BY VICTOR ADAR
It is a tough job to start an investment club, and turning one into a fully-fledged company that now employs 70 people is even tougher as Dan Awendo, managing director of Home Afrika is proving it. It requires a bigger scope of thinking since resources are usually not enough at the initial stages but one must start from somewhere.
With rising need for start up capital some ten years ago, the real estate player won the initial battle but ended up with a much larger group of contributing founders. Before steadily growing over the last five years to become the public company listed under the Growth Enterprise Market Segment at the Nairobi Stock Exchange, it had attracted 128 shareholders who had helped to raise about Sh2million.
While people come together to be able to do transactions efficiently and cut bigger deals, for a chama, that number was massive. But, well, to ride out the usual investment storms it was necessary for the group to expand that ownership so that a more significant capital can be obtained. At the time the main interest among the friends was real estate. It was all of people who were in real estate in one way or another; architects, quantity surveyors, engineers, and finance people.
Mr Awendo agrees that it is increasingly becoming an option for friends who have a certain interest to come together. “Intention was to bring together a small group of people who could contribute some money,” he says. “We started pretty much like a chama, and the idea was to use two years or one and a half years to raise that money. When you have critical mass capital you can then be able to do transactions that would have been difficult for individuals to do.”
Decidedly an entrepreneur, Awendo believes that for the real estate firm to boom and operate efficiently, fresh business lines are essential. That’s why the beginning of 2017 saw them launch new businesses including a real estate agency and estate management services, and selling of smart plots. These newly formed revenue streams will help diversify and boost the firm’s income streams and solve the problem of cash flow that the company has been grappling with in the past once and for all.
Actually, there was a time when the company’s savings run dry and could not afford to pay salaries. But Awendo says the real estate player is worth a fortune maintaining that that has since changed thanks to improved corporate governance following reshuffling of old board and management that related to legacy problems and more lean organization following a restructuring of departments. This involved substantial changes to the board and senior management, which was carried out in the first half of 2016 along with consolidating a number of inactive wings and reorganizing key departments – with most of these having already been completed.
While real estate investments are very long term and would turn in profits after nearly seven to ten years, one of the backbones of sources of income is shorter-term liquidity. The new streams apart from being instrumental in the stability and taming short term expenses, it is the short term sources that remain part of the upfront capital, an ideal supplement to the high up-front capital requirements real estate development involves. One example is buying huge chunks of land, sub dividing and selling to perhaps middle income customers, or to buyers who can afford to pay quickly.
Perhaps resorting to lower segment of the market that he calls “low hanging fruits”, Awendo is confident that there’s significant cash flowing. Their main target market, though, is the medium to upper market class.
“For real estate, it’s not a straight jacket financial reporting. The system is a bit cruel,” he says, pointing out that while Home Africa’s deferred income from sale of land or property stands at Sh900 million, deposits from sale of plots and property reflect in balance sheet as liabilities (Sh1 billion) depressing the outlook of its financial position.
An accounting and finance professional with over 25 years of post-qualification experience in audit, accounting, management consultancy and corporate finance advisory, Awendo who is also a certified public accountant, a financial analyst and a graduate of the Advanced Management Program from Strathmore Business School and the IESE Business School of Spain is leading a change management process to turn around the company into an efficient, profitable and valuable investment vehicle for its shareholders and other stakeholders.
With a keen understanding of the unique environment of small and medium-sized enterprises finance in Africa given his travels on the continent consulting and training bankers on SME and Structured Trade Finance, the shrewd businessman is also the founder and immediate past chief executive of Investeq Capital and currently sits on its board as non-executive Chairman.
During his tenure as CEO, he led Investeq to win both local and continental awards in strategy, leadership, customer orientation, financial performance and entrepreneurship. Before founding Investeq Capital, he was the general manager for Loita Capital Partners and Loita Asset Management and was group financial controller before becoming responsible for the group’s East African Corporate Finance business.
His passion is making a difference in Home Africa, a real estate developer that’s presently behind the multi-billion shilling Migaa, a live-in-golf community in Kiambu County that rests on a 774 acre parcel of land and other real estate projects like Lango project (21 acres) in Tiwi beach south coast and Lake View Heights (96 acres) project. The developers’ first project was Morning Side Office Park, Ngong Road. The company’s fundamentals, so it seems, are strong owing to the asset it holds in form of a large land bank.
“In choosing our first project, it was clear in our mind that we need to start projects that can generate significant resources for us. So we can start building capital base and as we go into the housing sector we then have capacity from a resource perspective to make it possible for us. That’s how we ended up with this (referring to Morning Side Office) first building. We partnered with the land owner then of course we brought in other partners to develop and to sell the project,” he says. .