildings, among them the 31-storey Old Mutual Tower in Nairobi’s Upper Hill, valued at Sh5.5 billion.

“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, and in South Sudan we have had some offers,” said chief executive Arthur Oginga. 

“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.”

Old Mutual Tower is one of the tallest buildings in Kenya. 

The group’s Kenyan assets also include Equity Centre, Telkom Place, Union House, NCBA Annex, and Kimathi House. In Uganda, its holdings comprise Nakawa House, the Nakawa Business Park worth Sh4.3 billion, and a plot of land. 

It also owns Juba Apartments, Equatoria Tower and a plot in South Sudan, while its Rwandan portfolio is limited to land valued at Sh258.8 million.

Mr Oginga admitted the business has been unable to secure meaningful returns from its property holdings.

“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,” he said. 

“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 move comes as Old Mutual battles a sharp decline in profitability. Net earnings fell by 99 per cent last year to Sh5 million from Sh327 million, hit by lower interest income, fair value losses, and shrinking insurance premiums. 

The Kenyan life business also came under strain from a higher loss ratio.

Property had once been seen as a hedge against volatility in other investments, but Old Mutual’s experience illustrates how prolonged stagnation in the region’s real estate market has eroded that role. 

The firm had previously explored pooling its assets into a real estate investment trust (REIT) but has now opted for outright sales as it seeks to restructure and focus on more profitable areas.

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