Property developer Acorn Group posts Sh1.2 billion loss

Property developer Acorn Group Holdings made a Sh1.2 billion net loss in the year ended December 2018, according to the latest available disclosures by the company.

Acorn, which was formed as a joint venture between private equity firm Helios and local investors, had posted a net loss of Sh105.3 million the year before.

The company says it is still in its growth phase and will make profits once it scales up its development projects that will generate rental income and capital gains.

Acorn is currently focused on developing and managing student hostels in Nairobi that charge a monthly rent of between Sh7,000 and Sh33,000 depending on location and amenities provided. “The first phase of the group’s operations is not profitable as minimal income is produced and costs to develop the platform are being incurred,” Acorn said in the report. “The reported operating deficits are expected to turn around as the number of properties constructed increase and start to generate significant rental income and capital gains.”

Acorn’s sales rose 241.6 percent to Sh186.2 million in the review period. The company recorded a paper loss of Sh115.7 million in its investment properties, reversing a gain of Sh488.8 million a year earlier.

Administrative expenses increased 94.4 percent to Sh620.8 million while interest paid on borrowings –absent in the prior year— stood at Sh145.4 million.

The company’s normal borrowings expanded 56 percent to Sh1 billion. Its lenders include Stanbic Bank (Sh500 million) and KCB (Sh300 million).

Acorn’s interest expenses on loans provided by its shareholders doubled to Sh567.1 million from Sh277.9 million.

This came as debt provided by the owners including Helios increased to Sh3.1 billion from Sh2.1 billion. The property developer ended the period with a negative equity of Sh1.3 billion which it says will be reversed in the medium term.

“The group’s negative net assets position is projected to be eliminated in 2023,” Acorn said.

The company is the first to offer branded, private student accommodation on a large scale. Its Qwetu and Qejani hostels offer a study room, Wi-Fi, and a gym among other features.