Sh5.5 billion Old Mutual Tower up for sale

UAP Old Mutual Tower, a 33-storey office complex in Upper Hill, Nairobi. FILE PHOTO | KANYIRI WAHITO | NMG

Old Mutual Group Holdings has placed its Old Mutual Tower in Upper Hill, Nairobi on sale amid rising debt service costs.

In disclosures on Monday, the firm indicated that its shareholders would approve the sale and transfer of the office block at its Annual General Meeting to be held on November 14.

The sale of the 31-storey office tower comes amidst higher debt servicing costs, which have seen the insurer seeking to restructure its balance sheet to include the conversion of shareholder loans into preference shares.

Read: Old Mutual in fifth year of dividend drought

The company valued the 324,881 square feet tower, which also serves as its headquarters at Sh5.5 billion in the year ended December 2022, maintaining the carrying value of the investment property from 2021.

Old Mutual Tower is the firm’s largest investment property ahead of Uganda’s Nakawa Business Park, South Sudan Equatorial Tower and Equity Centre which serves as the headquarters of lender Equity Group.

The sale of the tower at the carrying value would have the impact of reducing the group’s investment property portfolio, which stood at Sh19.2 billion at the end of 2022.

Old Mutual has come under pressure from years of loss-making and elevated borrowing which has exposed the company to heftier finance costs.

However, in six months to June 2023, the financial services provider cut its half-year loss by more than half to Sh348 million from a wider loss of Sh1.1 billion a year earlier. Finance costs nevertheless nearly doubled on account of rising interest costs and a depreciated local currency.

“Finance costs on borrowings were up 96 percent over the same period in 2022 due to increased interest rates as well as forex losses on the portion of the debt that is US dollar-denominated,” the company said.

“The Libor, on which interest is determined for US dollar loans, moved from 0.59 percent in June 2022 to five percent in June 2023 while the Kenya shilling depreciated by 14 percent against the US dollar over the same period.”

Finance costs reached Sh1.8 billion from Sh937 million previously as the pool of borrowed funds grew to Sh15.7 billion from Sh14.4 billion in December 2022.

The firm continues to bet on offering a variety of financial services to customers for future growth.

“Our strategy is focused on delivering our integrated financial services offering to meet all of our customers’ financial needs under one roof. This will enhance our customer experience and improve productivity or our distribution channels in the various markets we operate,” the company added.

Shareholders of Old Mutual are also expected to take a vote on the conversion of shareholder loans into preference shares at next month’s AGM.