Old Mutual to offload entire Sh19 billion property portfolio

Regional insurer Old Mutual Holdings has announced plans to sell its entire real estate portfolio across East Africa, marking its exit from the struggling property market.

The planned disposal, which includes the 31-storey Old Mutual Tower in Nairobi’s Upper Hill, is part of a wider business restructuring strategy that also involves exiting South Sudan.

The company said weak returns from its property portfolio had made real estate investments unattractive, with yields stuck in single digits and valuations showing little growth.

Chief Executive Officer Arthur Oginga confirmed that the insurer has intensified efforts to secure buyers for its properties, most of which are located in Nairobi.

“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 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.”

At the close of last year, Old Mutual’s investment properties were valued at Sh19.4 billion, down from Sh21.2 billion previously. The Upper Hill tower alone was valued at Sh5.5 billion, the highest among the firm’s assets.

Other key Nairobi properties include Equity Centre, Telkom Place, Union House, NCBA Annex, and Kimathi House.

Beyond Kenya, the firm owns three properties in Uganda — a plot of land, Nakawa House, and Nakawa Business Park, valued at Sh4.3 billion.

In South Sudan, the insurer controls a plot, Juba Apartments, and the Equatoria Tower. Rwanda’s single holding is a plot valued at Sh258.8 million.

Oginga said the real estate downturn has limited both rental income and capital appreciation, undermining the case for property as a viable investment.

“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 insurer’s financial struggles have compounded the decision to exit the sector.

Old Mutual reported a sharp earnings decline, with net profit plunging 99 percent to Sh5 million from Sh327 million the previous year.

This was attributed to lower interest income, fair value losses, reduced written premiums, and rising finance costs.

Insurance revenues dropped by Sh57 million, while the life business in Kenya faced a higher loss ratio.

The company also suffered from lower income from equities and increased costs linked to the refinancing of a loan for its Uganda properties.

In earlier years, Old Mutual had explored the option of consolidating its real estate assets into a Real Estate Investment Trust (REIT) to reduce exposure in the sector.

A REIT is a regulated investment vehicle that pools resources from investors to generate income from property holdings.

However, with the planned disposal, the firm is instead pursuing a complete exit from direct real estate ownership in the region.