Fusion Real Estate Development Trust - Offering Memorandum

20th JUNE 2016
Fusion Real Estate Development

Trust - Commercial
OFFERING MEMORANDUM
20TH JUNE 2016
In respect of The Public Offer of 100,000,000 Fusion Real Estate Development Trust - Commercial (FRED COMMERCIAL) REIT Units at an Offer Price of KES 23.00 per Unit as promoted by Fusion Capital Limited.
In making your decision to invest in REIT Securities you should
be aware that there is no recourse to the assets of the Issuer or
the Trustee.
Should the Trustee exercise its authority to borrow on behalf

of the Trust then Unit Holders rights to distributions and to the
assets will rank after the payments to creditors.
The investment in REIT Securities is an equity investment and

as a REIT Securities Holder in the REIT you invest as an equity
investor. Distributions and return of capital are not guaranteed
and are dependent on the performance of the assets of the REIT.
The Trustee, REIT Manager and other parties are also entitled
to receive payment of fees and expenses ahead of payments to
REIT Securities Holders who invest in REIT Securities.
This Offering Memorandum is issued in compliance with all applicable laws including the Capital Markets Act (Cap 485A)
and the Nairobi Securities Exchange Listing Manual.
2
PROMOTER
REIT MANAGER
REIT TRUSTEE
LEAD TRANSACTION ADVISOR
TAX CONSULTANT
LEGAL ADVISOR
REPORTING ACCOUNTANT
REGISTRAR
PROPERTY MANAGER
PROPERTY VALUER
AGE QUOD BENE AGIS
NGOTHO PROPERTY CONSULTANTS LTD

ARBITRATION ADJUDICATION D B VALUATION
LEAD SPONSORING BROKER
RECEIVING BANK
(iii)
3
THIS DOCUMENT
IS IMPORTANT FOR
CONSIDERING WHAT
ACTION TO TAKE
AND REQUIRES YOUR
CAREFUL ATTENTION
AS IT INCLUDES
LEGAL, MARKET AS
WELL AS HISTORICAL,
CURRENT AND
FUTURE FINANCIAL
INFORMATION.
(iv)
4
Contents
1.
IMPORTANT NOTICE
10
2. DECLARATIONS
11
3.

3.1
3.2
3.3
CORPORATE INFORMATION OF
THE MAIN PARTIES
The Promoter
The Trustee
The REIT Manager
12
12
12
13
4.

CONSULTANTS AND ADVISORS

TO THE TRANSACTION
14
5.
DEFINITIONS AND INTERPRETATIONS
16
6.
GLOSSARY OF ABBREVIATIONS
19
7.
FREQUENTLY ASKED QUESTIONS
20
8.
KEY FEATURES OF THE OFFER
8.1 REIT Structure, Key Parties and flow of funds
8.2 The Offer
8.3 Reasons for the Offer
8.4 Timetable of Principal Events
8.5 Minimum Subscription and Application Size
8.6 Underwriting
8.7 Basis of REIT Units Initial Price
9.
ELIGIBLE ASSETS OF THE TRUST AND

ACTIVITIES OF THE SCHEME
9.1 Eligible and permitted assets of the REIT
9.2 Assets to be vested in the Trust
9.3 Initial development and construction of the REIT
9.4 Strategy of the REIT Manager in implementing

the objectives
9.5 Permitted non-real estate assets and restrictions on

investment and REIT Managers strategy as regards

such investment
9.6 Investment Policy Statement
9.7 Risk management strategies to be employed

by the REIT Manager
9.7.1 Internal risk management
9.7.2 Independent checks
9.8 Level of Borrowings and the assumed terms

and interest rates
9.8.1 Limitations on Borrowing under the Regulations
10. THE TRUSTEE
10.1 Senior Management
10.2 Co-operative Bank role as trustee
10.3 Trustees power to borrow on behalf of trust and charge

or pledge assets as security
10.3.1 Trustess power under trust deed to borrow
10.3.2 Limits contained in the act or regulation
10.3.3 Circumstances in which REIT Securities Holder may be

required to vote to approve a borrowing by the Trustee
10.3.4 Implications of the Trustee exceeding the limits in Act or

Regulations or the limits set out in the Trust Deed
(v)
5
21
25
27
27
27
27
27
27
28
28
28
29
29
29
29
30
30
30
31
31
32
32
34
35
35
36
36
36
11.
THE PROMOTER
11.1 Overview
11.2
Investment Principles
11.3
Shareholding Structure
11.4
Board of directors
11.5
Senior Management
11.6
Resources and experience in the conduct of development and construction activities
11.7
Minimum regulatory investment to be maintained by the Promoter
11.8
Relationship between the Promoter, REIT Manager and the Owners of the asset to be transferred
11.9
Promoters capacity to find cost overruns
37
37
37
37
37
38
40
41
41
41
12
THE REIT MANAGER (FUSION INVESTMENT MANAGEMENT LIMITED)
12.1 Overview
12.2
Products and Services
12.3
Board of Directors
12.4
Senior Management
12.5
Fusion Investment Managements role as REIT Manager
12.6
REIT Managers Terms of Appointment
12.7
Shareholding Structure

40
13.
THE PROPERTY MANAGER
42
42
42
42
43
45
45
45
13.1 Overview
13.2
The services we Offer
13.3
Property Management services
13.4
Property Managers sales strategy
46
46
46
49
14.
THE STRUCTURAL ENGINEER
50
14.1
14.2
14.3
14.4
14.5
14.6
Overview and Background

Services
Key Personnel
Role of the Structural Engineer
Timing for the submission of the Structural Engineers Report
Potential conflicts of interest of the Structural Engineer
50
50
50
52
52
52
15.
THE PROPERTY VALUER
53
15.1
15.2
15.3
Key personnel
Policy in relation to revaluations
Potential conflicts of interest of the Property Valuer
53
53
53
16.
THE PROJECT MANAGER CERTIFIER
54
16.1
16.2
16.3
16.4
16.5
16.6
16.7
Overview
Background
Services
Key Personnel
Roles, duties, responsibilities and obligations of the PMC
Timing for the submission of the initial Project Manager Certifiers Report
Potentially conflicting interests or competing roles of the PMC
54
54
54
54
54
54
54
17.
KEY TERMS OF THE TRUST DEED AND SCHEME DOCUMENTS
55
17.1
17.1.1
17.1.2
17.1.3
17.1.4
17.1.5
17.1.6
Key aspects of the Trust Deed

Key parties roles, responsibilities and obligations
Liabilities of the Trustee and REIT Manager
Powers of the Trustee and REIT Manager
Appointment, removal, retirement or replacement of Parties
Valuations
Meetings of Securities Holders
55
55
55
55
55
55
55
(vi)
6
46
17.1.7

17.1.8
17.1.9
17.1.10

17.1.11

17.1.12
17.1.13
17.2
17.2.1
17.2.2
17.2.3
17.2.4
Rights of REIT securities holders, including limitations of those rights and decisions or actions requiring the
approval of REIT securities holders
56
Requirements for listing
56
Rights and limits on the ability to call for or to obtain redemption of REIT securities
56
Circumstances in which connected persons are not permitted to exercise voting rights in respect
of REIT Securities held by them
56
Maximum fees and charges permitted by the trust deed and payable by investors either directly or
indirectly out of the assets of the trust
56
Permitted expenses, costs and charges payable out of or reimbursable from the assets of the fund
56
The termination or winding up of FRED - COMMERCIAL
56
Summary of the material terms of other scheme documents
57
Contract with the REIT Manager
57
Contract with Legal Advisor
57
Contract with Project Manager Certifier
58
Contract with Structural Engineer
58
18.
OVERVIEW OF PROJECTS TO BE UNDERTAKEN
59
18.1
18.2
18.3
18.4
18.5
18.6
18.7
18.7.1
18.7.2
Greenwood City
Ownership of SPV
Intentions of the Transferors and Lock-Up Period
FRED - Commercial Sources and Uses of Fund
Proforma Project Time Scale and Phasing
Regulatory Approvals
Greenwood City Project Status Update - May 2016
Summary of May 2016 Valuation Report
Summary of May 2016 Project Status Report
59
59
59
59
60
60
60
61
63
19.
PRO-FORMA FINANCIAL INFORMATION
66
19.1
19.2
19.3
Income Statements
Balance Sheet
Cash flow Statement
66
66
67
20.
KEY ASSUMPTIONS AND SENSITIVITY ANALYSIS
68
20.1
20.2
20.2.1
20.2.2
20.2.3
20.2.4
20.2.5
20.2.6
20.2.7
Key Assumptions
Sensitivity Analysis
Construction Period: Base Case
Construction Period: + 6 Months
Post Development Period: + 6 Months
68
68
68
69
69
70
70
71
71
21.
21.1
21.2
FRED - COMMERCIAL VALUATION AND VALUATION BASIS

Valuation Summary
Overview of Valuation Approaches and Methods
72
72
72
22.
ASSET VALUATION AND VALUATION BASIS
73
22.1
22.2
22.3
22.4
22.5
22.6
Assets to be vested in the Trust

Assets Valuer
Valuation Basis
Valuation Summary
Implications of failure to invest within 180 days
Policy in relation to revaluations
73
73
73
73
74
74
23.
INVESTMENT CONSIDERATIONS
75
23.1
23.2
23.3
23.4
Opportunity for portfolio diversification

Liquidity
Opportunities in the real estate sector
Experienced and incentivized team
75
75
75
75
(vii)
7
24.
ECONOMIC OVERVIEW
76
24.1
24.2
24.3
24.4
Kenya Economic Performance

Macro-Sector Overview
Macro-Economic Overview
Economic overview of Meru
76
76
77
79
25.
REAL ESTATE SECTOR OVERVIEW
80
25.1
25.2
25.3
25.4
25.5
25.6
25.7
Property market segments

Trends in the Housing Market
Private sector players in the housing sector
Growth in value of approved building plans
Housing market projections
Regulatory framework
Analysis of Demand for Housing
80
81
82
82
83
84
84
26.
ACCOUNTS & FINANCIAL STATEMENTS
86
27.
RISK FACTORS
89
27.1
27.2
Risks Related to the Assets of FRED - Commercial

Risks Related to FRED - Commercials Securities
89
91
28.
FEES, COSTS AND EXPENSES
92
28.1
28.2
28.3
28.4
Fees, costs and expenses in relation to the Issue or Offer of the REIT securities
Fees, costs and expenses payable by the Trustee
Statement of the Estimated MER of the REIT
Limits imposed by the Regulations on the charging of fees or reimbursement of expenses
92
92
92
92
29.
DISTRIBUTION POLICY AND FACTORS DETERMINING DISTRIBUTION
93
29.1
29.2
29.3
29.4
29.5
Distribution Policy per the Trust Deed

Distribution of Realized Capital Gains
Retention of Realized Capital Gains
Powers and Obligations of the REIT Manager and the Trustee with respect to distributions
Implications of failure to make distributions as per the Regulations
93
93
93
93
93
30.

TAXATION, DISCRETION AS REGARDS DISTRIBUTIONS & IMPLICATIONS FOR

TAXATION TREATMENT OF THE REIT AND DISTRIBUTIONS
94
30.1
30.2
30.3
30.4
30.5
30.6
Taxation treatment of the REIT

Tax on distributions to investors
Stamp duty
Tax treaties
Expert opinions on tax treatment
Circumstances in which taxation treatment may vary
94
94
94
94
94
94
31.
TRANSFERABILITY OF REIT SECURITIES, LISTING AND REDEMPTION
95
31.1
31.2
Restriction on the transferability of the REIT securities.

Listing of the REIT securities
95
95
32.
EXPERT OPINIONS
96
32.1
32.2
Summary of SPV valuers report

Summary of pre-feasibility report
96
96
33.
MEETINGS, REPORTS AND ACCOUNTS & REIT SECURITIES HOLDERS RIGHTS
97
33.1
33.2
33.3
Requirement for meetings and the rights of REIT securities holders to require the calling of meetings;
Notices and voting
Matters which require a special resolution
97
97
97
(viii)
8
33.4
33.5
33.6
Matters which must be put to a vote of REIT securities holders

REIT securities holders right to receive reports and financial statements
Statement on the key rights of REIT securities holders
97
98
98
34.
ADDITIONAL INFORMATION
99
34.1
Material Contracts
99
35. CONSENTS
100
36.
DOCUMENTS AVAILABLE FOR INSPECTION
101
37.
APPLICATION FOR REIT SECURITIES & APPLICATION FORM
102
37.1
37.2
37.3
37.4
37.5
37.6
37.7
37.8
37.9
37.10
37.11
Acceptance and Application Procedures

Opening and Closing Date of the Offer
Application Money
Rejection policy
Refund policy
Allocation Policy
Foreign Investors
How to complete the application
Minimum number and value of REIT securities that can be applied for
Allocation of Units
Qualification of an investor as a professional investor
102
102
102
104
104
104
104
104
104
104
104
38.
AUTHORISED SELLING AGENTS
105
39.
SCHEDULES/ APPENDICES
107
39.1
39.1.1
39.1.2
39.2
39.2.1
39.2.2
39.3
39.3.1
39.3.2
39.4
39.5
39.6
Audited Financial Statements for the period ending 31st December 2014 of Trustee
Statement of Comprehensive Income
Statement of Financial Position
REIT Managers Audited Financials
Property Managers Audited Financials
Offer Application Form
Letter of Undertaking
Legal Opinion
107
107
108
109
109
109
110
110
110
111
114
115
(ix)
9
1 Important Notice
THIS DOCUMENT IS IMPORTANT FOR CONSIDERING WHAT ACTION TO
TAKE AND REQUIRES YOUR CAREFUL ATTENTION AS IT INCLUDES LEGAL,
MARKET AS WELL AS HISTORICAL, CURRENT AND FUTURE FINANCIAL
INFORMATION.
The Fusion Real Estate Development Trust - Commercial
(FRED - COMMERCIAL) Offer is restricted and
therefore is only open to Professional Investors as defined
in the Definitions and Interpretations section.
In making your decision to invest in REIT Securities you
should be aware that there is no recourse to the assets of
the Issuer or the Trustee.
The investment in REIT Securities is an equity
investment, and as a REIT Securities Holder in the REIT
you invest as an equity investor. Distributions and return
of capital are not guaranteed and are dependent on the
performance of the assets of the REIT.
Should the Trustee exercise its authority to borrow
on behalf of the Trust then Unit Holders rights to
distributions and to the assets of the REIT will rank after
the payments to creditors.
The Trustee, REIT Manager and other parties are also
entitled to receive payment of fees and expenses ahead of
payments to REIT Securities Holders who invest in REIT
Securities.
This Offering Memorandum contains information
that is provided in compliance with the requirements
of the Capital Markets Act (Cap. 485A), the rules and
regulations made thereunder, and the Rules of the Nairobi
Securities Exchange (NSE).
This Offering Memorandum is issued by Fusion Capital
Limited (Fusion or the Promoter or the Issuer) and has
been prepared in respect of the issue and subscription of the
Units being issued by Fusion D-REIT (the Development and
Construction Real Estate Investment Trust or the D-REIT)
and the subsequent listing of the Units on the NSE. No REIT
Securities can be issued based on this Offering Memorandum
more than six months after the stated date of publication of
this Offering Memorandum.
It is expected that the trading of the Units will commence on

Thursday, July 28th 2016. The NSE assumes no responsibility
for the correctness of any of the statements made or opinions or
reports expressed in this Offering Memorandum. Admission of the
Units issued pursuant to the D-REIT regulations on the NSE is not
to be taken as an indication of the merits of the Promoter or of the
Units.
If you are in any doubt about the contents of this document or the
nature or the transaction or investment or the risks attached to the
investment then you should consult a person licensed under the
Capital Markets Act who specializes in advising on investments in
or acquisitions of securities.
Legal Advisors Opinions
Mboya Wangongu & Waiyaki, the Legal Advisors, have given

and not withdrawn their written consent for the inclusion in this
Offering Memorandum of their Legal Opinion, and the references
to their names, in the form and context in which they appear, and
have authorized the contents of the said Legal Opinion which form
part of the documents available for inspection.
Reporting Accountants Opinion
This Offering Memorandum contains statements from Deloitte &

Touche, the Reporting Accountants, which constitute a statement
made by an expert in terms of Reg. 17(1) (i) of the Regulations.
The Reporting Accountants have given and not withdrawn their
consent to the issue of the said statements in the form and context
in which they are included in this Offering Memorandum.
Forward-looking statement
Application has been made to the Capital Markets

Authority (CMA or the Authority) and the Scheme
has been authorized by the Authority. As a matter of policy,
the CMA assumes no responsibility for the correctness of
any statements or opinions made or reports contained in
this Offering Memorandum. In addition, the Offering
Memorandum has been approved by the Authority. The
approval by the Authority is not a recommendation nor
a statement by the Authority in relation to the suitability
of the REIT for investment or as to the risks and the
Authority has no liability.
This Offering Memorandum contains forward-looking statements

relating to the REITs proposed business. These forward-looking
statements can be identified by the use of forward-looking terminology
such as believes, expects, may, is expected to, will,
will continue, should, would be, seeks or anticipates
or similar expressions or the negative thereof or other variations
thereof or comparable terminology, or by discussions of strategy,
plans or intentions. These statements reflect the current views of
the REIT Promoter with respect to future events and are subject to
certain risks, uncertainties and assumptions. Many factors could
cause the actual results, performance or achievements of the REIT
to be materially different from the future results, performance or
achievements that may be expressed or implied by such forwardlooking statements. Some of these factors are discussed in more
detail under Risk Factors. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those described
in this Offering Memorandum as anticipated, believed, estimated
or expected.
The NSE has given permission for listing of the Units.
This Offering Memorandum is dated: 20th June 2016
10
2 Declarations
The Issuer declares that all information stated in this
Offering Memorandum and the statements contained
herein are correct and neither the Board of Directors,
minutes, audit reports nor any other internal documents
contain information which could distort the interpretation
of this Offering Memorandum.
In accordance with the provisions of Regulation 25 of the
REITs Regulations, the Promoter being the Offeror in this
Offer shall have continuing liability for any covenants and
warranties given, misleading or deceptive statements made
and/or any omissions in this Offering Memorandum.
Each expert named in the Offering Memorandum shall be

liable solely for misrepresentations and omissions arising from
statements made by them, provided that due consent has been
obtained from the relevant expert for the inclusion of such
statements in the Offering Memorandum.
For the avoidance of doubt, the liability of the Trustee shall be
limited to covenants and warranties made by itself as well as any
misleading and deceptive statements made by, and included in
the Offering Memorandum with the approval of, the Trustee in
its capacity as an expert.
Signed.....................
Signed.....................
Dr. Philip Goodwin Kimathi Kamencu
Chairman, Fusion Capital Limited

Director, Fusion Capital Limited

Signed.....................
Signed.....................
Luke Kinoti Nelly Mbugua
Chief Executive Officer, Fusion Capital Limited


Signed. Signed.....................
Susan Kagundu Constantine Malai

Signed.....................
Signed.....................
Dr. James Mageria Daniel Kamau

We, the Lead Transaction Advisor and the Legal Advisor, hereby state that this Offering Memorandum and the Scheme
Documents comply with the Act and the Regulations.
Signed.....................
Maurice Opiyo

Managing Director NIC Capital Limited

Signed.....................
Peter M. Waiyaki
Partner Mboya Wangongu & Waiyaki
11
3 Corporate Information of the Main Parties

3.1 THE PROMOTER

CONTACT INFORMATION FOR THE PROMOTER
Fusion Capital Limited,

ACK Garden House, Block A, 1st Ngong Avenue
P.O. Box 47538 - 00100 Nairobi,
Tel: +254 (020) 2710149/53/55
DIRECTORS OF THE PROMOTER
Name
Position
Nationality
Address
Dr. Philip Goodwin Executive Chairman
British
P.O. Box 47538 - 00100, Nairobi
Luke Kinoti
Chief Executive
Kenyan
P.O. Box 47538 - 00100, Nairobi
Susan Kagundu
Executive Director, Finance
Kenyan
P.O. Box 47538 - 00100, Nairobi
Daniel Kamau
Executive Director, Real Estate
Kenyan
P.O. Box 47538 - 00100, Nairobi
Constantine Malai
Non- Executive Director
Kenyan
P.O. Box 47538 - 00100, Nairobi
Dr. James Mageria
Kenyan
P.O. Box 47538 - 00100, Nairobi
Kimathi Kamencu
Kenyan
P.O. Box 47538 - 00100, Nairobi
Nelly Mbugua
Kenyan
P.O. Box 47538 - 00100, Nairobi
Company Secretary - Livingstone Associates of P.O. Box 30029 - 00100, Nairobi
3.2 THE TRUSTEE

CONTACT INFORMATION FOR THE TRUSTEE
Co-operative Bank of Kenya Limited

Co-operative Bank House,
nd
2 Floor, Haile Selassie Avenue
P.O. Box 48231 - 00100 Nairobi,
Tel: +254 (020) 3276237
12
DIRECTORS OF THE TRUSTEE

Name
Position
Nationality
Address
Stanley C. Muchiri, EBS
Chairman
Kenyan
P.O. Box 48231 - 00100 Nairobi
Julius M. Riungu
Vice Chairman
Kenyan
Dr. Gideon M. Muriuki,

MBS
Managing Director
Kenyan
Macloud Malonza
Director
Kenyan
J. Sitienei
Director
Kenyan
R. L. Kimanthi
Director
Kenyan
Benedict Simiyu
Director
Kenyan
W. Ongoro
Director
Kenyan
R. Simani
Director
Kenyan
Lawrence Karissa
Director
Kenyan
John Murugu
Director
Kenyan
W. J. Mwambia
Representing PS
National Treasury
Kenyan
Company Secretary - Rosemary Majala Githaiga of P.O. Box 48231 - 00100 Nairobi
3.3 THE REIT MANAGER

CONTACT INFORMATION FOR THE REIT MANAGER
Fusion Investment Management Limited

ACK Garden House, Block A, 1st Ngong Avenue
P.O. Box 47538 - 00100 Nairobi,
Tel: +254 (020) 2738460

DIRECTORS OF THE REIT MANAGER

Name
Position
Nationality
Address
John G. Msafari
Chairman,
Non-Executive
Kenyan
P.O. Box 47538 - 00100, Nairobi
Dr. Philip Goodwin
Executive Director
British
P.O. Box 47538 - 00100, Nairobi
Luke Kinoti
Chief Executive
Kenyan
P.O. Box 47538 - 00100, Nairobi
Gladys Mboya
Non-Executive
Director
Kenyan
P.O. Box 47538 - 00100, Nairobi
Charles Mbui
Non-Executive
Director
Kenyan
P.O. Box 47538 - 00100, Nairobi
Company Secretary - Maonga Ndonye Associates of P.O. Box 73248 - 00100, Nairobi
13
4 Consultants and Advisors to the Transaction

Lead Transaction Advisor
Legal Advisor
NIC Capital Limited

NIC House, Masaba Road
P.O Box 44599 - 00100, Nairobi, Kenya
Tel: +254 20 2888000 / 4948000,
Fax: +254 20 2888505
Contact: Maurice Opiyo
Email: maurice.opiyo@nic-capital.com
Mboya Wangongu & Waiyaki Advocates

Lex Chambers, Maji Mazuri Road,
Off James Gichuru Road
P. O. Box 74041 - 00200, Nairobi, Kenya
Tel: +254 20 2160312,
Fax: +254 20 2160312
Contact: Peter M. Waiyaki
Email: pwaiyaki@lexgroupafrica.com
Reporting Accountant
Registrar
Deloitte & Touche

Certified Public Accountants (Kenya)
Deloitte Place, Waiyaki Way, Muthangari
P.O. Box 40092 - 00100, Nairobi, Kenya
Tel: +254 20 4230000,
Fax: +254 20 4448966
Contact: Freda K. Muchena
Email: fmuchena@deloitte.co.ke
CDSC Registrars Limited

Nation Centre, Kimathi Street
Tel: +254 (20) 2912000
Contact: Marion Kioi
Email: mkioi@cdsckenya.com
Structural Engineer
Property Valuer
Multiscope Consulting Engineers Limited

Silverpool Office Suites, 3rd Floor
Jabavu Lane, Hurlingham
Tel: +254 20 2734744; +254 722 703475
Fax: +254 20 2717736
E-mail: info@multiscope.co.ke
Ngotho Property Consultants Limited

7th Floor, Tower A, Eden Square,
Chiromo Road, Westlands
P.O Box 1870 - 00606, Nairobi, Kenya
Tel: +254 728130925, +254 20 3673309
Contact: Paul Ngotho
Email: ngothoprop@yahoo.com
Project Manager Certifier
Property Manager
Beeque Consultants Limited

Princess Flats, Unit No. 11
Kabarnet Road, Off Ngong Road
Tel: 0722 667146, 0733 734535,
Fax: +254 20 577269
Contact: John M. Mburire
Email: info@beeque.com
Citiscape Valuers & Estate Agents Limited

1st Floor, Occidental Plaza,
Muthithi Road, Westlands
P.O. Box 16062 - 00100 , Nairobi, Kenya
Tel: +254 20 3742169; +254 20 2503636;
+254 708 848481; +254 733 785698
Contact: Nelly K. Mbugua
Email: info@citiscapevaluers.com
14
Tax Consultant
Asset (SPV) Valuer
Deloitte & Touche

Deloitte Place, Waiyaki Way, Muthangari
Tel: +254 20 4230000, Fax: +254 20 4448966
Contact: Maurice Wangutusi
Email: mwangutusi@deloitte.co.ke
Burbidge Capital Limited

4th Floor, Nivina Towers,
Museum Hill, Westlands Road, Westlands
P.O Box 51525 - 00100, Nairobi, Kenya.
Tel: +254 20 2100102; +254 20 3744618
Contact: Edward Burbidge
Email: edward.burbidge@burbidgecapital.com
Lead Sponsoring Broker
Receiving Bank
African Alliance Kenya Investment Bank Limited

1st Floor, Wing B, Transnational Plaza,
Mama Ngina Street, Nairobi
PO Box 27639 - 00506, Nairobi, Kenya
Tel: +254 20 2762664 / 27620000
Contact: Alistair Gould
Email: goulda@africanalliance.co.ke
NIC Bank Limited

P.O. Box 44599 00100, Nairobi, Kenya
Tel: +254 (20) 2888000,
Fax: +254 (20) 2888505
Contact: Peter Muthini
Email: peter.muthini@nic-bank.com
15
5 Definitions and Interpretations

The following terms shall have the respective meanings set
out below:
Accounting period means the period of 12 months
starting on the First day of January and ending on the last
day of December each year;
Act refers to the Capital Markets Act, Chapter 485A of the
Laws of Kenya, as amended from time to time;
Auditors means the independent auditor appointed from
time to time by the Trustee as auditor of the Scheme, subject
to the provisions of the Act and the Regulations;
Authority or CMA means the Capital Markets
Authority established under the Act;
Authorized Units means all Units that may be issued at
any given time by FRED - COMMERCIAL, whether they
have been issued (and are therefore Units in Issue) or not;
Beneficiary means any holder of REIT Securities of
FRED - COMMERCIAL from time to time;
(ii) May only exit the investment in the REIT

Securities by selling the units in a secondary market;
Connected person or connected party in relation to
the real estate investment trust scheme includes:
(a) The REIT Manager;
(b) A valuer appointed to undertake a valuation of

the scheme;
(c) The Trustee;
(e) A Substantial Holder of REIT Securities in

the Scheme;
(f) A director, a senior executive or an officer of any
person referred to in (a), (b) and (c) above;
(g) An associate (as Associate is defined in the Act,
as amended from time to time) of any person
referred to in (d) and (e) above;
Business Day means a day which is a working day in

Kenya and excludes Saturday, Sunday, and public holidays;
(h) A controlling entity, a holding company, a

subsidiary or an associated company of
any person referred to in (a) to (d) above;
CDS Account means a central depository electronic

account held at CDSC that holds financial securities such
as shares and bonds;
D-REIT means a development and construction real estate

investment trust authorized as such by the Authority under
the Regulations;
CDSC means the Central Depository & Settlement

Corporation Limited;
Closed ended fund means a fund or trust in which-
D-REIT Scheme or development and construction

real estate investment trust scheme means a real estate
investment trust scheme authorized as such by the Authority
under the Regulations;
(a) A person invests by subscribing for an issue of

REIT Securities or by acquiring REIT Securities in a
secondary market;
Eligible Investments in respect of FRED - COMMERCIAL

means the assets and investments specified under Regulation
76 of the Regulations;
(b) The value of the investment fluctuates over

time as determined by market price for the

REIT Securities;
Eligible Real Estate has the meaning attributed to it under

the Regulations;
(c) The number of the REIT Securities issued

remains constant over time except where a new
issue of REIT Securities is made or there is a
reduction in the capital of the fund initiated by
the trustee or as a consequence of termination or
winding up of the trust; and
(d) The REIT Securities Holder, except where there is
a reduction in the capital of the fund initiated
by the trustee or as a consequence of termination or
winding up of the trust-

(i) Is not entitled to require the trustee to redeem
the REIT Securities; and
Foreign Investor means a person eligible for classification

as a professional investor under the Regulations but which is
neither established in nor a citizen of any of the East African
Partner States;
FRED - COMMERCIAL means the Fusion Real Estate
Development Trust - Commercial established under the
Trust Deed;
Fund means all contributions of money or moneys worth,
property or real estate, or other income or assets of FRED
- COMMERCIAL, including money borrowed or raised
by the Trustee for the purpose of the Scheme and includes
16
all amounts due and any rights of the REIT Manager or

REIT Trustee to institute action against any person and the
rights of the beneficiaries of the trust together to institute
an action against any party including the Trustee;
Initial Offer means the first offer or issue of REIT
Securities made to persons other than the Promoter or
parties connected to the Promoter or REIT Manager of
FRED - COMMERCIAL;
Investor means a holder of REIT Securities of FRED COMMERCIAL and who is a beneficiary under the Trust
Deed;
Issue Price means the Offer price of one (1) Unit which
is KES 23.00;
Management Fee means amount payable by the REIT
Trustee to the REIT Manager for managing FRED
COMMERCIAL in accordance with the terms of the REIT
Management Agreement;
Net Asset Value or NAV means the value of all assets
of the Fund less the value of all liabilities of the Trust,
including Trustee and Management Fees, as at the day the
calculation is made;
Net asset value per unit or NAV per unit means the
NAV divided by the number of units of REIT Securities
issued and not redeemed on the day the calculation is
made;
NSE means the Nairobi Securities Exchange Limited;
Offer Units or Units on Offer means 100,000,000
Units in FRED - COMMERCIAL on offer pursuant to this
Offering Memorandum;
Ordinary Resolution means a resolution passed by
unitholders by simple majority;
Professional Investor means(a) Any person licensed under the Act;
(b) An authorized scheme or collective investment

scheme;
(c) A bank or subsidiary of a bank, insurance company,

co-operative society, statutory fund, pension or

retirement fund; or
(d) A person including a company, partnership, association
or a trustee on behalf of a trust which, either alone,
or with any associates on a joint account subscribes
for REIT securities with an issue price equal to at least
KES 5,000,000/=.
Real Estate Investment Trust Assets or REIT Assets
includes all assets of the REIT;
Real Estate Investment Trust Fund or REIT Fund

has the same meaning as the Fund;
Realized Capital Gains means cash equivalent of
appreciation of capital assets formerly held by the REIT
disposed through sales or letting;
Recognized Securities/Stock Exchange means the
NSE, or any other securities exchange in or outside Kenya
approved by the REIT Manager and the Trustee, subject to
the Act, on which the REIT Securities created by the Trust
Deed are listed;
Register means the register of the holders of FRED
- COMMERCIAL Securities, as maintained by or on
behalf of the Trustee pursuant to the Trust Deed and the
Regulations;
Regulations means the Capital Markets (Real Estate
Investment Trusts) (Collective Investment Schemes)
Regulations, 2013 as amended from time to time;
REIT means real estate investment trust and the REIT
means this REIT established by the Trust Deed;
REIT Manager means the person licensed as a REIT
Manager under the Regulations and appointed as the REIT
Manager of the REIT pursuant to the Trust Deed and in
accordance with the provisions of the Regulations;
REIT Management Agreement means the agreement
entered into between the REIT Trustee and the REIT
Manager with respect to the management of the REIT and
dated 1st March 2016;
REIT Securities in relation to FRED - COMMERCIAL
means units in FRED COMMERCIAL, and in relation
to any other REIT Scheme means units in such real estate
investment trust or a real estate investment trust scheme;
Securities means any instrument defined as such under
the Act and includes REIT Securities;
Securities Holder or Units Holder means any person
who has purchased and holds any Units and is registered in
the Register as evidence that he holds the Units;
Scheme means a real estate investment trust scheme as
defined in the Regulations;
Scheme Documents include(a) This Offering Memorandum, including any conversion
or supplementary Offering Memorandum;
(b) The Trust Deed and any amending, supplemental or
replacement Trust Deed;
(c) Any document appointing a REIT Manager or setting
out the terms of appointment, the role or obligations
of a REIT Manager;
17
(d) Any document appointing a Property Manager, Project

Manager Certifier or Structural Engineer or setting out
the terms of appointment, the role or obligations of
such persons;
(b) A director, senior executive, officer, controlling entity,

holding company, subsidiary or associated company of
the holder, if the holder is an entity other than a
natural person;
(e) Any document described in (b), (c) or (d) above which

relates to an investee trust; and
Total Asset Value or TAV means the value of all assets

of the fund based on the most recent valuation;
(f) The Memorandum and Articles of Association of any

investee company and any shareholders agreement
including any amending, supplemental or replacement
Memorandum and Articles of Association or

shareholders agreement.
Trust Deed or Deed means the Trust Deed entered into by

the Promoter and the REIT Trustee dated 29th February 2016
(as supplemented and amended by the supplemental Trust
Deed dated 15th April 2016) that sets out the trusts governing
FRED - COMMERCIAL and includes every instrument that
varies those trusts, or affects the powers, duties, or functions
of the Trustee or manager of FRED - COMMERCIAL;
Special Resolution means a resolution passed by a majority

of not less than three-fourths of such holders of REIT
Securities who, being entitled so to do, vote in person (or
where proxies are permitted by proxy) at a general meeting
of holders of FRED - COMMERCIAL Units of which at
least twenty one days written notice specifying the intention
to propose the special resolution has been given;
Special Purpose Vehicle or SPV means Meru
Greenwood Park Limited, a property holding company
being the registered owner of Land Reference Number Meru
Municipality Block I/3;
Substantial holder of REIT Securities means a person
who holds fifteen per centum (15%) or more of the issued
FRED - COMMERCIAL securities, where for the purposes
of calculating the fifteen per centum (15%), in addition to
any REIT Securities held by the holder, that person is also
considered to be the holder of any REIT Securities held by:
(a) An associate of a holder who is an individual; or
Trustee in relation to FRED - COMMERCIAL, means the

Trustee herein, or his replacement or successor;
Unit means a security in FRED - COMMERCIAL being
an undivided share, right, interest or entitlement in the assets
of FRED - COMMERCIAL as a whole, and may not be
construed to confer interest in a particular asset of the REIT;
Units in Issue means all units which have been created and
issued and which have been entered in the Register including
those held or deemed to be held by the REIT Manager, and
which have not been cancelled;
Valuation report means a report made by a valuer; and
Valuer means a person appointed as a valuer under the Trust
Deed or by other contract and subject to the Regulations to
prepare or who is required to prepare a valuation report.
Terms not defined herein will conform to the definitions
adopted in the Act, the Regulations or the Trust Deed.
18
6 Glossary of Abbreviations
CDA
Central Depository Agent
CDSC
Central Depository & Settlement Corporation Limited
CMA
Capital Markets Authority
D-REIT
Development and Construction Real Estate Investment Trust
EBIT
Earnings Before Interest and Tax
FCL
Fusion Capital Limited
FIM
Fusion Investment Management Limited
FRED - COMMERCIAL
Fusion Real Estate Development Trust - Commercial
IFRS
International Financial Reporting Standard
IRR
Internal Rate of Return
KES
Kenya Shillings
LTA
Lead Transaction Advisor
MER
Management Expense Ratio
NAV
Net Asset Value
NSE
Nairobi Securities Exchange Limited
OM
Offering Memorandum
PMC
REIT
Real Estate Investment Trust
RM
REIT Manager
SE
Structural Engineer
SPV
Special Purpose Vehicle
19
7 Frequently Asked Questions

What is a Real Estate Investment Trust (REIT)?
What types of REITs are there?
A REIT is a vehicle which allows investors to pool

resources together and invest in real estate. The Securities
Holders/ Unit Holders of REITs will hold units which may
either be redeemed by the REIT Manager or are tradeable
in a secondary market on a securities exchange.
The Regulations allow for two types of REITs based on the

primary objective:
REITs are relatively new investment vehicles in Kenya.

How does a REIT finance its activities?
A REIT typically requires significant and continuing
capital to buy additional assets. A REIT generally finances
its activities through security offerings and debt offerings,
including subordinated and senior debt, as well as through
financing agreements (credit agreements, term loans,
revolving lines of credit etc.) with banks and other lenders.
Who invests in REITs?
Besides individual investors, organizations such as pension
funds, investment banks, insurance companies, private
equity corporations and other institutional investors invest
in REITs due to potential for long term growth and, in some
cases, high levels of current income. For a listed D-REIT,
the minimum permissible investment is KES 5,000,000/=.
What are the returns to REIT investors?
REITs typically provide dividends plus the potential for
capital appreciation.
What is the typical structure of a REIT?
The Regulations require that a REIT:
(a) Is structured as an unincorporated common law
trust divided into units;
(b) Is established under a Trust Deed;
(c) Has a trustee who is independent of the REIT
Manager and the promoter; and
(d) Has a REIT manager and a trustee who are licensed
and satisfy requirements under the Regulations.
(a) Development and Construction REIT (D-REIT)

a REIT dealing in development and construction of
real estate projects;
(b) Income REIT (I-REIT) a REIT dealing in the
acquisition of real estate as a long term investment
for the purpose of earning income.
What are the requirements for investing in a D-REIT?
The Regulations require that investors in D-REIT schemes
must be Professional Investors.
How do I Invest in a REIT?
One may invest in a publicly traded REIT, which is listed
on a securities exchange, through a securities dealer or
stockbroker. An investor can enlist the services of an
investment bank, investment advisor or financial planner
to help analyze his or her financial objectives. These
professionals may be able to recommend appropriate REIT
investments for the investor. An investor may also contact
a REIT directly for a copy of the REITs annual report
(if any), prospectus or Offering Memorandum and other
financial information.
How are REIT securities valued?
Like companies whose stocks are publicly traded, REIT
securities are priced by the market throughout the trading
day. To assess the investment value of REIT units, typical
analysis involves one or more of the following criteria:
(a) Anticipated growth in earnings per unit;
(b) Anticipated total return from the REIT unit, estimated
from the expected price change and the prevailing
dividend yield;
(c) Current dividend yields relative to other yield-oriented
investments (for example, bonds, stocks and other
high-income investments) ; and
(d) Underlying asset values of the real estate and/or
mortgages, and other assets.
20
8 Key Features of the Offer

This section contains a summary of the Offer of units in FRED - COMMERCIAL.
FRED - COMMERCIAL is structured as a D-REIT meaning that the Trust will primarily
be involved in acquiring real estate property for development and construction.
Key features of FRED - COMMERCIAL will be as
follows:
(d) The assets in the Trust are held in the name of and are
sunder the control of the Trustee.
(a) It is structured as a common law unincorporated

trust divided into units;
(b) It is established through the Trust Deed;
(c) The Trustee is independent of the REIT Manager;
FRED - COMMERCIAL offers for sale 100,000,000 Units

(Offer Units) worth KES 2,300,000,000. Proceeds of the
Offer will be invested in the acquisition, development and
construction of real estate development assets as described
below.
Details
Statistics
Objectives of FRED -
COMMERCIAL
The objective of FRED - COMMERCIAL is to generate income and capital growth by

principally investing in Real Estate Development Projects. The REIT Manager may,
with the consent of Unit Holders, vary the main objective of the REIT scheme to take
account of changing economic factors, tax laws and provisions.
The objects of FRED - COMMERCIAL are set out in Clause 5 of the Trust Deed and
are as follows:
5.1 the acquisition of eligible real estate, investment in eligible investments and
the undertaking of real estate development and construction projects including,
but not limited to commercial and other real estate related development and
construction projects;
5.2 marketing and sale of real estate;
5.3 retention and management of the real estate assets of the trust with the objective
of earning income from the assets;
5.4 the undertaking of incidental or connected activities and activities related to the
assets of the trust; and
5.5 such other activities as may be authorized by the Regulations.
Nature of the Trust and

Redemption
FRED - COMMERCIAL is a closed ended fund meaning that among others, the Trust
has the obligation to redeem Units once they are issued. Investors will therefore only be
able to exit from FRED - COMMERCIAL by disposing of Units in the secondary market
based on market value of the units.
NOTE: LIQUIDITY OF THE UNITS WILL DEPEND ON THE DEMAND AND
SUPPLY FOR THE REIT UNITS WITHIN THE SECONDARY MARKET.
Eligibility to invest
Investment in FRED - COMMERCIAL is restricted and is only open to Professional

Investors.
Issue Price per Unit
KES 23.00
Total number of Units on

Offer
100,000,000
Classes of Units
The REIT will not issue different classes of Units.
Listing
The REIT Units will be listed on the restricted market segment of the NSE.
Transferability of FRED COMMERCIAL Units
Every fully paid Unit in the Trust is freely transferable subject to the trading rules of the
securities exchange on which the Units will be listed.
Distribution of Realized
Capital Gains
The Regulations do not require FRED - COMMERCIAL, being a D-REIT Scheme, to

make annual distributions to the REIT Unit Holders. However, the REIT Manager may
recommend to the Trustee and the Trustee may distribute any realized capital gains to the
REIT Unit holders if and when the capital gains are realized.
21
Details
Statistics
Retention and Reinvestment

of Realized Capital Gains.
The REIT Manager may retain any realized capital gains and invest in new income
producing real estate, developments or buy to rent housing provided that:
(a) the REIT Manager has received approval from the REIT Unit Holder to retain the
capital gains by way of ordinary resolution; and
(b) any retained capital gains will be reinvested within two years of the date of their
realization, failing which they must be distributed within two months of the end of
the two years.
Term of the Trust
FRED - COMMERICAL shall be unlimited in duration subject to the Perpetuities and

Accumulations Act (Chapter 161 of the Laws of Kenya).
Proposed Initial Projects
The initial project under FRED - COMMERCIAL is Greenwood City- a mixed use
development featuring a state of the art shopping mall, a modern office block and high-end
two and three-bedroom apartments located at Land Reference Number Meru Municipality
Block 1/3 in Meru, Kenya.
A more detailed description of the project is set out in Section 18.1 herein.
Acquisition of Additional
Assets
The REIT Manager is permitted to acquire and develop additional assets as long as these
acquisitions are permitted by the Regulations and are in line with the REIT Managers
stated investment criteria.
REIT Managers investment

strategy
FRED - COMMERCIAL shall invest in eligible investments and eligible real estate as
permitted by the Regulations for D-REITs.
FRED - COMMERCIALs investment policy shall encompass the management of FRED -
COMMERCIALs liquidity position or management of assets and liabilities to provide adequate
resources to meet anticipated fund demands.
FRED - COMMERCIALs investment policy is thus designed to guide the Trustee and the
REIT Manager in carefully deliberating and evaluating all available investment options for
investing surplus cash assets of FRED - COMMERCIAL which will provide maximum
returns in the form of net interest income earned, capital gains and an optimum liquidity
management strategy under various scenarios.
FRED - COMMERCIAL must maintain reserves to protect itself and its investors against
anticipated, unusual or unexpected cash requirements as well as earning reasonable return
on its excess funds, without incurring undue risk.
Before any investment the investment recommendations initially go through a rigorous
vetting process by the REIT Manager prior to approvals. This provides a strong monitoring
mechanism and control which may be exercised with respect to the assets invested to ensure
consistency with the investment objectives of the investor.
More detailed information on the investment strategy is set out in Section 9.4 of this
Offering Memorandum.
Gross proceeds from the

Offer
KES 2,300,000,000
Estimated net proceeds

receivable by the Trust
KES 2,200,550,000
22
Details
Statistics
Summary of Key Risks
The key risks involved in investing in FRED - COMMERCIAL include:

1. Risk Related to the Assets of FRED - Commercial
a)
b)
c)
d)
e)
f)
g)
Political Risk
Insecurity Risk
Land Acquisition Risk
Economic Risk
Execution Risk
Demand Risk
Market Risk
a. Currency Risk
b. Interest Rate Risk
c. Price Risk
h) Financing Risk
a. Counterparty Risk
b. Real Estate Market Downturn
c. Counterparty Risk
2. Risk Related to FRED Commercial Securities

a)
b)
c)
d)
e)
f)
Price Risk
Regulatory Risk
Distribution/Dividend Risk
Dilution Risk
Growth Risk
Reputation Risk
The above along with mitigating factors are discussed in more detail in section 27 of this
Ongoing role of the Promoter
Provision of project management services to the REIT Manager in accordance with the
project management agreement dated 8th September 2014 entered into between the
Promoter and the SPV.
Financial Structuring
mechanisms
The Trustee, on behalf of the REIT, may borrow amounts of up to 60% of the Total Asset
Value. Any distributions to Unit Holders will be net of payments to senior lenders.
The Promoter on behalf of the REIT has been in high level discussions with various financial
institutions willing to provide debt financing for the project.
The consequences of the REIT inability to raise the necessary debt financing is outlined in
Section 27.
23
Details
Statistics
Summary of obligations
of the Trustee: the
Co-operative Bank of
Kenya Limited
As Trustee, Co-operative Banks roles as outlined in the Trust Deed will include:
a) Appointment of REIT Manager and supervision of its activities;
b) Ensure that the Fund & assets of the Scheme are invested according to the Trust
Deed, income of the Scheme is applied according to Scheme Documents, insurance
of assets, payments & distributions made in accordance with the Scheme, and that
borrowing limitations are observed;
c) Maintain custody, hold, protect and control all the assets of the REIT scheme
(held in the name of the Trustee) for the benefit of REIT Securities Holders as
beneficiaries of the trust;
d) Act honestly and in a fiduciary capacity in the best interests of beneficiaries and
exercise due care and diligence in the discharge of their functions;
e) Enter into borrowing arrangements for the purpose only of fulfilling the objectives
of the trust and may pledge or otherwise give security over the assets of the trust
scheme to secure such borrowing;
f) Prepare and maintain a register of REIT Securities Holders of the Scheme. The
Trustee may, with the prior written approval of the Authority, appoint another
person to prepare and maintain the register on its behalf; and
g) Apply to the Authority for termination of the Scheme.
Summary of obligations of
the REIT Manager: Fusion
Investment Management
Limited
As REIT Manager, FIM will:

a) Carry out the administration of the REIT Assets including the management of the
portfolio of investments;
b) Advise the Trustee on the asset classes, if any, that are available for investment;
c) Formulate a prudent investment policy;
d) Invest the REIT Fund in accordance with the investment policy;
e) Reinvest any income of the REIT which is not required for immediate payments;
f) Prepare and dispatch in a timely manner all cheques, warrants, notices, accounts,
summaries, declarations, offers and statements;
g) Make available for inspection to the Trustee or any auditor appointed by the Trustee,
the records and the books of accounts, giving either oral or written information as
required;
h) Be fair and equitable in the event of any conflict of interest;
i) Credit to the REIT all monetary benefits or commissions arising out of managing
the Fund, other than its Fees;
j) Account to the Trustee within thirty days after receipt of any monies payable to the
Trustee;
k) Keep and maintain records of the REIT at all times;
l) Provide instructions to the Trustee to implement the objectives of the REIT and
appoint a property manager or other person as its agent to assist it in undertaking
its duties as RM; and
m) Be liable for any acts or omissions of its agents.
PLEASE NOTE THAT THE ABOVE IS ONLY A SUMMARY AND INVESTORS SHOULD READ AND
UNDERSTAND THIS OFFERING MEMORANDUM IN FULL BEFORE DECIDING TO PARTICIPATE IN
THE OFFER.
24
8.1 REIT Structure, Key Parties and Flow of Funds
Below is an outline of the various parties involved in FRED - COMMERCIAL.
Investor 1
Investor 2
Investor 3
Investor 4
Investor n
Holds units
Trust Deed
REIT Trustee
(Co-operative Bank)
Appoints
Holds shares
REIT Manager
(FIM)
Project 3
Meru Greenwood
Park Limited
Project 2
Manages
Appoints
Contractor
Architect
Engineers
Project Manager etc
The Promoter will facilitate the purchase of the SPV which is held in Trust. Thereafter, the Trustee in consultation with
the REIT Manager appoints the Valuer, Structural Engineer, Auditor and Project Manager Certifier.
25
Flow of Funds in the REIT
Below is an outline of the proposed flow of funds from FRED - COMMERCIAL.
Project 1
Project 3
Project 2
Project 4
Project n
Proceeds from the projects

Capital gains
Rental income
Capital
Returns & Capital Invested
REIT Manager + Trustee Fees + Other Service Fees
Debt repayment
Retained returns and capital
invested in new projects
Residual value
(Capital & returns)
Distribution
Investor 1
Investor 2
Investor 3
26
Decision on
dividend and
re-investment
REIT Trustee
REIT Manager
Investor n
8.2 The Offer
The REIT offers for subscription 100,000,000 units at a

subscription price of KES 23.00 per unit. The Scheme
will initially encompass Greenwood City - a mixed use
development featuring a state of the art shopping mall, a
modern office block and high-end two and three-bedroom
apartments located in Meru, Kenya and which is further
described in Section 18. The Trust will be a closed ended
fund. Furthermore the Trust, with existing Unit Holders
approval, can issue additional units for further funding of
the REITs activities. This would be to both existing

and new investors. Such offer could result in dilution of
existing Unit Holders who do not wish to exercise their
right to acquire additional units.
8.3 Reasons for the Offer
The proceeds of the Offer will facilitate the acquisition

and development of real estate development assets as
listed below within the objectives of the REIT:
Use of funds
Amount (KES)
Acquisition and Development of Greenwood City
2,200,550,000
Issuance Costs
99,450,000
Total
2,300,000,000
More detailed information is provided in Section 18 of this Offering Memorandum.
8.4 Timetable of Principal Events

Event*
Date
1.
Approval from CMA
Monday, February 29th 2016
2.
Offer Open
Thursday, June 23rd 2016
3.
Closing Offer
Friday, July 15th 2016
4.
Allotment and Announcement
Wednesday, July 20th 2016
5.
Final date for payment for Units to Receiving Bank for applications
against irrevocable bank guarantees
Friday, July 22h 2016
6.
Latest date for crediting of CDS Accounts
Wednesday, July 27th 2016
7.
Listing and Commencement of Trading/Bell Ringing
Thursday, July 28th 2016
* The dates indicated above may be subject to change with the prior approval of the CMA. Any such amendments will
be published in the press.
8.5 Minimum Subscription and Application Size
The REIT is subject to the receipt of not less than 7 valid

applications for the Units.
Furthermore, there is no maximum application size by any
one applicant. The minimum application size per applicant
is however KES 5,014,000 or 218,000 Units.
The listing will be subject to at least 25% of the Units
in Issue being subscribed for by parties other than the
Promoter, REIT Manager and connected parties.
8.6 Underwriting
The Offer is not underwritten.
8.7 Basis of Issue Price
27
The Issue Price has been determined by the Promoter

in consultation with the Lead Transaction Advisor on
the basis of valuation techniques taking into account the
following:
(a) The countrys macro-economic outlook;
(b) Appraisal values of the various properties; and
(c) The projected cash flows.
9 Eligible Assets of the Trust and Activities of the Scheme

9.1 Eligible and permitted assets of the REIT
(vi) The investee company invests directly in the eligible

real estate and is recorded on the certificate of

title or certificate of lease or register as the sole owner;

(c) Investment in eligible real estate assets through an

investee trust in which the trustee of the D-REIT in its
capacity as trustee is the sole beneficiary and has

absolute control of voting and right to appoint and
remove the Trustee of the investee trust and where -
The Eligible Investments in respect of FRED COMMERCIAL means the assets and investments
specified under Regulation 76 of the REIT Regulations,
including:
(a)

(b)

Investment directly in eligible real estate in accordance

with the Regulations;
Investment in eligible real estate assets through

investment in an investee company incorporated in
Kenya which directly owns the eligible real estate and
which is wholly beneficially owned and controlled by
the trustee in its capacity as the trustee of the
D-REIT where-

(i)

(ii)

(iii)

(iv)

(v)

(i)

(ii)

(iii)

(iv)

(v)

(vi)

The D-REIT Trustee has the absolute power at

any time to appoint and, without incurring any
liability, to remove the directors;
The Trustee of the REIT, the company, the directors
and the shareholders have entered into a
shareholdersagreement;
The REIT Manager of the D-REIT is appointed as
the manager of the investments of the investee
company;
The Memorandum and Articles of Association of
the investee company and the terms of the
shareholders agreement limit the objectives
of the investee company and the powers of
the company and directors and impose the same
obligations on the company, its directors and the
manager of the trust as if the investee company
was a D-REIT and an authorized scheme
under the Act and the Regulations and was subject
to the same obligations and restrictions as are
imposed by the Regulations;
The provisions of the Regulations on the carrying
out of a valuation, reporting and audit apply to the
investee company as if the investee company was
a D-REIT and an authorized scheme under the

Regulations;
The investee trust is formed under the Laws of Kenya as

an unincorporated common law trust;
The D-REIT Trustee is also the trustee of the investee
trust;
The REIT Manager of the D-REIT is also the manager
of the investee trust;
The terms of the trust deed for the investee trust limit
the objectives of the investee trust, the trustees powers
and impose the same obligations on the trustee and
the manager of the trust as if the investee trust was
a D-REIT and an authorized scheme under the

Regulations and subject to the same obligations and
restrictions as are imposed under the Regulations;
The provisions of the Regulations on the carrying out of
a valuation, reporting and audit apply to the investee
trust as if the investee trust was a D-REIT and an
authorized scheme under the Act and the Regulations;
The trustee as trustee for the investee trust invests

directly in the eligible real estate and is recorded on the
certificate of title or certificate of lease or register as
the sole owner.
(d) Investment in cash, deposits, bonds or securities and

money market instruments;
(e) Investment in a wholly beneficially owned and

controlled company which conducts real estate related
activities; and
(f) Investment in income producing assets including shares

in property companies incorporated in Kenya whose
principal business is real estate related or REIT securities
in other Kenyan real estate investment trust schemes.
Subject to the success of this Offer, the following assets will be purchased by the Trust:
Asset
Project
Date of Transfer
to The Trust
Valuation (Kes)
Consideration
(Cash / Securities)
100% of the
issued shares in
Meru Greenwood
Park Limited
Greenwood City
located at Meru
Town Block I/3
Within 180 days of

the close of FRED COMMERCIAL offer.
868,858,099*
37,776,440 Units
*this constitutes the value of the real estate and cash held by the SPV as on 28th September 2015
28
9.3 Initial development and construction of the REIT
The REIT intends to undertake such initial development

and construction activities as are set out in Section 18.
The following documents relevant to the development are
available for inspection
(a)

(b)

Valuation Reports summaries have been outlined in

Sections 21 and 22 of this Offering Memorandum.
The Legal Opinion in relation to transfer or acquisition of
the assets and the title a summary of which is included
in Section 39.6.

(c)

9.6 Investment Policy Statement
Notwithstanding anything contained herein to the contrary,

the REIT Assets may be invested only in accordance with
the following investment guidelines and the Trustee shall
not permit any of its subsidiaries, property companies or
realestate related companies or investee trusts to conduct
their operations and affairs other than in accordance with
the following investment guidelines:
9.4 Strategy of the REIT Manager in implementing

the objectives
In implementing the objectives of the Trust, the REIT

Manager will pursue a strategy encompassing:
(a)

(b)

(c)

(d)

(e)

(f)
Capital Preservation: The investment of FRED -

COMMERCIALs assets will ensure the preservation
of capital;
Medium Term Capital Growth: Capital growth with
the avoidance of excessive risk over the long term. Short
term volatility will be tolerated if appropriate considering
the asset class and comparable market index;
Return on Investment: The attainment of the agreed
investment performance deliverables against the
accepted benchmarks over the investment period;
Liquidity: An adequate level of liquidity will be

maintained to enable FRED - COMMERCIAL to meet
its liabilities and obligations;
Diversification: The investment portfolio will
be diversified to the extent possible;

Other Matters;

(i) Development and construction activities to be

undertaken and the budget and estimates for

undertaking such activities;

(ii) Consents and approvals to be obtained and the

time frame for such;

(iii) The time frame over which the total development

and construction activities are intended to be
conducted;

(iv) The REIT Managers strategy as to sale or lease of

the completed properties or a combination of both

and the time frame until it is anticipated that cash

flows will be generated;

(v) Include details of any foreign exchange exposure,

for example, as regards the acquisition of any plant

or equipment or building materials; and

(vi) Include details of any Structural Engineers

report or of a Quantity Surveyor or of any

Project Manager.
9.5 Permitted non-real estate assets and restrictions

on investment and REIT Managers strategy as
regards such investments

In addition to investing in real estate, FRED COMMERCIAL may invest in the following:
(a) Cash, deposits, bonds or securities and money

market instruments;
(b) A 100% wholly beneficially owned and controlled
company which conducts real estate related activities;

and
Income producing assets including 100% shares in
property companies incorporated in Kenya whose
principal business is real estate related or REIT
securities in other Kenyan real estate investment
trust schemes.
FRED - COMMERCIAL shall undertake investment

activities in line with the FRED - COMMERCIAL risk
management policy guidelines and shall only invest in
eligible investments and eligible real estate as permitted for
D-REITs by the Regulations, or any modifications thereof.
FRED - COMMERCIAL shall invest its excess funds
in investments conforming to the risk appetite and risk
reward matrix provided that FRED - COMMERCIAL shall
not make, or permit any of its Subsidiaries to make, any
investment that could result in the REIT ceasing to qualify
as an Authorized REIT Scheme under the Regulations.
FIM will set investment limits which shall be reviewed
from time to time as per market demands and must conform
to the applicable regulations.
No investment shall be made contrary to the provisions of
the applicable regulations. In particular:
(a)

(b)

(c)

Eligible real estate for FRED - COMMERCIAL shall be

investment in real estate in Kenya, unless the
Regulations otherwise allow in future;
Such real estate may be owned directly or through

investee companies owned 100% by the Trustees or
investee trusts of which the Trustee is 100% beneficiary;
FRED - COMMERCIAL will not co-own eligible real
estate with any other person.
Accounting treatment of investments shall be as per the

prevailing International Financial Reporting Standards
(IFRS) and International Accounting Standards (IAS).
FRED - COMMERCIAL may invest in securities that have
been approved by the Trustee and the REIT Manager, and
shall include the following:
(a)

(b)

29
Investing in income producing projects including

100% of the shares of property companies incorporated
in Kenya whose principal business is real estate related or
REIT securities in other Kenyan real estate investment
trust schemes;
Investing in a wholly beneficially owned and controlled
company which conducts real estate related activities;
and
(c) Investing in cash, deposits, bonds or securities and

money market instruments;
If at any point in time the investment spread is not as

defined above, the REIT Manager must rectify this as soon
as possible and ensure this does not exceed a period of
thirty days from the day on which the limit was exceeded.
Within one year of the date of its authorization, FRED COMMERCIAL is expected to have invested at least thirty
percent (30%) of the total asset value directly in

(a) Development and construction projects; or

(b) Income producing real estate which FRED -

COMMERCIAL will develop or construct.
The Trustee and REIT Manager shall ensure that the real
estate acquired or to be acquired as an asset of FRED COMMERCIAL-

(a)

(b)

(c)

The REIT Manager may, with the consent of the REIT

Securities Holders, request that the Trustee invest up to a
maximum of ten percent of the total asset value in a wholly
owned and controlled company carrying out real estate
related activities including-
Can be developed in the manner and for the

proposed use;
Is free from encumbrances at the time of acquisition
except for any charges entered into by the Trustee as
authorized by the Trust Deed and the applicable

regulations; and
Has reasonable prospects when the development or
construction is completed for sale for a profit or
for leasing as income producing real estate.
(a)

(b)
(c)
At the time of entering into the lease, the lease has a

remaining term of at least twenty five years;
The real estate has been valued as leasehold; and
The lease is lodged for registration.
The REIT Manager shall ensure that investments in cash,

deposits, bonds, securities and money market instruments
shall be spread across a number of issuers, securities and
instruments so that not more than five percent (5%) of the
total asset value is exposed to any one issuer or institution
or to members of the same group. This, however, shall
not apply to deposits, bonds or securities issued by, or
guaranteed by, the Government of Kenya or to deposits
with a banking institution licensed in Kenya.
The REIT Manager shall invest in properties that meet the
following criteria:
(a)

(b)

(c)

(d)

(e)

Have expected returns on an IRR basis of at least 20%

per annum on a gross basis (before fees);
Have individual project development cost of at least
KES 400 million;
Fall in the Commercial Real Estate Developments
sector;
Enhance sector and geographic diversification
within Kenya; or
In the case of leasehold land, has at least 25 years left
on the lease.
The REIT Manager will in all instances seek to develop

real estate properties for sale and use its best endeavours to
sell the properties within three years of completion of each
development.
Property management;
REIT management;
Property maintenance or design; or
The provision of services to tenants or to FRED -
COMMERCIAL.
This shall not include the provision of mortgages or

finance except to the extent that FRED - COMMERCIAL
is authorized by the Regulations to provide mortgages
or finance.
For the purposes of determining the level of the investment
which can be made, the percentage shall be calculated by
reference to the amount of the proposed investment and the
value of the total asset value at the date that the investment
is made.
The Trustee and the REIT Manager shall, where the real
estate acquired is leasehold, ensure that

(a)
(b)
(c)
(d)

9.7 Risk Management Strategies to be employed by

the REIT Manager
The REIT Manager will maintain a rigorous and robust
risk management process to ensure all risks are identified
and fully mitigated. Outlined below is a summary of the
risk management process.
9.7.1 Internal Risk Management

The objective is to continuously mitigate all extraneous
risks i.e., risks that have nothing to do with the market e.g.
instance operational risks aided by Quality Audits. The
REIT Managers internal methodology toward risk will be
based on the following facets:
(a)

(b)

(c)

30
Independent checks and controls at all levels and across

business units. This is in order to ascertain both accuracy
and objectivity, as well as to provide an audit trail that
can be reviewed on call;
Comprehensive risk disclosure and mapping to the
Board of Directors, Regulators and Shareholders. This
adds another level to the process, and ensures that
overriding levels of verification exist; and
Stringent internal controls whereby every decision of
impact not only has to be reviewed by a senior member
of the business unit, but is also signed off by at least one
member of senior management. This applies on
everything from the analysis of funds available for
investment to the pricing process. An audit trail will
be kept of all the checks for the purposes of periodic
audit reviews.
9.7.2 Independent Checks

Auditor
FRED - COMMERCIAL will be audited annually by a
reputable independent audit firm appointed by the Trustee.
The Auditor shall report on whether the Trustee and the
REIT Manager have complied with the Regulations. The
Auditor will not be the same as the auditor of either the
Trustee or the REIT Manager
Trustee
FRED - COMMERCIAL has appointed a Trustee under
the Trust Deed. The Unit Holders may approve a change of
trustee in accordance with the provisions of the Trust Deed
and the Regulations.
9.8 Level of Borrowings and the assumed terms and

interest rates
The Trustee on behalf of the Trust may borrow amounts
with a value of up to sixty per centum (60%) of the Total
Asset Value of FRED - COMMERCIAL.
The Trustee may borrow additional amounts on a temporary
basis (for not more than six months) of up to a maximum of
seventy-five per centum (75%) of the total asset value with
the prior sanction of REIT Securities Holders by way of an
ordinary resolution.
9.8.1 Limitations on Borrowing under the Regulations

Regulation 81 sets out the maximum levels of borrowings
by a D-REIT as follows:
(1) The trustee of a D-REIT may, subject to any restriction

or lesser limit imposed under the scheme documents,

borrow or enter into financing arrangements-

(a) On its own initiative where such borrowing is

required to preserve the value of the assets of
the trust and is in the best interests of the REIT
securities holders; or

(b)

If requested to do so by the REIT manager, to give

effect to the objectives of the scheme to acquire real
estate assets, to undertake development and
construction, to undertake capital expenditure or to
refinance any existing borrowing.
(2) The trustee may provide security over the assets of the real

estate investment trust and scheme to secure the

borrowings under paragraph (1).
(3) Borrowings entered into by the trustee on behalf of a

D-REIT or by any investee company or investee trust shall

not exceed, in aggregate, at the time the liability is

incurred, sixty percent of the total asset value:

Provided that the limit in borrowings shall not operate

to prevent the rolling over or refinancing of any debt where

the amount rolled over or refinanced is not more than the

amount originally borrowed.
(4) Despite paragraph (3), the trustee may, with the approval

of REIT securities holders by way of an ordinary resolution

borrow or enter into a financing arrangement up to a

maximum of seventy five percent of the total asset

value, for a temporary purpose for a term not exceeding

six months.
(5) Failure by the trustee to comply with the borrowing

limitation under this regulation shall not constitute

an offence.
(6) Despite paragraph (5) and where the trustee exceeds the
borrowing limits specified in this regulation
(a) D-REIT may cease to be classified as a real estate

investment trust scheme for taxation purposes;

(b) Subject to the scheme documents, the REIT securities
holders may institute a cause of action against the
trustee or the REIT manager; and

(c) The Authority may revoke the authorization issued to the
REIT under regulation 18.
NB: Material changes can only be made to the objectives and
eligible assets of the REIT if authorized by the Act and the
Regulations and approved by the REIT Securities Holders
31
10 The Trustee
The Co-operative Bank of Kenya Limited (the Bank) is incorporated in Kenya
under the Companies Act and is also licensed to do the business of banking under
the Banking Act.
The Bank was initially registered under the Co-operative Societies
Act at the point of founding in 1965. This status was retained
up to and until 27th June 2008 when the Banks Special General
Meeting resolved to incorporate under the Companies Act with a
view to complying with the requirements for listing on the NSE.
The Bank went public and was listed on 22nd December 2008.
Shares previously held by the 3,805 co-operatives societies and
unions were ring-fenced under Coop Holdings Co-operative
Society Limited which became the strategic investor in the Bank
with a 64.56% stake.
The Bank has three subsidiary companies, namely:
(a) Kingdom Securities Limited, a stock broking firm with
the bank holding a controlling 60% stake;
(b) Co-opTrust Investment Services Limited, the fund
management subsidiary wholly-owned by the bank; and
(c) Co-op Consultancy & Insurance Agency Limited

(CCIA), the corporate finance, financial advisory and

capacity- building subsidiary wholly-owned by the bank.
The Bank has offered custodial services to a wide range of
retirement funds, collective investment funds and personal
investment groups since 2001 and is regulated by the following
bodies:
(a) The Capital Markets Authority;

(b) The Retirement Benefits Authority; and
(c) Central Bank of Kenya (CBK).
The Bank is also regulated under the Central Depositories

Act as a Central Depository Agent (CDA) and holds a CMA
licence as a REIT Trustee.

Name
Profile
Dr. Gideon Muriuki, MBS, (51)

Group Managing Director
& CEO
Appointed Managing Director in 2001. Joined the bank in 1996 as a Senior Corporate
Manager then Director, Corporate and Institutional Banking in 1999. Holds a Bachelor
of Science degree in Mathematics, is a Fellow of the Kenya Institute of Bankers and
was awarded an Honorary Doctorate in Business Management. He has over 25 years
experience in banking and finance. He is also the Managing Director of Co-optrust
Investment Services Limited and Co-op Consultancy & Insurance Agency Ltd - both
subsidiaries of the Bank. He is a Director of Kingdom Securities Limited, Vice-President
Africa - International Co-operative Banking Alliance (ICBA), Executive Committee
Member of the Kenya Bankers Association and Chairman, Governing Council of the
Africa International University. He was voted the CEO OF THE YEAR AFRICA 2014
by the International Banker.
Rosemary Majala Githaiga,

(Mrs), Company Secretary
She has over 24 years experience as a lawyer and prior to joining Co-op Bank in 1996,
worked for Hamilton Harrison & Mathews Advocates. She is an Advocate of the High Court
of Kenya, a member of the Institute of Certified Public Secretaries CPS (K) and an Associate
Member of the Chartered Institute of Arbitrators. As the Company Secretary of the Co-op
Bank Group, she has responsibility for overall provision of legal counsel and company
secretarial services. She is also the Trust Secretary for the Co-operative Bank Foundation, the
corporate social responsibility vehicle of the bank. She is also a Director of CIC Insurance
Group Limited.
Samuel Birech
Chief Operating Officer
He joined the bank in 2002. Sam was appointed Chief Operating Officer in December 2014
and is a career banker with over 20 years experience in local and international banks. He
has held various senior positions and was previously the Director, Retail Banking for 8 years
where he presided over the transformation of the Retail and SME business at the Bank. He
is currently responsible for driving operational efficiency and excellence in shared services
to provide frontline teams with seamless delivery systems and processes deriving from his
wide experience in overall frontline Business and risk management. He holds a Bachelor
of Commerce degree from the University of Nairobi and has attended various local and
international courses. He is a Board Member at Pan Africa Christian University.
32
Name
Profile
Maurice Matumo
Director, Retail & Business
Banking Division
He joined the bank in 2006. He is in charge of Retail and Business Banking Division of the
Bank, responsible for network and business growth with special focus on consumer and SME
value creation. He is an experienced banker with 17 years experience in Kenya and abroad
with a rich and extensive experience in business development, Human capital management and
strategic channel development. He holds a Bachelor of Arts degree in Business Management
from Moi University and has attended various local and international courses.
Evelyne Munyoki
Director, Human Resources
Division
She drives the banks Human Resources responsible for the People Agenda with a primary
focus on performance, talent and employee engagement. She is an experienced strategic HR
partner to the Banks Business with over 19 years experience in HR with six of those years
in the banking and financial services sector. She is a proven professional in development and
execution of Human Capital strategy, HR Business Partnering, talent management, design
and implementation of Employee Engagement initiatives. She holds a Masters Degree in
International Business Administration (Finance Major) and a Bachelors of Arts in Land
Economics. She is a Certified Professional Career Coach and a member of the Institute of
Human Resources Management (K).
Anthony Mburu
Director, Credit Management
A career banker with over 22 years of banking experience both in Kenya and the region. Most
of these years were spent in the line of Credit and Risk Management. He holds a Bachelors
degree in Commerce and has attended various proprietary and international Credit courses.
He is also a Director of Kenya Co-operative Coffee Exporters (KCCE) Limited.
Patrick Nyaga
Director, Finance & Strategy
Division
Has over 22 years experience mainly in auditing and banking. Previously served at KPMG
(EA), with the main focus being audit of financial institutions and especially banks in Kenya
and the region. He then joined main-line banking where he has worked for over 13 years.
He holds an MBA from Strathmore Business School, a Bachelor of Commerce degree in
Accounting, is a Certified Public Accountant (K) and a member of ICPAK. He is also a
Director of CIC General Insurance Limited.
William Ndumia
Director, Transformation
He joined the bank in 2006. He is in Charge of the Transformation office giving leadership
to the various transformation initiatives and programs to achieve the banks growth and
efficiency strategies. He has been in the bank for over 10 years previously as Director
IT & Innovation, Director Operations and Head Business Change management. He is an
experienced banking operations expert having previously worked for international banks in
various technical, controls and compliance roles. He holds a Bachelor of Science Degree in
Mechanical Engineering and has attended various courses on project management and risk
management both locally and internationally. He has overseen execution of various technical
projects including the implementation of the core banking system, card management system
and a global review of all bank processes among others.
Lydia Rono
Director, Corporate &
Institutional Banking Division
She has held many senior positions at the Bank in her 29 years banking experience. She is
responsible for crucial business growth in the Corporate & Institutional Banking division
providing leadership in the various business units under her. She holds a Bachelors Degree in
Commerce and an MBA from University of Nairobi and has attended various courses.
Vincent Marangu
Head, Co-operatives Banking
Division
Joined the bank in 2003 and has wide experience in business and financial advisory working
with co-operatives and rural finance sectors as Head of Co-op Consultancy and Insurance
Agency Ltd. Vincent has key competencies in corporate finance, strategic planning, business
planning, organizational development and business operations review. He has consulted for
co-operatives in Kenya and East Africa region and implemented many donor projects with
international agencies. He holds a Bachelors Degree in Economics and Business Studies and
is a graduate of the School of African Microfinance. He is a member of the Association of
Professional Co-operators (APC), Kenya.
33
Name
Robert Morris Aloo

Treasurer
Edgar Mwandawiro
Chief Risk Officer
Profile
He joined the bank in 2013. He has over 10 years experience in Treasury management. He is
responsible for the banks Treasury management and growth objectives. Prior to joining Cooperative Bank of Kenya, he worked as Head of Treasury in KCB Bank Uganda Ltd. He holds
an MBA in Finance from USIU Africa and a Bachelors of Arts Degree in Land Economics
from the University of Nairobi. He is a Certified Public Accountant (K) and a member of
ICPAK. He is also a member of The Financial Markets Association of Kenya (ACI Kenya).
He joined the Bank in January 2016. He has over 17 years banking experience mainly in risk
management and banking operations. He previously worked for Commercial Bank of Africa
for 10 years. Prior to joining Co-op bank, he worked at Gulf African Bank for seven years
as the Head of Risk. He is a holder of Masters Degree in International Banking and Finance
from Birmingham University, England and Bachelor of Commerce degree from University of
Nairobi. He has attended various risk management trainings both locally and internationally.
The compliance officer details:

Name
Profile
Amos Mwita
Amos is responsible for coordinating the management of the banks Compliance Risk.
i.e. implementation and maintenance of the Compliance policy and function, Know your
customer (KYC), Anti Money Laundering and Counter Terrorism financing Policies. He has
over 15 years of banking experience as an Operational efficiency and Monitoring expert at
Co-operative Bank of Kenya.
Head, Compliance Department
10.2 Co-operative Banks Role as Trustee

Subject to the provisions of the Trust Deed, the Regulations
and the Act, the Trustee shall have all powers necessary to
protect the interests of Securities holders in terms of the
Act, the Regulations and the Trust Deed and shall, save
as otherwise provided in the Trust Deed, have authority
necessary to carry out the function and purposes of the
Trust to secure the fulfilment of the objects of the REIT. In
particular, the Trustee shall:
(a) Act in accordance with the terms of the Trust Deed,
the scheme documents, the Act and the Regulations;
(b) Act honestly and in a fiduciary capacity as Trustee in
the best interests of the REIT Securities Holders as
beneficiaries of the real estate investment trust
and the Trustees discretions;
(c) Fulfill the obligations and duties set out in the Trust
Deed, the scheme documents and in conformity
with the Regulations;
(d) Act in accordance with any other law applicable to
Trustees, including the Trustee Act;
(e) Maintain custody, hold and protect all the assets of the
real estate investment trust, ensure they are held in the
name of and where registration is provided for are
registered in the name of the Trustee and if required in
the name of any secondary disposition trustee and
ensure that all the necessary filings and registrations
are recorded, undertaken and maintained;
(f) Protect interests of the real estate investment
trust in any asset;
(g) Ensure that the assets are:
34
(i) Clearly identified as the assets of the trust

and the scheme;
(ii) Held separately from any other assets of the

Trustee and of any secondary disposition trustee

and any other trust, scheme or person;
(iii) Not included in the accounts of the Trustee; and
(iv) Not charged, pledged or dealt with except in

accordance with the provisions of the Trust Deed,

the Act and the Regulations.
(h) Appoint the REIT Manager and, if necessary, to
protect the interests of beneficiaries, remove the REIT
Manager and appoint a substitute REIT Manager;
(i) Act as the REIT Manager on a temporary basis in
any period where there is no other REIT Manager
until a new REIT Manager is appointed;
(j) Supervise the activities of the REIT manager to ensure
that they comply with the terms of the scheme
documents , the Act and the Regulations;
(k) Not delegate to the REIT Manager except if appointed
by the Authority as a secondary disposition trustee or
to any other person not being an officer or employee
of the Trustee any function of or involving:

(i) Supervision of the REIT Manager; or

(ii) The custody or control of the assets of the scheme;
(l) Ensure that:

(i) The fund and the assets of the scheme are invested

in accordance with the terms of the Trust Deed,

the Act and the Regulations;
(ii) Income of the scheme is applied in accordance

with the terms of the scheme documents;
(iii) Assets of the real estate investment trust which are

insurable are insured and valued as required by the

scheme documents, the Act and the Regulations;
(iv) All payments and distributions made out of the

assets of the scheme are made in accordance with

the terms of the scheme documents, the Act and

the Regulations;
(v) Any borrowing limitations set out in the scheme

documents, the Act and the Regulations are

complied with;
(m) Act in the best interests of the beneficiaries and if there
is a conflict between the interests of the Trustee and
those of any beneficiary, then the Trustee shall give
priority and preference to the interest of the
Beneficiary;
(n) Not make use of confidential information acquired
when acting as the Trustee to gain an improper
advantage for itself or for another person or to cause
detriment to a Beneficiary;
(o) The Trustee shall act in accordance with the

instructions of the REIT Manager provided that the
instructions are:
(i) In accordance with the terms of the Trust Deed

and any prospectus or Offering Memorandum;
(ii) In accordance with the provisions of the Act or

these Regulations and the law relating to Trusts

and Trustees,
(iii) In the Trustees opinion is in the best interests of

the REIT Securities Holders.
(a) Prior to acquisition or disposal of any asset;

(b) Prior to the initial issue or offer of any REIT securities

except where the issue or offer is made to the promoter
or to connected persons;
(c) On an annual basis or shorter period as is necessary to

enable the trustee and or the REIT manager to prepare
the reports required to be prepared under the Trust Deed,
the Act or the Regulations or to fulfill its obligations

as trustee;
(d) If the auditor or REIT Securities Holders request; and
(e) At any other time, if the Trustee or the REIT manager

or the auditor is of the opinion that it is desirable in the
interests of the REIT securities holders that a valuation
be conducted or that there has been a material
change that may result in the then current valuation
being incorrect.
Save as disclosed herein, the Trustee does not have any potentially
conflicting nor competing roles nor any current pending or threatened
litigation which might materially affect the resources or financial
capacity of the Trustee to fulfil its role or responsibilities as the trustee
of the REIT.
10.3 Trustees Power to Borrow on Behalf of the Trust

and Charge or Pledge Assets as Security
10.3.1 Trustees powers under the Trust Deed to borrow
These are set out in Clause 19 of the Trust Deed as
follows:
19.1
The Trustee may enter a borrowing arrangement-
19.1.1 on the initiative of the Trustee where such borrowing

is required to preserve the value of the REIT Assets and

is in the best interests of the REIT Securities Holders;
or
19.1.2 If requested to do so by the REIT Manager to give effect

to the objectives of the scheme to acquire real estate

assets or to undertake capital expenditure or refinance

an existing borrowing.
19.2 The Trustee may provide security over the REIT Assets

to support borrowings under Clause 19.1.
19.3 Notwithstanding the provisions of Clause 19.1 and

19.2, the Trustee shall ensure that any borrowing or

provision of security is not prejudicial to the interests

of the REIT Securities Holders.
19.4 The total borrowings entered into by the Trustee on

behalf of FRED - COMMERCIAL or by any investee

company or investee trust shall not exceed, in

aggregate, at the time the liability is incurred,

sixty per centum (60%) of the Total Asset Value

of FRED - COMMERCIAL;

Provided that:-
(p) The Trustee has power to appoint valuers, lawyers,

accountants and other professionals for the purpose
of permitting it to carry out its duties and perform its
obligations and shall charge the fees, cost and
expenses of such as an expense to the REIT.
All legal proceedings which may be instituted by or
against the REIT shall be instituted by or against the
Trustee in its capacity as such, and the Trustee shall have
the power and be capable of instituting, prosecuting,
intervening in or defending any legal proceedings of
whatsoever nature relating to or concerning the REIT
or its affairs and as a prerequisite to such action, to
require the REIT Manager to indemnify it against all
costs and expenses thereby incurred. The Trustee shall
in no way be liable to make any payment hereunder
to any Securities Holder except out of any funds held
by or paid to it for that purpose under the provisions
hereof.
The Trustee shall cause a valuation of the real estate assets
of the trust to be conducted and ensure that other assets of
the trust are appropriately valued:
19.4.1 This limit shall not operate to prevent the rolling over

or refinancing any debt provided that the amount

rolled over or refinanced is not more than the amount
35

originally borrowed, and
19.4.2 The trustee may borrow on its own initiative or on the

recommendation of the REIT manager up to a

maximum of seventy-five per centum (75%) of the

total asset value with the prior sanction of REIT

Securities Holders by way of an ordinary resolution

for a temporary purpose for a term not exceeding

six months.
19.5 Any non-compliance with the borrowing limitation

under this Regulation shall not result in a breach of the

Act or these Regulations but may result in19.5.1 The D-REIT ceasing to be classified as a real estate

19.5.2 Subject to the scheme documents, in the REIT

Securities Holders having a cause of action against

the Trustee or the REIT Manager; and
19.5.3 Revocation of authorization of the REIT by the
Authority.
19.6 The Trustee shall be entitled to limit its liability for

any borrowing to the assets of the Trust and subject

to the provisions of the Act, Regulations and the law

relating to trusts and Trustees shall entitled to be

indemnified out of the assets of the REIT for all losses,

expenses, fees and charges incurred in the performance
10.3.3 Circumstances in which REIT Securities Holder

may be required to vote to approve a borrowing by

the Trustee
This is set in Clause 19.4.2 of the Trust Deed. When the
trustee seeks to borrow an amount greater than sixty per
cent (60%) of the total asset value, the Trustee must obtain
the prior sanction of REIT Securities Holders by way of
an ordinary resolution. This borrowing is restricted to a
maximum of seventy-five per centum (75%) of the total
asset value and is to be used for a temporary purpose for a
term not exceeding six months.
10.3.4 Implications of the Trustee exceeding the limits in

the Act or Regulations or the limits set out in the

Trust Deed
These implications are set out in Regulations 81(5) and (6)
of the Regulations and in Clause 19.5 of the Trust Deed. In
summary, any non-compliance with the borrowing limitation
shall not result in a breach of the Act or the Regulations and
shall not constitute an offence but may result in-
10.3.2 Limits contained in the Act or Regulations on the

Trustees Powers
The Regulations limit the Trustees powers to borrow in
Regulation 81(3) and (4) as follows:
(3) Borrowings entered into by the trustee on behalf of a

D-REIT or by any investee company or investee trust

shall not exceed, in aggregate, at the time the liability

is incurred, sixty percent of the total asset value:
Provided that the limit in borrowings shall not
operate to prevent the rolling over or refinancing of

any debt where the amount rolled over or refinanced is

not more than the amount originally borrowed; and
(4) Despite paragraph (3), the trustee may, with the

approval of REIT securities holders by way of an

ordinary resolution borrow or enter into a financing

arrangement up to a maximum of seventy five percent

of the total asset value, for a temporary purpose for

a term not exceeding six months.

(a) The D-REIT ceasing to be classified as a real estate

(b) Subject to the scheme documents, the REIT Securities
Holders having a cause of action against the Trustee
or the REIT Manager; and

(c) Revocation of authorization of the REIT by the

Authority.
36
11 The Promoter
11.1 Overview
Fusion Capital Limited is a hybrid business financing and

private equity house, designed around the needs of local
businesses in the emerging economies of East and Central
Africa. Fusion Capital has presence in Nairobi, Kigali,
Kampala and Dar es Salaam. The Company is focused
on opportunities in the East African marketplace, but has
plans to expand to the Great Lakes region and beyond as
its capital base expands.
warehousing and factories. Fusion invests through welltried Special Purpose Vehicle (SPV) structures, normally
having a controlling interest and working closely with real
estate entrepreneurs.
11.3 Shareholding Structure

Name
11.2 Investment Principles
Fusion Capital is building scale by remaining close to its

chosen marketplace. The Company lives where it invests,
creating a unique pipeline of opportunities from research
and a network of local contacts. Successful investment
outcomes are about good judgment, good relationships and
good systems. This quality-first approach is serving the
Company well.
Fusion Investments Limited
Fusion Capital achieves the above by:

(a)

(b)

(c)

(d)

(e)

(f)

(g)

(h)

Rigorously analyzing the risk in any investment and

performing appropriate due diligence;
Keeping it real, and investing only where common sense
supports the results of analysis;
Investing only where FCL believes the fundamentals
of management, environment and performance
are attractive;
Sticking closely to the Institutional Limited Partners
Association Guidelines, including a zero tolerance
approach to corruption;
Giving its people good training, a stimulating working
environment, and financial rewards aligned with its
investors interests;
Investing only where Fusion Capital has genuine
local insight;
Ensuring that deals are legally executed with rigour
and intelligence; and
Realising that it is not just about putting money in and
waiting for an exit opportunity: Fusion Capitals view
is that growth needs to be mentored and overseen
throughout the life of the investment.
Number
of Shares held
1,485,799
The Trustees Fusion Capital

Employee Share Ownership Plan
Trust
86,850
Luke Mwiti Kinoti
78,149
Mary Kathambi Kinoti
61
Constantine Akilimali Malai
30
Total Issued Shares
1,650,889
11.4 Board of Directors

Name
Position
Dr. Philip Goodwin Chairman (Executive)

Luke Kinoti
Chief Executive (Executive)
Susan Kagundu
Group Finance Director

(Executive)
Daniel Kamau
Director, Real Estate (Executive)
Constantine Malai
Dr. James Mageria
Fusion Capitals real estate financing programme includes

amounts from $3,000,000 to $20,000,000. All across
the region, Fusion is financing the development of the
buildings which dynamic economies need: from affordable
housing, to luxury residential developments to office blocks,
37
Director (Non-Executive,
Independent)
Director (Non-Executive,
Independent)
Kimathi Kamencu
Director (Non-Executive)
Nelly Mbugua
Director (Non-Executive)

Name
Profile
Luke Kinoti
Luke had the original vision for Fusion: an institution which would directly address the under-served
Group Chief Executive capital needs of growing businesses in the vibrant East African region. He is the Chief Executive of
Fusion Capital, the Promoter of FRED - COMMERCIAL and is a co-founder of the Fusion Group
of companies, which comprises subsidiaries offering financial and investment services in private
equity, real estate, private wealth management, pension management and insurance for local and
international investors. He has overseen the group expansion in East Africa over the last 10 years.
Lukes career embraces over 30 years of business financing, investment management and strategy
implementation, mentoring, training and development of executives serving the sector. In the past,
he has held various senior leadership positions in development and SME/Microfinance lending
institutions including African Medical and Research Foundation (Kenya), Ecumenical Church Loan
Fund (ECLOF) and National Council of Churches of Kenya (NCCK).
Luke is a graduate of the University of Nairobi (Mathematics and Statistics). He is also a member of
the Institute of Directors and sits on various Boards.
Susan Kagundu
Executive Director,
Finance & Operations
Susan oversees the Group Finance Department responsible for preparing, analyzing and disseminating
financial information to various stakeholders, and managing the Groups funds. She is responsible
for finance and tax matters for FRED - COMMERCIAL.
Susan is a Certified Public Accountant with over 15 years experience in financial reporting and
management accounting. She was previously the Finance Manager for Melchizedek Hospital, and
Deputy Head of Finance for the Karen Hospital.
Susan is a Bachelor of Commerce (Finance) graduate from the Catholic University of Eastern Africa,
a member of the Institute of Certified Public Accountants of Kenya, a Member of the Women on
Boards Network and an Associate of the Institute of Directors. Susan is a Director on various SPV
Boards.
Daniel Kamau
Executive Director,
Real Estate
Daniel heads the Real Estate team responsible for all aspects of real estate investment in the East
African region. He has a deep understanding of the East African property market and development
process from acquisition to investment exit through his involvement in transactions in the commercial,
residential, retail and hospitality sectors. He is responsible for overseeing the development and
construction activities of the Project to be undertaken by FRED - COMMERCIAL.
Daniel represents Fusion in various SPVs as a Director and has been instrumental in successfully
sourcing, negotiating, structuring and undertaking due diligence for Fusions real estate investments,
currently managing and overseeing a portfolio of over USD$ 200 Million. His previous position was
as Head of Private Equity and Business Development at Fusion Capital, overseeing a wide range of
deals in the financial services sector, FMCG, agribusiness and others. Prior to that he worked as an
Audit Assistant for Thumbi Nganga & Associates.
Daniel is a double major Bachelor of Commerce (Accounting & Business Administration) graduate
from Daystar University, and is in his final stages of his Master of Business Administration (Finance).
Lydia Kariuki
Head of Governance,
Risk and Compliance
Lydia oversees legal, governance, risk and compliance matters for the Fusion Group and is responsible
for regulatory reporting for FRED COMMERCIAL.
She is a Certified Public Secretary and an Advocate of the High Court of Kenya, with over 10 years
experience in corporate and commercial practice. She is also certified as a compliance and corporate
governance professional. She previously worked as a Senior Associate Advocate at Nyachoti and
Company Advocates, overseeing the conveyancing and commercial law departments.
Lydia is a Member of the Law Society of Kenya, the Institute of Certified Public Secretaries of
Kenya and the Institute of Directors. She is also an Associate of the Chartered Institute of Arbitrators
and the Institute of Human Resource Management-Kenya. Lydia is currently writing her theses for
the award of a Master of Business Administration (MBA) degree at the Strathmore Business School.
38
Name
Profile
Bethuel Mutai
Investment Manager,
Real Estate
Bethuel Mutai is an Investment Manager with the Fusion real estate investment team. He is
responsible for on-the-ground co-ordination of project service providers and consultants to ensure
timely and efficient delivery of projects, and particularly the Project to be undertaken by FRED
- COMMERCIAL.
Bethuel is involved in deal sourcing, structuring and management of Fusion real estate projects
across the East African region, and has demonstrated value in the successful execution of the
real estate portfolio worth over US$200 Million. He was previously involved in the successful
execution of large-scale commercial, residential, retail and mixed use development projects at
Acorn Group.
He holds an MBA in Finance and Investment from the University of Nairobi - School of Business
and a Bachelor of Science in Construction Management (First Class Honours) from JKUAT. He is
currently pursuing his Charter in Alternative Investments Management.
Charity Kirima
Investment Manager,
Real Estate Project
Accounts
Charity is an Investments Manager with the Fusion real estate investment team. She is responsible
for Project Accounts and oversees SPV Project Accountants. She is also involved in deal sourcing,
structuring, project financial monitoring, financial modelling and reporting.
Charity previously worked as a Private Equity Investment Analyst for Fusion Capital and was
involved in fund management as an Investment Banker at Dyer and Blair Investment Bank Limited.
She holds an MBA (Finance) from the University of Nairobi, a Bachelor of Arts in Education
(Mathematics & Business Studies) from Kenyatta University and is a Certified Public Accountant.
James Maclean
Investment Manager,
Fundraising
He has worked with the Fusion Group in the United Kingdom (UK), with short stints in Kenya, for
the past seven years.
He started out as a loan officer working in the Fusion Private Equity and SME department. In the
UK, James was responsible for investor relations and reporting. He designed the Fusion Portfolio
Management Service, which provides access to investments of all kinds in East Africa and beyond for
professional investors, through a Financial Conduct Authority - regulated Investment Manager. James
was also instrumental in identifying, structuring and closing successful fundraises under the Fusion
African Access Limited Partnership (FAALP) Fund. He is currently responsible for fundraising for
Fusion real estate projects in the UK, including structuring and promoting FRED - COMMERCIAL.
He is a Bachelor of Science in Economics graduate from the University of Bath in the UK and also
holds a CF30 qualification from the Chartered Institute of Securities and Investments.
Mutindi Ndambuki
Sales & Marketing
Manager
Mutindi is the Sales & Marketing Manager for the Fusion Group, responsible for leading and
coordinating project sales activities, managing the Groups communication and public relations
aspects, marketing research, event planning and media relations. She is an Accredited Chartered
Marketer with eight years experience.
Mutindi previously worked as a Business Advisor in Fusions Private Equity and SME department
and as a Marketing and Communications Officer in the Investor Relations department, responsible for
implementing and managing investor communication and marketing strategies.
She holds a Bachelor of Commerce (Marketing) from Daystar University and is accredited by the
Chartered Institute of Marketing.
39
Real Estate Consultant:

Name
Profile
Michelle Small
Director, Fusion
Investment Limited
Michele is a Director of Fusion Investment Limited, the holding company of Fusion Capital Limited.
She is a seasoned real estate professional who, until July 2012, was an Acting Director of the Property
and Tourism team at the European Bank for Reconstruction and Development (EBRD).
Michelle represented the EBRD on the Investment Committees and Supervisory Boards of real estate
funds and property companies where EBRD had invested and still represents them on one such
investment committee. She has extensive knowledge of the Central and South-Eastern real estate
markets and over the last two years, has also been working with Fusion Capital in the Eastern African
markets (Kenya, Uganda, Rwanda, Tanzania and Burundi), as an Independent Property Consultant
with MS Commercial Real Estate Capital Limited.
11.6 Resources and experience in the conduct of development and construction activities
Fusion Capital has the following resources and experience
in the conduct of development and construction activities:
(a) A dedicated team of real estate investment

specialists,tasked with the following responsibilities
(i)
(ii)

(iii)

Identifying real estate investment prospects;

Screening the prospects for investment
suitability;
Structuring and negotiation of investment
terms;
Project /SPV
Location
(iv) Structuring and managing investment vehicles;

(v) Raising funding needed;
(vi) Procuring professional services for preparatory,
development and post-development phases;
(vii) Project management during the development phase;
(viii) Managing exits (through sales).
(b) Over 5 years experience investing and managing

investments in real estate in Kenya, and the wider East
Africa. A description of projects undertaken, or in the
process of development, is outlined below:
Brief Description
Flamingo
Nairobi, Kenya
Tower Limited

Upward Scale Nairobi, Kenya
Investment

Company

Limited

Hand in Hand Athi River,

Limited
Kenya

Grande Park
Estate Limited

Nakuru, Kenya

Grade A finish office development

On Mara Road, Upperhill area
149,000 square feet of lettable space and 235 parking bays
A total of 18 levels
Model: Build-lease-sell to yield investor
Grade A finish office development
On 4th Ngong Avenue, Community area
183,000 square feet of lettable space and 278 parking bays
Over a total of 25 levels
All office space and parking spaces to be sold
Residential accommodation development, 3 bedroom
maisonnettes
Targeted at the middle income market
Of the total 209 unit development Fusion was involved in
phase 2 (82 units)
Build to sell model
Residential housing development, consisting of 3 bedroom
apartments
A total of 64 units, in 2 phases. Phase 1:32 units, and
Phase 2:32 units
Kiamunyi, Olive-Inn area
Build to sell model
40
Estimated
project Value
(KES)
1,300,000,000
1,500,000,000
600,000,000
272,000,000
Project /SPV
Location
Mtwapa
Mtwapa,
Starehe Homes Kenya
Limited
Kigali Heights
Development
Co. Limited
Brief Description

Kigali, Rwanda

Goldmark
Properties
Limited
Kampala,
Uganda
Estimated
Project Value
(KES)
Residential housing development, composed of 3 bedroom

apartments
A total of 90 units
Located at the northcoast, next to La Marina Restaurant
Build to sell model
Grade A finish mixed use (office and retail) development
Located on Kimihurura Roundabout, adjacent to the Kigali
Convention Center
335,000 square feet of lettable space
All space to be let to tenants, and sold to a single yield
investor
A 16 unit fully serviced apartment development
Provides rental units both for short and long term stay
Bukoto area
11.7 Minimum regulatory investment to be

maintained by the Promoter
(a) A Promoter who sells or transfers any real estate or
proposes to transfer or sell any real estate to the trustee
of the D-REIT within a period one year of the

establishment of the D-REIT shall maintain an

investment of at least 10% of their investment for two
years from the close of the initial offer or if the issue is
to be listed from the date of first listing of the REIT
Securities. The REIT Securities held by the Promoter
shall not be sold or transferred during the lock in period
except where the transfer is as a result of the death or
insolvency of the Promoter;
(b) A Promoter may, after the second anniversary of
the close of the initial offer or issue, reduce its holding
to zero percent;
(c) The Trustee shall not register any transfer by the
Promoter, if the transfer results in the Promoter holding
REIT Securities which are below the minimum level the
Promoter is required to retain during the lock in period.
1,200,000,000
3,706,000,000
300,000,000
11.8 Relationship between the Promoter, REIT Manager

and the Owners of the Asset to be transferred
Fusion Capital Limited (the Promoter) is the holding
company of Fusion Investment Management Limited (the
REIT Manager). Fusion Capital Limited is a registered
shareholder of Meru Greenwood Park Limited, the SPV to
be transferred to the REIT. Fusion Capitals shareholding
in Meru Greenwood Park Limited is held in trust ultimately
on behalf of Fusion African Access (2011) Limited
Partnership (FAALP), a closed-ended Fund registered
under law of Guernsey as Number 1440.
Nelly Mbugua, a Director of the Promoter, is also the
Managing Director of Citiscape Valuers & Estate Agency
Limited, the Property Manager.
11.9 Promoters capacity to fund cost overruns

The Promoter may, but has no obligation to, fund cost
overruns. In the event that any unscheduled cost overruns
are funded, additional securities will be issued to the
Promoter for the same. Any other structure of funding
costs overruns will be discussed with and approved by the
Trustee.
41
12 The REIT Manager

12.1 Overview
Fusion Investment Management Limited (FIM) was

incorporated on 19th October 2011 as a private limited
liability company under Chapter 485A of Laws of Kenya.
The company is registered as number CPR/2011/58835.
Fusion Investment Management Limited is a specialist
fund manager, focused on mobilizing finance for African
development. Based in Nairobi, Kenya, FIM provides well
managed, controlled exposure to investment opportunities
of all kinds, with a focus on Africa. FIM services investors
within Africa as well as those investing from outside the
continent. FIMs mission is to provide attractive and well
managed vehicles and mechanisms to mobilize capital,
both domestically and from abroad, with the emphasis
on good returns and controlled risk. FIM raises capital
from investors in developed countries and in Africa, and
invests it for a strong commercial return in the East African
Region.
12.2 Products and Services
FIM provides investors with thoughtful, well considered

and well managed investments, with a geographical focus
on East Africa, organized in four main categories:
(a)
(b)
(d)
(d)
Real Estate Development

Private Equity
Money Markets
Listed Securities
FIM operates through either fully discretionary funds or

through semi-discretionary Portfolio Management Service
(PMS) accounts.
12.3 Board of Directors
The FIM Board is made up of experienced and independentminded individuals of varied backgrounds. The Boards
role is to advise the management team on the strategic
direction of investment, to open doors for the company
using members high-level contacts, and to advise on any
major conflicts of interest or fundamental policy issues
which arise in the course of investment activity.
FIM is a Kenyan Capital Markets Authority (CMA) licensed

Fund Manager and REIT Manager, and is a member of the
Fusion Group of companies.
Name
Profile
John G Msafari
Chairman
(Non-Executive,
Independent)
John is an Independent Director and the Chairman of the Fusion Investment Management Board. He
is also a Board Director of East African Sea Food Ltd, Kenya and Karmic Foods Limited - Uganda
John is currently the Administrative Director of Alpha Group, a conglomerate of companies operating
in Sub Saharan Africa and Gulf countries.
John served as a Board Director of the Central Bank of Kenya and the Kenya School of Monetary Studies
from 2011 to 2015. He also served as the Commissioner General of the Kenya Revenue Authority
(KRA) from 1998 to 2001. Internationally, he has served as the Commissioner General Designate
of the Gambia Revenue Authority and later an Advisor to the Commissioner General where he was
instrumental in setting up the Gambia Revenue Authority and reviewing the drafting of the Gambia
Customs & Excise Bill, 2008, among other assignments. In 2009, he was awarded Commander of the
National Order of the Republic of the Gambia (CRG) in recognition and appreciation of the exemplary
Leadership and Service to The Gambia Revenue Authority. He has served as Chief Executive of the
Ocean Freight Group of companies, as well as a Board Member of the Kenya Ports Authority, Kenya
International Freight & Warehousing Association and the Kenya Ships Agents Association. John
holds a Bachelor of Commerce (Business Administration & Marketing) degree and is a Fellow of the
Institute of Chartered Shipbrokers (FICS).
Dr. Philip Goodwin

Director (Executive)
Dr. Philip Goodwin saw the potential in East African investment markets as early as 2005, and
is Fusions Founding investor as well as Chairman of the principal Group of Companies. Phil is
responsible for the overall strategic direction of the Group, performance of the Board, performance
of the portfolio and fund raising.
Phil has 35 years in private equity investment, predominantly in the UK, but also in other parts of
Europe, Japan, and Africa.
His early and formative career was spent at 3i, after which he moved to HSBC Private Equity and
co-led the management buy-out in 2002, when HSBC Private Equity became Montagu Private
Equity.
Phil holds a Masters from Oxford University and a Doctorate from Manchester University.
42
Name
Profile
Luke Kinoti
Chief Executive
(Executive)
Luke had the original vision for Fusion: an institution which would directly address the under-served
capital needs of growing businesses in the vibrant East African region. He is the Chief Executive of
Fusion Capital, the Promoter of FRED - COMMERCIAL and is a co-founder of the Fusion Group
of companies, which comprises subsidiaries offering financial and investment services in private
equity, real estate, private wealth management, pension management and insurance for local and
international investors. He has overseen the group expansion in East Africa over the last 10 years.
institutions including African Medical Research Foundation (AMREF), Ecumenical Church Loan
Fund (ECLOF) and National Council of Churches of Kenya (NCCK).
Luke is a graduate of the University of Nairobi (Mathematics and Statistics). He is also a member
of the Institute of Directors and sits on various Boards.
Gladys Mboya
Director
(Non-Executive,
Independent)
Gladys is a Non-Executive Director on the Board of Fusion Investment Management. She is an

Advocate of the High Court of Kenya andis the Managing Partner of Mboya Wangongu & Waiyaki
Advocates with over 20 years experience in Corporate and Commercial practice. Gladys advises
on Corporate and Commercial transactions including; Bonds, Banking & Finance, joint ventures
and Capital Raising. She also advises on the Structuring of Commercial Real Estate Property
Developments and the Real Estate Investment Trusts (REITS).
She holds a Masters degree in Business Administration (MBA) from the University of Warwick
(UK), a Bachelor of Laws with Honours degree (LLB) from the University of Wales, Aberystwyth
(UK) and a Diploma in Law from the Kenya School of Law.
She is a member of the Law Society of Kenya, Chartered Institute of Arbitrators and Institute of
Certified Public Secretaries of Kenya.
Charles Mbui
Director
(Non-Executive,
Independent)
Charles is a Non-executive Director on the Fusion Investment Management Board. He is a marketing

and general management specialist of long experience having worked for various organizations
both locally and abroad. He is currently the Managing Director and Chief Executive Officer of Chai
Trading Company Limited. He was previously the General Manager, Sales and Marketing of the
Kenya Tea Development Agency (KTDA) and earlier on worked in Uganda as General Manager,
Mastermind Tobacco (K) Limited before that. Other companies he previously worked for include
Caltex Oil (K) Limited and Pan Africa Insurance Company in Sales and Marketing positions.
Charles holds a Master of Business Administration (Marketing) degree from the Jomo Kenyatta
University of Agriculture and Technology (JKUAT), and a Bachelor of Commerce (Business
Administration) degree from the University of Nairobi. He also holds Post Graduate degree in
Business Management from the University of South Africa (UNISA), Diploma in Advanced
Management Programme (AMP) from Strathmore Business School /IESE Barcelona Business
School - Spain.
Charles is currently reading for a PhD in Business Management and is a member of the Kenya
Institute of Management and the Institute of Directors.
Fusion Investment Managements strength is the depth and breadth of its executive management team and professional staff. The
management team is made up of the following:
Name
Profile
Luke Kinoti
Group Chief Executive
Luke had the original vision for Fusion: an institution which would directly address the underserved capital needs of growing businesses in the vibrant East African region. He is the Chief
Executive of Fusion Investment Management, the REIT Manager of FRED - COMMERCIAL
and is a co-founder of the Fusion Group of companies, which comprises subsidiaries offering
financial and investment services in private equity, real estate, private wealth management,
pension management and insurance for local and international investors. He has overseen the
group expansion in East Africa over the last 10 years.
43
Name
Luke Kinoti
Group Chief Executive
Profile
institutions including African Medical and Research Foundation (Kenya), Ecumenical Church
Loan Fund (ECLOF) and National Council of Churches of Kenya (NCCK).
Luke is a graduate of the University of Nairobi (Mathematics and Statistics). He is also a member
of the Institute of Directors and sits on various Boards.
Susan Kagundu
Executive Director,
Finance & Operations
Susan oversees the Group Finance Department responsible for preparing, analyzing and disseminating
financial information to various stakeholders, and managing the Groups funds. She is responsible
for finance and tax matters for FRED - COMMERCIAL.
Susan is a certified public accountant with over 15 years experience in financial reporting and
management accounting. She was previously the Finance Manager for Melchizedek Hospital, and
Deputy Head of Finance for the Karen Hospital.
Susan is a Bachelor of Commerce (Finance) graduate from the Catholic University of Eastern Africa,
a member of the Institute of Certified Public Accountants of Kenya, a Member of the Women on
Boards Network and an Associate of the Institute of Directors. Susan is a Director on various SPV
Boards.
Michael Kimondo
Head of Asset
Management Services
Michael heads the Asset Management team and is responsible for fundraising, business development,
portfolio management, treasury functions and all aspects of Fusions interaction with investors
locally and internationally. He is the team leader for the REITs Manager responsible for ensuring
that the assets of the REIT are invested in accordance with the REIT Trust Deed.
He previously served as the Finance Manager and Head of Treasury at Fusion. Prior to that, Michael
worked as an Accountant with Laborex Europharma (Kenya), a subsidiary of Compagnie Franaise
de lAfrique Occidentale (CFAO), with locations in more than 34 countries and French overseas
territories.
Michael is a Bachelor of Commerce (Finance) graduate from the University of Nairobi and a
Certified Public Accountant (Kenya). He is currently reading for a Master of Business Administration
(MBA) degree at the University of Nairobi. He is also a member of the Institute of Certified Public
Accountants of Kenya (ICPAK).
Daniel Kamau
Head of Real Estate
Daniel heads the Real Estate team responsible for all aspects of real estate investment in the East
African region. He has a deep understanding of the East African property market and development
process from acquisition to investment exit through his involvement in transactions in the commercial,
residential, retail and hospitality sectors. He is responsible for overseeing the development and
construction activities of the Project to be undertaken by FRED - COMMERCIAL.
Daniel represents Fusion in various SPVs as a Director and has been instrumental in successfully
sourcing, negotiating, structuring and undertaking due diligence for Fusions real estate investments,
currently managing and overseeing a portfolio of over USD$ 200 Million. His previous position was
as Head of Private Equity and Business Development at Fusion Capital, overseeing a wide range of
deals in the financial services sector, FMCG, agribusiness and others. Prior to that he worked as an
Audit Assistant for Thumbi Nganga & Associates.
Daniel is a double major Bachelor of Commerce (Accounting & Business Administration) graduate
from Daystar University, and is in his final stages of his Master of Business Administration (Finance).
Daniel represents Fusion in various Special Purpose Vehicles as a Director.
44
Name
Profile
Lydia Kariuki
Head of Governance,
Risk and Compliance
Lydia oversees legal, governance, risk and compliance matters for the Fusion Group and is
responsible for regulatory reporting for FRED COMMERCIAL.
She is a Certified Public Secretary and an Advocate of the High Court of Kenya, with over 10
years experience in corporate and commercial practice. She is also certified as a compliance
and corporate governance professional. She previously worked as a Senior Associate Advocate
at Nyachoti and Company Advocates, overseeing the conveyancing and commercial law
departments.
Lydia is a Member of the Law Society of Kenya, the Institute of Certified Public Secretaries
of Kenya and the Institute of Directors. She is also an Associate of the Chartered Institute of
Arbitrators and the Institute of Human Resource Management-Kenya. Lydia is currently writing
her theses for the award of a Master of Business Administration (MBA) degree at the Strathmore
Business School.
12.5 Fusion Investment Managements role as REIT

Manager
FIM is the REIT Manager of the REIT. As REIT Manager,
FIM will be required to:
(a) Carry out the administration of the REIT Assets including
the management of the portfolio of investments in
accordance with the direction and the authority of the
Trustee; as well as the provisions of the Trust Deed
and the Act;
(b) Advise the Trustee on the asset classes, if any,
that are available for investment;
(c) Formulate a prudent investment policy;
(d) Invest the REIT Fund in accordance with the
investment policy of the REIT Scheme;
(e) Reinvest any income of FRED - COMMERCIAL
which is not required for immediate payments;
(f) Ensure that the units in the REIT are priced in accordance
with the provisions of the Trust Deed, the Regulations
and the Act;
(g) Prepare and dispatch in a timely manner all cheques,
warrants, notices, accounts, summaries, declarations,
offers and statements under the provisions of the Trust
Deed and the Act;
(h) Make available for inspection to the Trustee or any
auditor appointed by the Trustee, the records and the
books of accounts of the REIT Manager, giving either oral
or written information as required with respect to all
matters relating to the REIT Manager, its properties
and its affairs;
(i) Be fair and equitable in the event of any conflict
of interest;
(j) Credit to the REIT all monetary benefits or commissions
arising out of managing the Fund, other than the
REIT Managers Fees;
(k) Account to the Trustee within thirty days after receipt by
the REIT Manager any monies payable to the Trustee;
(l) Keep and maintain records of the REIT at all times;
(m) Not engage or contract any advisory or management
services on behalf of FRED - COMMERCIAL without
prior written approval of the Trustee;
(n) Provide instructions to the Trustee to implement the
objectives of the REIT and appoint a property manager
or other person as its agent to assist it in undertaking its
functions as REIT Manager; and
(o) Be liable for any acts or omissions of its agents.
12.6 REIT Managers Terms of Appointment

(a)

(b)

FRED - COMMERCIAL will at all times be managed and

administered by a REIT Manager licensed by the Capital
Markets Authority and appointed by the Trustee as a

contractor in a fiduciary capacity to fulfill the role of the
REIT Manager as set out in the Act, the Regulations and
the Trust deed and to fulfill the objectives of the Trust.
The REIT Manager will cease to manage the fund under
the following circumstances:

(i) Revocation or suspension of the REIT Managers
licence;

(ii) Winding up of the REIT Manager;

(iii) Resignation of the REIT Manager; or

(iv) Removal of the REIT Manager in accordance with

the provisions of the Deed, the Act and the
Regulations.
(c) The REIT Manager shall be removed immediately on the

happening of any of the following events:

(i) If a court of competent jurisdiction orders

liquidation of the REIT Manager except for voluntary
liquidation for the purpose of reconstruction or
amalgamation upon terms previously approved in

writing by the Trustee and the Authority;

(ii) If a receiver is appointed for the undertaking of the
REIT Managers assets or any other parts;

(iii) If for any good reason the Trustee is of the opinion

and so states in writing to the Authority that a

change of the REIT Manager is desirable in the
interest of the Securities Holders.
12.7 Shareholding Structure

Name
Fusion Capital Limited

(registered in Kenya as
C.115970)
Luke Mwiti Kinoti
Total Issued Shares
45
Number of
Shares
held
%
Shareholding
299,998
99%
0.001%
300,000
13 The Property Manager

13.1 Overview
Citiscape Valuers & Estate Agency Limited (CVEAL) is

incorporated in Kenya as a limited liability company to offer
independent and comprehensive real estate professional
service. The firm is registered and regulated by relevant
government institutions and professional bodies including:
The Institution of Surveyors of Kenya (ISK), The Royal
Institution of Chartered Surveyors (RICS), The Valuers
Registration Board, The Estate Agents Registration Board.
With RICS and ISK memberships, Citiscape is recognized
and certified to provides real estate services locally and
globally.
CVEAL professionals have over 25 years of experience

in property management, sales and letting and property
valuation in Kenya and the East African region. We are
committed to provision of exemplary services in real estate
consultancy, through efficient and personalized advice
that upholds professional standards and ethics, to the full
satisfaction of our clients.
We provide market-leading advice and transaction
support to investors, corporates and property owners for
their personal and business property needs. This is in
line with our vision in which we seek to be the leading
and the most preferred property consultancy firm that is
known for excellence in real estate solutions. Our focus is
prime residential, commercial, industrial and agricultural
property markets.
13.2 The Services We Offer

Citiscape offer real estate consultancy services in the

following key areas:
Property Management
Property Valuation
Sales and Letting; Purchases and Leasing
Project Development Analysis
Project Management
Research
Real Estate Training
Environmental Impact assessments and audits
13.3 Property Management Services
As Property Manager, Citiscape will provide the following

key services:
Sale of the apartments - Aggressively market and sell
the Greenwood City apartments with a view to achieve
projected sales as per marketing plan;
Letting - Let the Greenwood City Mall and the Offices to
high net worth tenants for sustained income flow;
Management - Ensure quality management of the core
rental income stream of the property. Maintain the
property to the highest standards for physical and
economic value addition to the property. Maintain
a virtuous working relation with the tenants for to ensure
sustained income stream for the property
Overall coordination of the property management
aspects - Be the link between the property users and
the REIT Manager.
The following key personnel will be instrumental in the Property Management:

Name
Profile
Ms. Nelly K. Mbugua

Managing Director
Ms. Nelly K. Mbugua is a registered estate agent with the Estate Agents Registration
Board (EARB), a Chartered Surveyor and a registered and practising valuer. Nelly is
the acting chair of the EARB - the regulatory body in Kenya responsible for registration
and regulation of property managers and estate agents in Kenya.
Nelly is a member of the Royal Institution of Chartered Surveyors (RICS) as well as the
Institution of Surveyors of Kenya (ISK). She is a past chairperson of the Chapter of the
Valuers and Estate Management of ISK. She is a registered Lead Expert with National
Environmental Management Authority.
Nellys real estate career spans 24 years, in which she has had hands-on experience
in commercial, residential, retail and office property management; property sales and
letting; property valuation and research; project management and real estate training.
Ms. Mbugua has worked with Mureithi Valuers; Lloyd Masika Limited rising to the
position of an associate director; CBB Richard Ellis and Kenya Valuers as a director.
Within the companies, Nelly carried out commercial, retail and residential property
management, valuation and real estate agency.
Ms. Mbugua holds a Bachelor of Arts degree in Land Economics from the University
of Nairobi, a post-graduate diploma from the Institution of Surveyors of Kenya and an
Environmental Impact Assessment certificate from the Africa Nazarene University in
Kenya.
46
Name
Profile
Ms. Bilo Bhullar

Ms. Bhullar is a certified chartered accountant and holds a diploma in accounting in
Head of Property Management business management. Ms. Bhullar has over 28 years experience in the real estate sector.
She has experience in commercial, retail, office and residential property management,
with a lot of involvement in property management accounting. She served for 24 years
as a senior accountant and a property manager at Lloyd Masika Limited and Amee
Holding Limited.
At Citiscape, Ms. Bhullar has been involved with management of large commercial,
residential and retail properties. She also oversees supervision of staff, rent collection,
liaison with clients, preparation of market reports, bank reconciliations, preparation of
ledgers, preparation of detailing monthly income/expenditure statements and tenant
support. She handles all high net worth clients and maintains a database of this group
of valued clients.
She takes charge of project marketing, strategy implementation and client liaison.
Mr. Michael Otieno
Associate Director - Property
Management
Mr. Michael Otieno is a registered and licensed valuer and estate agent. He is a member
of the Institution of Surveyors of Kenya.
Michael has been involved with commercial, residential and office management and has
carried out business development and market analysis for the Citiscape. Michael has
been a property manager for the company and has had hands-on experience in handling
leases, letting of vacant space, rent collection, budgeting, staff supervision and financial
statement preparations.
Michael holds a Bachelor of Arts degree in Land Economics from the University of
Nairobi, a post-graduate diploma from the Institution of Surveyors of Kenya. He has 5
years post graduate experience in property management, sales and letting and valuation.
Mr. Amos Agiro

Business Development and
Quality Assurance Manager
Mr. Agiro holds a Bachelors degree in Information Systems (IS) and is a finalists in
Master of Business Administration (MBA), Strategic Management from USIU - Africa.
Amos is responsible for online and technology driven marketing. He is also responsible
for formulation of potential growth strategy as well as support and monitoring of
implementation of the strategy. He oversees the implementation of Quality Management
Systems.
He coordinates the knowledge and feedback from the companys departments and
clients to ensure that the company is implementing its growth strategy successfully. To
this end, Amos manages company brand and products, and prepares marketing material
including for both the digital and non-digital platforms. Mr. Agiro is also responsible
for:
Re-branding and repositioning of the company to global standards;
Developing and promoting the company profile on both digital and non-digital
platforms;
Initiating new product lines for the company;
Coordinating with all staff members with the view of synergising and increasing
performance in specific projects;
Developing comprehensive and robust marketing communication strategies for the
company and its products, through an integrated and diverse approach.
47
Name
Profile
Mr. Kevin Mungai

Head - Valuation & Research
Mr. Mungai is a holder of Bachelors degree in Real Estate Management (BRE) from
the University of Nairobi. He has four years experience in property valuation, property
management, sales and letting.
Kevin has undertaken residential and commercial property management and has handson experience in rent collection, client liaison, handling repairs and maintenance,
preparation of management plans among other management skills.
He also has experience in valuation of hotels, office blocks, shopping malls, residential
and commercial properties. He handles selected portfolios and selected high net worth
clients.
Mr. Mungai is a graduate member of the Institution of Surveyors of Kenya (ISK). He
has four years experience in the real estate sector.
Ms. Zawadi Hilda Wandera

Ass. Property Manager
Ms. Wandera is a holder of Bachelor Real Estate Management (BRE) from the
University of Nairobi. She has one year experience in property management, property
sales and letting.
She is involved in day-to-day property management of rent collection, lease
administration, rent collection and tenants liaison. Ms. Wandera also handles valuation
of commercial, residential and agricultural properties. She is also responsible for
generating valuation reports and market sector summaries. She is responsible for site
visits and client correspondence.
Ms. Wandera is a graduate member of the Institution of Surveyors of Kenya (ISK).
Ms. Winnie Wachiuri

Associate Estate Agent
Ms. Wachiuri is a holder of Bachelor Real Estate Management (BRE) from the University
of Nairobi. She has one year experience in commercial estate agency, valuation and
property management.
She is involved in day-to-day property management of rent collection, lease
administration, rent collection and tenants liaison. Ms. Wachiuri also handles valuation
of commercial, residential and agricultural properties. She is also responsible for
generating valuation reports and market sector summaries. She is responsible for site
visits and client correspondence.
She is currently the office manager at Greenwood City Meru, a commercial shopping
complex with offices, residential and retail shops. Winnie undertakes property valuations
in the company.
Ms. Wachiuri is a graduate member of the Institution of Surveyors of Kenya (ISK).
Ms. Carol K. Nyaga

Sales and Letting Executive
Ms. Nyaga has over 6 years experience in real estate residential sales and letting and is
a hands-on and seasoned marketer, having worked as a sales executive and supervisor
with Deacons Kenya.
Ms. Nyaga is responsible for:
Residential marketing and sales;
Marketing and follow-up of individual clients;
Client databases;
Customer satisfaction;
Selected high net worth clients.
48
Name
Profile
Ms. Rosyline Naitore

Sales and Letting Executives
Ms. Rosyline has 5 years experience in real estate agency and has a background of
business management and front office management. She is responsible for residential
and commercial sales in the coast region.
She is responsible for residential marketing and sales in the Coast region. She is the
company lead agent on the Marina Creekside development. More specifically, she is
tasked with:
Maintaining a database of all potential clients;
Following up and trying to close the deal with targeted clients;
Writing and submitting regular report;
Targeted marketing through events and group email.
13.4 Property Managers Sales Strategy

To make this REIT a resounding success, Citiscape key
service provision areas will be underpinned by thorough
market knowledge, based on year-on-year market analysis.
We have laid the following key strategies:
(a)

Targeted and aggressive marketing campaigns We

have targeted local investors in the East African region
as well as international investors for our marketing
campaigns. This is aimed at companies and individuals
who are looking to expand their investments in Meru
and in lifestyle centres like Greenwood City Meru;
(b)

Enhanced marketing through digital and non-digital

platforms - We have embarked on showcasing
Greenwood City as the ultimate destination for
investment to first and second time homeowners and
investors through revamped websites, Eshot
emails and other social media avenue; and
(c) Networking among peers with the aim of raising

interest and awareness of the property, regionally

and globally. More specific strategies include:
i. Mall letting - A combination of print media

presence, direct marketing and online marketing

has yielded exciting interest in Greenwood City

resulting in a number of leading international brands

and companies taking up space and signing leases;
ii. Office letting - We are reaching out to professionals

who are taking advantage of the devolved units

of governance with the aim of offering grade A

office space to them to decentralize their services.

These include doctors, architects, engineers, valuers

among others; and
iii.
Apartment Sales - We have carried out direct market

and networking to the elite within and without the

Meru County. In addition, we have embarked on

aggressive online marketing that has resulted in

diaspora interest in the apartments as they seek

income generating homes in the County.
49
14 The Structural Engineer

14.1 Overview and Background
Multiscope Consulting Engineers Limited is a Kenyan

consulting engineering firm that started operations in April
2001 as a sole proprietorship but later in April 2007 registered
as a limited company. The firms mission is to satisfy
Client needs by providing innovative, creative, feasible,
quality solutions to engineering problems; solutions that
are economical, socially desirable and environmentally
sustainable. The firm strives to be distinctly different in its
delivery of services by consistently delivering projects of
desired quality on time and within budget.
14.2 Services
Multiscope provides consultancy services in diverse fields

of civil engineering and its related development projects
which currently comprise of the following core areas of
specialization:
(a)
(b)
(c)

(d)

(e)
(f)
(g)
(h)
Bridge ,Road and Transport Engineering,

Water Supply and Sanitation,
Structural Engineering Design and construction
supervision
Structural Audit Design and construction
supervision
Geotechnical Engineering,
Dam Engineering,
Infrastructure Development Studies and
Forensic Engineering
14.3 Key Personnel

Multiscope Consulting Engineers Senior Management
Name
Profile
Eng. S.N. Maugo,

Managing Director
Eng. Maugo is a Registered consulting Engineer and a Member of the Association of Consulting
Engineers with more than 36 years of experience in geotechnical investigations, forensic
engineering, structural design and construction supervision of several projects. He has been
involved in the geotechnical investigations and/or design of dams, spillways and outlet works,
urban and rural water supply, low rise and high-rise reinforced and pre-stressed concrete
buildings, industrial steel structures, water retaining structures and structural evaluation of
existing buildings. He has been a Project Structural Engineer for various projects.
His training included in-house training on quality control procedures and quality assurance
measures while working at Kenya Bureau of Standards as a Quality Control Engineer responsible
for surveillance of the quality of building and construction materials.
Eng Maugo holds a BSc (Civil Eng) from the University of Nairobi and a M.Eng (Structural
Engineering) from Concordia University, Montreal Canada. He was a lecturer at the civil
engineering Department, University of Nairobi for 18 years before opting out to venture into full
time consultancy work, in 2007.
Eng. B.O. Okoya

Director, Structures,
Research and Development
Eng. Okoya has over eight (8) years post graduate experience in design and construction
supervision of various civil and structural engineering works. He has been involved in technical
audit, forensic engineering, structural investigations and evaluation of existing buildings design
and construction supervision of low-rise and high-rise reinforced concrete buildings, steel and
reinforced concrete bridges, masts, industrial steel structures and various civil engineering works.
Eng. Okoya is a holder of a Bachelor of Science degree in Civil Engineering (First Class Honors)
from the University of Nairobi in 2008 and a Master of Science degree in Structural Engineering
from the University of Nairobi in 2013. He also lectures structural engineering at undergraduate
level in the department of Civil and Construction Engineering at the University of Nairobi since
February 2012. He has interests in and has been involved in research in the broader field of civil
engineering construction material covering concrete and steel.
Barrack is a Civil Engineer registered with Engineers Board of Kenya (EBK) and also a graduate
member of Institution of Engineers of Kenya (IEK). He is proficient in computer programmes
such as Civil CAD, Prokon, STAADPro, Robot, AutoCAD and Microsoft Office.
50
Name
Profile
Eng. R.K. Mwirigi

Associate Director,
Operations and Quality
Assurance
Eng. Mwirigi holds a B.Sc. in Civil Engineering from Jomo Kenyatta University of Agriculture
and Technology and is currently pursuing M.Sc. in Construction Engineering and Management at
Jomo Kenyatta University of Agriculture and Technology. He has professional experience which
has been gained during conducting feasibility studies, engineering designs and construction
supervision of roads, traffic studies, buildings, storm water drainages. He also has knowledge
on quality assurance and quality control, planning, coordination, budgeting and monitoring
of projects, pavement design, preparation of road geometric design drawings, estimation of
quantities and preparation of technical specification documents for road projects in
Kenya.
Over the eight years in practice, Eng. Mwirigi has been versed with professional design codes and
standards in civil engineering and in computer packages including: Microsoft Office packages,
(Word, Excel, PowerPoint, Access, MS Project, and Explorer) AutoCAD and Civil 3D.
Eng. Benjamin E.
Ongongo
Associate Director, Business
Development, Roads and
Transportation
Eng. Benjamin is a Registered Professional Engineer with Engineers Board of Kenya, EBK and
is also a Corporate Member of the Institution of Engineers of Kenya, IEK. He holds a B. Sc.
Degree in Civil Engineering from the University of Nairobi and Higher Diploma in Business
Computing from the Institute for Management of Information Systems (IMIS) UK.
Eng. Benjamin has over nine (9) years of post-graduate experience in the feasibility studies,
materials investigation, traffic studies, materials and traffic data survey analysis, design,
preparation of design and materials reports, cost estimation, preparation of tenders, contracts
documentation, construction works supervision, contracts administration and technical audits
of roads and rural water supply projects in Kenya. He is currently the Resident Engineer of Port
Reitz/ Moi International Airport Access Road.
He is computer literate with proficiency in Microsoft Office Suit, AutoCAD applications,
Primavera, NOVA Point (16.10, 17.00), and Civil 3D for day to day engineering applications.
Other trainings that Eng. Benjamin has attended include: People Leadership, Customer
Excellence & Writing Skills, Presentation Skills, First Aid at Work and Induction Course on
Occupational Health and Safety for Site Staff.
Eng. Richard Makori Juma

Senior Engineer, Water and
Sanitation
Eng. Richard Makori Juma is a Registered Professional Engineer working with Multiscope
Consulting Engineers Ltd. Over the years, he has acquired experience in the planning, design
and supervision of dams and Water Supply projects, Operation & Maintenance of Dam and
Water Supply projects, structural design of reinforced concrete structures, Road-works,
sewerage system design and flood protection. He has also been involved in carrying out the
Special Technical and Financial Audit of Water and Sanitation Improvement Project (WaSSIP)
Projects specifically Ruiru- Juja Water Supply Project and related civil works. He has also been
involved in carrying out the Technical and Financial Audit for 54 no. projects within the country
funded by the DANIDA through Community Development Trust Fund (CDTF).
He has completed work that includes: Review of project and general study of the project areas
through site visits and review of Clients reports; Preparation of mapped contours for the
project sites; Preparation of Preliminary and Final design and sizing of the water treatment units
including raw water and rising main analysis and design; Dam stability analysis; Preparation
of raw water and rising main analysis and design; Design of power infrastructure complex;
Carrying out Dam risk analysis and spillway design.
51
Name
Profile
Eng. George W. Maina

Senior Engineer, Structures
Eng. George W. Maina holds a Bachelor of Science (Civil Engineering) degree, is a Registered
Engineer with the Engineers Board of Kenya, EBK and is a Corporate Member of the Institution
of Engineers of Kenya, IEK. He possesses a sound and working knowledge of Ms Windows
operating system, and software such as PROKON, STAAD, MS PROJECT, and AutoCAD.
Eng. Maina has over 8 years of experience. The expertise, which has been gained in the public
and private sectors, covers a range of Civil / Structural Engineering disciplines encompassing
the Planning, Design, Management and Supervision of works involving Residential, Industrial
and Commercial Buildings, River Dredging and Bridges, Towers and Masts, and general Civil
Works: Water Resources, Highways and Roads, Public Health Engineering and Environmental
Management.
Eng. Urbanus K. Musyoka

Senior Engineer, Structures
Eng. Musyoka is a Corporate Member of the Institution of Engineers of Kenya and currently the
Resident Engineer of Meru Greenwood Park Limited. He has experience in supervision works
on commercial, institutional, industrial and residential developments. He has also been involved
in design of hydraulic structures, water supply and storm water and erosion control structures.
He is conversant with local and international design standards and specifications including
British Standards, American Standards, International Building Codes, Uniform building codes,
and Kenya standards. He is also proficient in the use of software such as Microsoft Office,
Microsoft Project, AutoCad, ArchiCad, Prokon, and Staad Pro.
14.4 Role of the Structural Engineer

The appointed Structural Engineer, will be required to:

(a) Conduct an appraisal of any real estate prior
to acquisition by the REIT; and

(b) Provide a report to the REIT manager and the
Trustee on:

(i)

(ii)

(iii)

The state of repair of the proposed property and

its services, systems and material plant and
equipment;
Any latent defects and the cost, if any, which is
likely to be incurred in curing such defects or
in bringing the property to a reasonable state
of repair; and
Any deficiencies in its ability to make a full
assessment and whether additional professional
assessment, input or reports are required.
14.5 Timing for the submission of the Structural

Engineers Report
As per the Regulations, the Structural Engineer is required
to provide a report to the REIT Manager and Trustee
as explained in Section 14.4 (b) above. The Structural
Engineers report will be prepared and provided to the
REIT Manager and Trustee within 180 days of the close
of the Offer.
14.6 Potential conflicts of interest of the Structural

Engineer
Multiscope Consulting Engineers does not have any
conflicts of interest or competing roles.
52
15 The Property Valuer

Ngotho Property Consultants Limited have been appointed
as the REITs valuer. The firm has working arrangements
with reputable firms of valuers and estate agents in Uganda,
Tanzania, Rwanda, Burundi and the United Kingdom for
consultation in regional and international assignments.
Further, the firm teams up with engineers, environmental
impact assessors, project managers, land surveyors,
quantity surveyors and accountants to carry out specific
specialised or multi-disciplinary assignments.
The firms areas of competence include:
(a)

Valuation of commercial, industrial, residential and

agricultural properties including plant, machinery,
furniture and equipment for sale, rental, mortgage,
insurance, accounting and forced sale purposes.
Carrying out forensic valuations for litigation
purposes or audit;
(b) Working to the standards specified by The Institution of the

Surveyors of Kenya (ISK) Hand Book and the Royal

Institution of Chartered Surveyors (RICS) Valuation

Standards;
(c) Alternative Dispute Resolution solving property and

construction disputes through structured mediation, expert

determination, adjudication and arbitration saving

valuable time and money for the parties in addition to

safeguarding privacy;
(d) Management, selling and letting of commercial, industrial

and residential developments. This includes lease

restructuring (surrenders, extensions as well as sale and

leasebacks) on reasonable terms; and
(e) Consultancy on Real Estate Investment Trusts

(REITs), Land Use, Baseline Surveys, Housing Stock

Condition Surveys, Seminars and Advocacy on

contemporary property.
15.1 Key Personnel

Senior Management
Name
Profile
Paul Ngotho
Managing Director
Paul Ngotho holds BA Land Economics (Hons) and is a Fellow (FISK) of The Institution of Surveyors
of Kenya), Member (MRICS) of the Royal Institution of Chartered Surveyors of UK, Chartered
Arbitrator and Fellow (FCIArb) of the Chartered Institute of Arbitrators of the United Kingdom. He
is also a Registered and Practising Valuer and Registered Estate Agent.
He has over 30 years of experience in real estate and dispute resolution in Kenya, Uganda, Rwanda
and the United Kingdom.
He is also a member of the Public Procurement Administrative Review Board (PPARB) and the
Political Parties DisputesTribunal (PPDT).
Mary Gathu
Mary Gathu holds a Bachelor of Commerce degree from the University of Nairobi, an MBA in
Strategic Management from the University of Wales and a Post Graduate Diploma in Teaching from
the University of Roehampton in United Kingdom.
15.2 Policy in relation to revaluations
The fair value of the properties is determined annually

at the reporting date by an independent professionally
qualified valuer adjusted by management to reflect the
current stage of completion of the project. In determining
the valuations the valuer refers to current market conditions
including recent sales transactions of similar properties. In
estimating the fair value of the properties, the highest and
best use of the property is their use at the end of the project
development adjusted by the completion factor to reflect
the condition as of the balance sheet date.
15.3 Potential conflicts of interest of the Property Valuer
Ngotho Property Consultants Limited does not have any

conflict of interest or competing roles.
53
16 The Project Manager Certifier

16.1 Overview
Beeque Consultants Limited, is a firm of Quantity Surveyors

and Building Economists, construction project managers
and construction contracts Arbitration/Dispute resolution.
16.2 Background
The practice was established in 1993 as a Partnership and

registered in March 1994 under the Registration of Business
Names Act Chapter 499 of the Laws of Kenya. It was registered
the same year under Architects and Quantity Surveyors
Ordinance. In March 1996, this firm was registered under
the Companies Act Chapter 486 of the Laws of Kenya as a
Private company limited by shares.
16.3 Services
The practice provides all functions associated with Quantity

Surveying and building cost consultancy including among
others;

(a) Feasibility studies;

(b) Cost planning and control;

(c) Preparing Bills of Quantities and other Bidding
documents;

(d) Preparing interim payment valuations;

(e) Measuring variations;

(f) Preparing and settling final accounts;

(g) Advising on economics of various building types;

(h) Materials, modes of construction;

(i) Arbitration in settlement of Building disputes;

(j) Project Management.
16.4 Key Personnel

Name
Profile
M.J. Mburire,
Technical Director
M.A.A.K (Q.S.) C.I.Q.S.K

B.A. (Build. Econs) Hons.
Registered Quantity Surveyor.
M.K.Kinyua
Finance Director
(MBA) Hons
S. W. Mugure
Partner
B.A. (Build. Econ) Hons

Registered Quantity Surveyor.
O.Z. Munala
Partner
B.A (Build. Econ) Hons.

Graduate Quantity Surveyor.
16.5 Roles, duties, responsibilities and obligations

of the Project Manager Certifier
The PMC will be required to:

(a) Monitor and report to the Trustee and the REIT

Manager on the progress of the development or
construction work being planned or undertaken;

(b) Report on the cost of work undertaken or to be

undertaken to complete the development
or construction;

(c) Monitor and report on the cost of scheduled plant

and equipment to be acquired; and

(d) Ensure that the costs under subparagraph (c)
are included in the development or construction
works budget.
Furthermore, the Project Manager Certifier shall monitor

and submit a report to the Trustee and the REIT Manager on
a monthly basis on:

(a) Whether or not the work has been completed in

accordance with the budget, project plan and payment
schedule or any variations prepared by the REIT
Manager and approved by the trustee;

(b) Whether scheduled payments should be disbursed

by the Trustee to meet the work undertaken, costs of or
connected with the development or construction;

(c) The costs of any proposed variation of scheduled

works or proposed acquisition of plant and equipment;
and

(d) the estimate of the cost and time required to complete
the development and construction work relative to the
budget and project plan.
16.6 Timing for the submission of the initial Project

Manager Certifiers Report
As per the regulations, the Project Manager Certifier is
required to provide a report to the REIT Manager and
Trustee as explained in Section 16.5 above. The initial
Project Managers Certifiers report will be prepared and
provided to the REIT Manager and Trustee within 180
days of the close of the Offer.
16.7 Potential conflicting interests or competing roles

of the Project Manager Certifier
Beeque Consultants Limited does not to have any conflicts
of interest or competing roles.
54
17 Key Terms of the Trust Deed and Scheme Documents

17.1 Key aspects of the Trust Deed
17.1.3 Powers of the Trustee and REIT Manager
17.1.1 Key parties roles, responsibilities and obligations
These are set out as follows:

Party
The Trustees, REIT Managers, Valuers, auditors and

Structural Engineers and Project Manager Certifiers roles,
responsibilities and obligations are set out in the following
sections of this document:
Party
Trustee
REIT Manager
The Property Valuer
Structural Engineer
Section
10
12
15
14
16
Trustee
REIT Manager
The liabilities of the REIT Manager are set out in Clause

13 of the Trust Deed and state as follows:
13.1 The REIT Manager of FRED - COMMERCIAL shall
not be liable for any loss, damage or depreciation in the
value of the Fund or of any investment comprised therein
or the income therefrom which may arise by reason of
depreciation of the market value of the Real Estate and
other assets in which the Fund is invested unless such loss,
damage or depreciation in the value of the Fund arises
from negligence whether professional or otherwise, willful
default or fraud by the REIT Manager or any of its agents,
employees or associates.
13.2 In the absence of fraud or negligence by the REIT

Manager, the REIT Manager shall not incur any liability by
reason of any matter or thing done or suffered or omitted
by it in good faith under the provisions of the Trust Deed,
Offering Memorandum, the Act or the regulations.
13.3 The REIT Manager shall not be under any liability
except such liability as may be expressly assumed by the
REIT Manager under the Trust Deed, any Information or
Offering Memorandum, the Act and the Regulations, nor
shall the REIT Manager save as expressly provided herein
be liable for any act or omission of the Trustee.
10
12
17.1.4 Appointment, removal, retirement or replacement

of Parties
These are covered as follows:
Party
Trustee
REIT Manager
The Property Valuer
Structural Engineer
17.1.2 Liabilities of the Trustee and REIT Manager

Under Clause 18.1.2 of the Trust Deed, the Trustee is
required to act honestly and in a fiduciary capacity as
Trustee in the best interests of the REIT Securities Holders
as beneficiaries of the real estate investment trust and the
Trustees discretions.
Section
Section
10
12
15
14
16
17.1.5 Valuations
The obligation to conduct valuations and frequency of
valuations is covered in the Trust Deed.
17.1.6 Meetings of Securities Holders
The obligation to call meetings and the rights of REIT
securities holders to call meetings are covered in Clause 33
of the Trust Deed. In summary:
The Trustee shall convene an annual general meeting of
the REIT Securities Holders within three months after the
relevant accounting reference date of the REIT via not
less than 21 days written notice, inclusive of the date in
which the notice is deemed to be served, and the day of
the meeting.
Securities holders may requisition for a meeting which
requisition shall
(a) State the objects of the meeting;

(b) Be dated;

(c) Be signed by a majority in number of all Securities
Holders who, at that date, are registered as the

Securities Holders representing not less than one -
tenth in value of all of the units in the REIT funds
then in issue;

(d) Be delivered to the REIT Manager.
The Trustee or the REIT Manager, as the case may be, may
convene an extra-ordinary meeting of Securities Holders
at any time but not later than six weeks after receipt of
a requisition. The quorum of the meeting shall consist of
Securities Holders of at least 25% of the Units in Issue
inclusive of proxies received.
NB: any purported limitation on fiduciary duty owed

to REIT securities holders by the Trustee and the REIT
Manager is invalid.
Securities holders have the right to receive reports and

financial statements of the REIT
55
17.1.7 Rights of REIT securities holders, including limitations

of those rights and decisions or actions requiring the
approval of REIT securities holders
Securities holders have the right to:

(a) Receive distributions on income of the REIT, if and
when declared by the REIT Manager, based on the
units held, less any withholding taxes chargeable.
If the Trustee is of the opinion that the level of
distribution recommended by the REIT Manager is
not in the interests of REIT Securities Holders, the
Trustee may call a meeting of REIT Securities Holders
for the purposes of approving, by an ordinary
resolution, a lower but not a higher distribution;

(b) Receive notices of meetings of securities holders;

(c) Attend and vote at meetings of securities holders;

(d) Appoint a proxy to attend and vote at a meeting of
securities holders; and

(e) Receive reports and financial statements of the REIT.
Note that Securities holders will not have the right to request
for redemption of their units.
Note further that a REIT security in FRED - COMMERCIAL
will not be construed to confer interest in a particular asset of
the REIT. Rather, it will be an undivided share, right, interest
or entitlement in the assets of FRED - COMMERCIAL as
a whole.
17.1.8 Requirements for listing

The following requirements will apply:

(a) The REIT Securities will be listed on a restricted

market segment of the relevant securities exchange;

(b) The REIT Securities will be offered in minimum

subscription or offer parcels of Kenya shillings five

million (KES. 5,000,000/=);

(c) The REIT Securities may, subject to the Regulations,
only be transferred to a party to whom they could have
been issued or offered; and

(d) There will be at least 7 investors in the REIT at
initial issue.
17.1.10 Circumstances in which connected persons are not

permitted to exercise voting rights in respect of REIT
securities held by them
Connected persons are not permitted to exercise their voting
rights in a contract for the provision of goods and services
where:

(a) the goods or services are to be contracted with that
connected party;

(b) the provision is not subjected to a transparent open
bidding process; and

(c) the proposed cost of the goods and services when

aggregated with all other transactions conducted with
connected persons relating to the provision of goods
and services in the immediately preceding 12 months

exceeds or would exceed 15% of the amount spent on

connected party-provided goods and services.
17.1.11 Maximum fees and charges permitted by the

trust deed and payable by investors either directly

or indirectly or out of the assets of the trust
There are no prescribed caps on costs within the Trust
Deed. However, the scheme documents set out the agreed
fees for the main consultants to the REIT being the REIT
manager, property manager, project manager certifier and
the structural engineer. Any alterations to these scheme
documents will be subject to the approval of securities
holders in general meeting.
For additional information on the estimated costs, fees and
charges for the REIT, refer to Section 28 of this OM.
17.1.12 Permitted expenses, costs and charges payable out of

or reimbursable from the assets of the fund
The Parties to the REIT will be remunerated out of the
assets of the REIT. Trustee will be entitled to certain
disbursements expressly required or authorized to be paid
out of the REIT.
The REIT Manager shall receive an asset management
fee as per Section 28 of the Offering Memorandum. In
addition the REIT Manager shall be reimbursed for the
costs and expenses set out in the Appointment Contract for
the REIT Manager.
Additional listing requirements will be determined by the

NSE, the securities exchange on which FRED - Commercial
securities are to be listed.
17.1.9 Rights and limits on the ability to call for or to obtain

redemption of REIT securities.
A Securities Holder shall not have the right to request the
Trustee to redeem its holding of REIT securities.
However, the REIT shall have the right but not the
obligation to offer to purchase for cancellation at any time
the whole or from time to time any part of the outstanding
Units, at a price per Unit and on a basis determined by the
Trustee, subject to compliance with all applicable securities
laws, instruments, regulations, rules, notices or policies or
the rules or applicable policies of the securities exchange
on which FRED - COMMERCIAL Securities are listed.
Upon winding up, the REIT Manager shall cause liabilities

of the REIT to be met out of the proceeds of the REIT
Fund.
17.1.13 The termination or winding up of FRED COMMERCIAL

The REIT may be wound up:

(a) By order of the court;

(b) If a special resolution is passed to that effect;

(c) When the period (if any) fixed for duration of the REIT
by the Trust Deed expires; or

(d) If an event occurs, on the occurrence of which a

Scheme Document provides that the REIT is to
be wound up.
56
Upon commencement of winding up:

(a) Regulations pertaining to pricing, dealing, investment
and borrowing powers shall cease to apply to the REIT;

(b) The REIT funds shall cease to issue and cancel Units;

(c) No transfer of a Unit shall be registered and no other
change to register of Securities Holders shall be made
without the sanction of the Trustee, as the case may be;

(d) The REIT shall cease to carry on its business, except so

far as may be required for its beneficial winding up;

(e) However the corporate state and corporate powers of
the REIT and (subject to the preceding provisions of the

Act) the powers of the Trustee shall continue until the
REIT is dissolved.
The REIT Manager shall as soon as practicable after the
effective time:

(a) Publish in not less than two daily newspapers of

national circulation published in the English
language, the decision to wind up the REIT and the date
of commencement of the winding up; and

(b) If the REIT Manager has not previously notified the
Securities Holders of the proposal to wind up, give
written notice of the commencement of the winding up
to the Securities Holders.
Finally the REIT will be wound up in the following manner:

(a) The REIT Manager shall cause liabilities of the REIT to

be met out of the proceeds of the REIT Fund;

(b) The REIT Manager shall give instructions of how

such proceeds (until utilized to meet liabilities or make

distributions to Securities Holders) shall be held

and such instructions shall be with a view to the
prudent protection of the creditors and Securities
Holders against loss;

(c) Provided there are sufficient funds, after provision for
expenses and the discharge of the liabilities of the
REIT funds remaining to be discharged, the REIT
Manager may arrange to make one or more interim
distributions out of such funds to the Securities holders
proportionately to the right to participate in the REIT
funds attached to their respective units; and

(d) The REIT Manager shall make a final distribution on or

prior to the date on which the final account is sent to

the Securities Holders after realizing the portfolio and
all the liabilities of the REIT.
17.2 Summary of the material terms of other scheme

documents
17.2.1 Contract with the REIT Manager
Services to be provided include:

(a) Administration of the REIT Assets including the

management of the portfolio of investments;
(b) Advising the Trustee on the asset classes, if any, that
are available for investment;

(c) Formulating a prudent investment policy;

(d) Investing the REIT Fund in accordance with the

investment policy;

(e) Reinvesting any income of the REIT which is not

required for immediate payments;

(f) Ensuring that the units in the REIT are priced in

accordance with the provisions of the Trust Deed, the

Regulations and the Act;

(g) Making subsequent issues of units in accordance with

the Trust Deed, the Regulations and the Act;

(h) Rectifying any breach of matters relating to incorrect
pricing of units or to the late payment in respect of
the issue of units;

(i) Preparing and dispatching in a timely manner

all cheques, warrants, notices, accounts, summaries,
declarations, offers and statements;

(j) Making available for inspection to the Trustee or any
auditor appointed by the Trustee, the records and the
books of accounts, giving either oral or written
information as required;

(k) Crediting to the REIT all monetary benefits or

commissions arising out of managing the Fund,

other than the RMs Fees;

(l) Accounting to the Trustee within 30 days after receipt
of any monies payable to the Trustee;

(m) Keeping and maintaining records of the REIT at
all times;

(n) Providing instructions to the Trustee to implement the
objectives of the REIT; and

(o) Appointing a Property Manager or other person as
its agent to assist it in undertaking its duties as
REIT Manager.
17.2.2 Contract with Legal Advisor


(a) Legislative review including advising on the

Regulations, the Capital Markets Act, the applicable
land laws and tax laws;

(b) Structuring advice i.e. advising on the most suitable
structure for the entity that will be the Promoter and
the REIT Manager;

(c) Providing legal advice in relation to the engagement
of other necessary players including the Trustee, the
REIT Manager, valuers and other consultants which

includes drafting the Management Services Agreement

with the REIT Manager and the Agreement with

Property Manager and other Agreements with

consultants and experts;

(d) Advising on and drafting of the REIT Trust Deed to
ensure compliance with the Regulations and general
Trust Law;

(e) Providing legal advice in relation to the process of

acquisition/transfer of real assets to the REIT in
order to comply with the asset requirements under
the Regulations;

(f) Advising in the process of applying to the CMA for the

authorization of the REIT Manager, REIT Trustee and
the REIT itself under the regulations;

(g) Drafting any legal transaction documentations/

agreements for the Offer including but not limited to
Board and Shareholders resolutions for adoption,
notices for the shareholders meeting and extraordinary
general meeting of the relevant entities to approve
the Issue;
57

(h) Assisting the transaction advisors in evaluating the
Issuers compliance with the Capital Markets

Authority regulations;

(i) Carrying out legal due diligence for purposes of

determining if the Issue meets the statutory
eligibility criteria prescribed in the Regulations;

(j) Issuing the formal legal opinions which are required
under the Regulations and to be included in the
Offering Memorandum both in respect of the issue and
of each property;

(k) Assisting in obtaining/drafting corporate, regulatory
and third party resolutions, consents, approvals,

notifications or appropriate waivers/exemptions

(if required);

(l) Assisting in drafting/reviewing the Offering

Memorandum to ensure it complies with the disclosure
requirements;

(m) Conducting legal due diligence on the assets to be

acquired and the Vendors of such property;

(n) Providing any other services that may be required of the
legal advisor from time to time; and

(o) Providing general legal guidance to the Promoter and
the REIT Manager and the transaction team throughout.
17.2.3 Contract with Project Manager Certifier


(a) The Project Manager Certifier shall monitor and submit
a report to the Trustee and the REIT Manager on a

monthly basis on
(i) Whether or not the work has been completed in
accordance with the budget, project plan and
payment schedule or any variations prepared by the
REIT Manager and approved by the Trustee;

(ii) Whether scheduled payments should be disbursed
by the trustee to meet the work undertaken, costs
of or connected with the development or
construction;

(iii) The costs of any proposed variation of scheduled
works or proposed acquisition of plant and
equipment; and

(iv) The estimate of the cost and time required to

complete the development and construction work
relative to the budget and project plan.

(b) In connection with the project, the Project Manager

Certifier shall recommend the disbursement of funds

by the Trustee
(i) Where such payments 1. are in accordance with the budget, project plan
and payment schedule approved by the
trustee: or
2. are varied and approved by a meeting of the
REIT Securities Holders where the total cost of

variation is more than 15% of the budgeted
costs; or

(ii) Where the Trustee is 1. of the opinion that disbursement is necessary
to protect the assets of the fund and the
interests of REIT Securities Holders; and

2. satisfied with the action which the REIT
Manager proposes to implement to rectify
any problem.
17.2.4 Contract with Structural Engineer


(a) The Structural Engineer shall ensure that the state

of repair of the specific real estate property,

including the services, systems and material plant
and equipment, is independently assessed, latent

defects identified and that these factors are
(i) taken into consideration in any valuation; and

(ii) disclosed in the Offering Memorandum.

(b) The Structural Engineer shall
(i) Conduct an appraisal of a specific real estate

property which is proposed to be acquired; and

(ii) Prepare and submit to the REIT Manager and the

trustee a report on 1. the state of repair of the proposed property,
services, systems and material plant
and equipment;
2. any latent defects and the cost, if any, which is
likely to be incurred in remedying such defects or
in bringing the property to a reasonable state of
repair; and
3. any limitation in the engineers ability to make a
full assessment and whether additional
professional assessment, input or reports
are required.
58
18 Overview of the Project to be Undertaken

18.1 Greenwood City
people and an urban population of over 30,000 people, the

supply of quality shopping facilities is nonexistent and we
intend to be the first entrant into this space. The mall will
house among others regional food, leisure, clothing and
electronics brands in one central, convenient location. This
development is a standard build-to-sell project with project
length expected to be 36 months.
Greenwood City is a mixed use commercial development

which includes a grade A shopping mall, a six storey office
block and luxury executive apartments sitting on a prime 6
acre plot in Meru County. The development will be a high
end mixed use facility serving Meru town and its environs.
The target market is middle income Kenyans from the
surrounding environs who are currently under-served in
the retail space. With a population of about 1.5 million
18.2 Ownership of SPV

Meru Greenwood Park Limited
Number of Shares
Percentage
TT Africa Real Estate Company
1,915,647
52.4%
Binder Limited
1,200,000
32.8%
539,200
14.8%
3,654,847
100%
Name
Fusion Capital Limited*

TOTAL
*shares held in trust for Fusion African Access (2011) Limited Partnership (FAALP)
18.3 Intentions of the Transferors and Lock-Up Period

(a) The Transferors of the assets set out in Section 18.2.
above will, in exchange for the assets therein set out,

subscribe for up to 37,776,440 units in FRED
COMMERCIAL or the equivalent of KES 868,858,099.

This translates to a 37.78% ownership stake in

FRED - COMMERCIAL assuming that all REIT units
are taken up;
(b)

Furthermore, the Transferors, will not reduce their

holding in FRED - COMMERCIAL to below 10% of their
initial investment as set out in 18.3 (a) above in the
two years following the date of listing of the Units
on the NSE.
18.4 FRED - COMMERCIAL Sources and Uses of Funds

The table below summarises FRED - COMMERCIALs Sources and Uses of Funds
SOURCES
Source
REIT Units Share Swap w/
SPV Owners
REIT Units Cash
Bank Debt
USES
Amount
(KES mm)
Percentage
868.86
23.33%
Acquisition
1,431.14
38.42%
Construction (Total)
1,424.64
38.25%
Use
100.00%
325.00
8.73%
2,457.22
65.97%
7,28.59
Retail
1,204.33
Apartment
407.29
Contingency
117.01
Professional Fees
573.42
15.40%
60.84
1.63%
308.16
8.27%
3,724.64
100.00%
Finance Cost
3,724.64
Percentage
Office
Marketing
TOTAL
Amount
(KES mm)
TOTAL
59
18.5 Proforma Project Time Scale and Phasing

FRED - COMMERCIAL TIME SCALE AND PHASING
2015
H2
PHASE
START DATE DURATION
Greenwood City
2016
H1
2017
H2
H1
2018
H2
H1
2019
H2
H1
END DATE
Purchase
Oct-15
Oct-15
Pre-Construction
Oct-15
Dec-15
Construction
Jan-16
24
Dec-17
Post Development
Jan-18
12
Dec-18
Marketing
Jan-16
36
Dec-18
Income Flow
Jan-18
12
Dec-18
Sale
Jan-19
Jan-19
18.6 Regulatory Approvals

Project
Property No.
Approval
L.R Meru
Greenwood City Municipality Block
1/3
Building Approval (Structural &

Architectural)
Apr-15
NEMA Approval
May-15
National Land Commission
No Concerns Raised
Meru Greenwood Park Limited Board

Resolution approving sale of shares to FRED
Commercial.
To be completed within 30 days

of close of offer
Competition Authority of Kenya
To be submitted within 30 days of

the close of offer
18.7 Greenwood City Project Status Update

May 2016

In May 2016 Co-operative Bank, the appointed REIT
Trustee of FRED - Commercial, commissioned a Valuation Report by Knight Frank Valuers Limited and a Project
Status Report by Howard Humphreys Limited to provide
REIT investors with an updated project status as of May
2016.

Status
The terms of reference of the reports are as follows;

Valuation Report
Current Market Valuation of the property (Land and
Improvements) located at Meru Municipality Block
1/3 Meru Town
Market Valuation of the project at 100% completion

Project Status Report

Current Status of Works;

Progress of works as per the contract Bill of
Quantities

Current state of project implementation against
the submitted program of works

Issues that have been encountered in the

project that affect the time, cost and quality
of the project

Summary of activities completed by
the contractor

Financial Status of Works;

Summary of the construction contract

Competitiveness of the Bill of Quantities

Compare the current gross value of work as

per last interim certificate with current status
of the ground

Project variations and financial appraisals.

Compare the Quantity Surveyor valuation with
Contract Bill of Quantities

Access Construction Contract risk

Identify main materials and plant and
equipment on site

Site Health and Safety

Advice and Recommendations;

Project Challenges

Project Schedule

Project Budget
60
Summaries of the Valuation and Project Status reports are provided below. The complete reports are included with the
documents available for inspection.
18.7.1 Summary of May 2016 Valuation Report

Here is a summary of the Property Valuation Report dated 21st May 2016 by Knight Frank Valuers Limited
Address
Meru Greenwood Park on Title No. Meru Municipality Block 1/3 - Meru Town.
Location
The property is located approximately 50 metres off Meru Chuka Embu Road, and along
Mwendantu Road, Meru Town Meru County.
Description
Greenwood park is a mixed development that is currently under construction.

Its designed to comprise a shopping mall, office block and residential apartments.
Areas
The development is on a site extending to 2.444 Hectares (6.04 acres) approximately.
Tenure
Leasehold title for 66 years from 1st January 1974 registered in the name of Meru Greenwood Park
Limited. Remaining unexpired lease period is 24 years.
Approval for extension of lease for ninety nine (99) years with effect from 1st May 2016 has been
granted by the National Lands Commission subject to conditions.
Planning
Application for approval for this development (Application No. 0079-2015) was submitted on 14th
May 2015 to the Meru County Government (Lands, ICT & Planning Department) and approved
(subject to conditions) on the 18th May 2015.
Proposed development The proposed development will comprise of a shopping mall, (27,081 SQ. M), Grade A office
block (16,077 SQ.M) and 53 No. 2 and 3 bedroom apartments block (7,881 SQ.M) provided with
parking (both basement and grade parking) and utility developments & areas (5 No. gate houses,
water reticulation installations, foul drainage, foot paths, fencing access gates and other associated
services) all on a six (6) acre plot.
Valuation
considerations
The projected income to be generated from letting and professional management of the
shopping mall/office block, and selling of the residential apartments
Successful completion of the development as per the approved building plans and
design specification and within schedule
Compliance to Meru County Government approval and National Environment Management
Authority (NEMA) project approval conditions
That the conditions set out by the National Lands Commission for extension of lease will be met
and a new ninety nine (99) years lease issued
That the conditions set out by the Meru county government for approval of the development
will be met and adhered to
61
Valuation date
17th May 2016
Valuation Summary
Description
Value (KSH) At current stage of

completion (21% completion)
Assuming 100% completion
Market Value
i) Land
ii) Buildings
330,000,000
561,000,000
330,000,000
3,350,000,000
Total
891,000,000
3,680,000,000
Market Value Assuming

100% Completion &
100% occupancy achieved
by January 2018
3,800,000,000*
Forced Sale Value
668,000,000
2,760,000,000
i) Shopping mall
ii) Office Block
iii) Residential Apartments
iv) Utility Building
v) Site works
306,000,000
165,500,000
89,400,000
-
1,369,000,000
736,000,000
400,000,000
13,000,000
29,000,000
Total
560,900,000
2,547,000,000
Insurance Value (Gross Replacement cost)
Annual Market Rent as at May 2016 assuming 100% construction completion and 100%
occupancy.
i) Shopping Mall
ii) Offices
250,500,000
93,000,000
Total
343,500,000
*Note: while working out this value, a discount rate has been applied to discount the developments
value of Ksh.4, 350,000,000 (as at January 2018) to Ksh. 3,800,000,000 (as at 17th May 2016).
This has been done appreciate the time value of money.
62
The valuation report gives the current market value of the property (Land and Improvements) located at Meru Municipality
Block 1/3 Meru Town as of 17th May 2016. Given the current market valuation of the land and improvements as provided
in the valuation report, the Net Asset Value of Meru Greenwood Park Limited as of May 17th 2016 is summarized below.
Meru Greenwood Park Limited May 2016 Net Asset Valuation
Assets
Market value of land*
Contractor Work Done
Other Work In Progress
Accounts receivable
Total Call Deposit Acc
Deposit-Legal Fees
Withholding tax
Cash & cash equivalents
330,000,000.00
547,004,827.00
186,660,116.83
70,000,000.00
5,007,237.34
5,800,000.00
1,894,295.62
12,948,079.51
Total value of assets
1,159,314,556.30
Liabilities
Certificates Payable
Accounts payable
Other payables
239,382,127.00
14,125,611.90
13,506,424.50
Total value of liabilities
267,014,163.40
Net Asset Value*
892,300,392.90
*Note: The REIT will purchase Meru Greenwood Park at the original September 2015 Net Asset Valuation (Kes. 868,858,099) as referenced
in section 22 of this document. This above Net Asset Valuation (Kes. 892,300,392) is for investor information only.
18.7.2
i)

Summary of May 2016 Project Status Report

Current Status of Works
Progress of Works as Per the Contract Bill of Quantities
Construction commenced on 18th September 2015. To date the construction works are approximately 21% complete.
The following is the physical status on site:
Main Works
Physical status
Retail mall:
Basement structure complete.

Ground floor slab complete.
1st floor level - hollow pot for suspended slab being laid.
Office space:
External works:
Basement 02 structure complete including the ramp.

Basement 01 columns and slab - formwork, reinforcement. Fixing and concrete
casting ongoing.
Backfilling around foundations ongoing.
Ground beams formwork and reinforcement fixing ongoing.
Site cleared of vegetation and pre-existing buildings.
Mechanical Services:
Physical Status Mechanical
Retail mall:
Drainage pipework and Basement sumps

Drainage pipework on ground floor slab
Most of mechanical cost would be captured under material on site
Office space:
Drainage pipework and sumps

Drainage pipework
Most of mechanical cost would be captured under material on site.
Apartments:
63
Mechanical Services:
Physical Status Mechanical
Apartments:
Mechanical services have not commenced

Materials on site form mechanical costs
External works:
Mechanical services have not commenced

Materials on site form mechanical costs
Current State of Project Implementation against the Submitted Program of Works

Revised Program of Works
Start
Finish
Current Status
PROPOSED SHOPPING MALL
2016/1/22
2017/6/24
Substructures
Reinforced Concrete and Staircase
22nd January 2016

6th March 2016
14th March 2016

Substructures complete
7th September 2016
Ground Floor
2016/3/6
2016/4/24
GF Slab and beam (S1)

Formwork
Reinforcement steel fixing
Casting the concrete
GF Column (S1)
GF Slab and Beam (S2)
Formwork
Reinforcement steel fixing
Casting the concrete
GF Column (S2)
Level 01 (Shopping Mall)
Roofing and Rainwater Goods
2016/3/6
2016/3/6
2016/3/19
2016/4/6
2016/4/8
2016/3/15
2016/3/15
2016/3/28
2016/4/15
2016/4/17
2016/4/16
2016/5/17
2016/6/17
2016/7/25
2016/4/7
2016/3/23
2016/4/5
2016/4/7
2016/4/15
2016/4/16
2016/4/1
2016/4/14
2016/4/16
2016/4/24
2016/5/30
2016/6/30
2016/7/31
2016/9/7
27th January 2016
12th June 2016
Bulk Excavation
Basement Level - 02
27th January 2016

22nd March 2016
5th February 2016

21st April 2016
Basement Level - 01
20th April 2016
12th June 2016
Substructures
Reinforced Concrete and Staircase
27th January 2016

26th February 2016
25th February 2016 Bulk excavation done

8th November 2016
Base and foundation
2016/2/26
2016/4/10
Ground Floor
Level 01 (Apartment)
2016/4/11
2016/5/3
2016/4/11
2016/5/22
Ground floor slab complete

Hollow pot laying ongoing
Not commenced
Not commenced
Not commenced
PROPOSED OFFICE BLOCK

Substructures
Bulk excavation done

Basement level 02 slab and columns
done
Basement 01 - formwork,
reinforcement fixing and concrete
casting for both columns and slab
ongoings
PROPOSED APARTMENT BLOCK
64
Strip foundation done.

Ground beams ongoing
Not commenced
Not commenced
ii) Financial Status

Construction Contract Summary
Project Name:
The Proposed Meru Greenwood Park,

Meru Town, Meru County.
Developer:
Meru Greenwood Park Ltd

P.O Box 47538 - 00100, Nairobi
Contract Duration:
100 weeks
Contract Commencement Date:
18th September 2015
Anticipated Completion Date:
11th August 2017
Time elapsed:
35%
Revisions to completion date:
None
% of work done:
20%
% of expected work (as per the program of works):
30%
Tender amount:
Kshs 2,522,074,929
Corrected Tender amount:
Kshs 2,516,167,844
Contract Sum:
Kshs 2,296,109,669.00
Authorized Additions:
None.
Authorized Omissions:
None.
Amount Certified to Date:
Kshs 380,742.800.00 (Exclusive of advance payment

and including April 2016 valuation).
Percentage of amount certified:
16.58%
*Note: The construction period in the main contract ends on the 11th of August 2017. Initial delays in mobilization
and excavation have been accounted for in this Offer Memorandum by modeling the project completion date as 31st
December 2017.
65
19 Pro-forma Financial Information

A summary of the 5 year pro-forma Income Statements, Balance Sheet, and Cash Flows for FRED - Commercial is
presented in the following below.
19.1 Income Statements

FUSION REAL ESTATE DEVELOPMENT TRUST - COMMERCIAL
PROJECTED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEARS ENDING 31 DECEMBER 2016 TO 31 DECEMBER 2019
2016 2017 2018 2019

Sh000
Sh000
Sh000
Sh000

Income
-
-
904,780
4,025,240
Cost of sales
-
-
(619,950)
(2,758,090)

Gross profit
-
-
284,830
1,267,160

Expenditure:

Management fee
(23,340)
(46,680)
(46,680)
(7,780)
Trustee fee
(5,840)
(11,670)
(11,670)
(1,950)

Total expenditure
(29,180) (58,350) (58,350) (9,730)

Loss for the year
(29,180)
(58,350)
226,480
1,257,430

Other comprehensive income
-
-
-

Total comprehensive loss for the year
(29,180)
(58,350)
226,480
1,257,430
19.2 Balance Sheet

PROJECTED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2016 TO 31 DECEMBER 2019

2016 2017 2018 2019

Sh000
Sh000
Sh000
Sh000

Non current assets
Construction and work in progress
1,784,800
3,443,540
-
-
Current assets
Inventory
-
-
2,878,410
Bank and cash balances
486,020
-
65,510
3,696,380

486,020
- 2,943,920 3,696,380
Total assets
2,270,820
3,443,540
2,943,920
3,696,380

Equity and liabilities

Capital and reserves
Share capital
2,300,000
2,300,000
2,300,000
2,300,000
Accumulated (deficit)/reserves
(29,180)
(87,530)
138,950
1,396,380

Shareholders funds
2,270,820
2,212,470
2,438,950
3,696,380

Non current liabilities
Borrowings
-
1,231,070
504,970

Total equity and liabilities
2,270,820
3,443,540
2,943,920
3,696,380
66
19.3 Cash Flow Statement

PPROJECTED STATEMENT OF CASHFLOWS FOR THE YEARS ENDING 31 DECEMBER 2016
AND 31 DECEMBER 2017

2016 2017 2018 2019

Sh000
Sh000
Sh000
Sh000

Cash flows from operating activitites

(Loss)/profit before taxation
(29,180)
(58,350)
226,480
1,257,430
Cost of construction and work in progress
(1,784,800)
(1,658,740)
-
Transfer of work in progress to inventory
-
-
3,443,540
(Increase)/decrease in inventory
-
-
(2,878,410)
2,878,410

Net cash (used in)/generated from
operating activities
(1,813,980)
(1,717,090)
791,610
4,135,840

Cash flows from financing activitites

Funding received from REITs issue
2,300,000
-
-
Funding received from borrowings
-
1,231,070
-
Loan repayment
-
-
(726,100)
(504,970)

Net cash generated from/(used in)
financing activities
2,300,000
1,231,070
(726,100)
(504,970)

Increase/(decrease) in cash
and cash equivalents
486,020
(486,020)
65,510
3,630,870

Cash and cash equivalents
At the beginning of the year
-
486,020
-
65,510

At the end of the year
486,020
-
65,510
3,696,380
67
20 Key Assumptions and Sensitivity Analysis

20.1 Key Assumptions
Greenwood City
Construction Time (Months)
24
Construction Cost*
Office Rentable Space (KES/sf)
7,233.50
Retail Rentable Space (KES/sf)
8,919.52
Apartment Rentable Space (KES/sf)
6,775.99
Interest Rates (%)
16
Sales*
Office ((KES/sf)
12,000.00
Retail (KES/sf)
21,591.10
Apartment 2 Bedroom Type A (KES/Unit)
10,300,000
Apartment 2 Bedroom Type B (KES/Unit)
10,000,000
Apartment 3 Bedroom (KES/Unit)
13,000,000
*Based on net lettable area
20.2 Sensitivity Analysis

The tables below summarize the effect of the key assumptions above on the expected profits (KES millions) and internal
rate of return (IRR) after fees on the initial project of FRED - COMMERCIAL.
Please note that these are forward looking statements as explained in Section 1 - Important Notice above. In addition,
these expectations may differ from the performance of the REIT units.
20.2.1 Construction Period: Base Case

Construction: Cost pm
30.00%
Sales: Price / Unit
20.00%
10.00%
0.00%
-10.00%
-20.00%
-30.00%
-30.00%
-20.00%
-10.00%
0.00%
10.00%
20.00%
30.00%
3,856.57
55.97%
3,205.54
49.02%
2,711.60
43.39%
2,327.63
38.76%
2,023.64
34.92%
1,779.61
31.72%
3,507.87
49.37%
2,857.98
42.40%
2,365.20
36.74%
1,982.39
32.08%
1,679.56
28.21%
1,436.71
24.97%
3,121.77
43.87%
2,475.30
36.72%
1,985.93
30.90%
1,606.51
26.10%
1,306.12
22.10%
1,064.88
18.75%
2,720.62
38.70%
2,074.15
31.33%
1,584.78
25.29%
1,205.38
20.28%
905.96
16.09%
666.53
12.56%
2,315.47
33.58%
1,669.00
25.92%
1,179.63
19.60%
800.23
14.31%
500.81
9.86%
261.37
6.08%
1,906.97
28.43%
1,260.50
20.40%
771.13
13.70%
391.73
8.05%
92.31
3.24%
(147.30)
1.68%
1,496.36
23.14%
849.89
14.65%
360.52
7.48%
(19.07)
1.67%
(318.49)
1.65%
(557.92)
1.64%
1,581.69
1,239.66
869.60
473.23
68.08
(340.59)
(751.21)
29.03%
22.25%
15.94%
9.59%
2.88%
1.67%
1.63%
68
The financial model prepared by the Lead Transaction

Advisor assumes a base case construction period of 24
months and a post development period of 12 months during
which the REIT earns rental income. Table 20.2.1 shows the
change in the expected profits and internal rate of return when
the construction cost per square metre changes in a range of
-30% to +30% as described in the top row and changes in
sales price per unit in a similar range. For instance a 0%
change in construction costs and a 0% change in sales prices will

result in a profit of KES 1,205.38 million and an IRR of 20.28%.
If construction prices decrease by 30% and sales prices increase
by 30% over the 24 months construction period, then we expect
a profit of 3,856.57 million and IRR of 55.97%. Conversely, if
construction prices increase by 30% and sales prices decrease by
30% then we expect a loss (highlighted in red) of KES 751.21
million and an IRR of 1.63%.
20.2.2 Construction Period: + 6 Months (30 Months)

30.00%
Sales: Price / Unit
20.00%
10.00%
0.00%
-10.00%
-20.00%
-30.00%
-30.00%
-20.00%
-10.00%
0.00%
10.00%
20.00%
3,623.70
56.65%
2,972.94
48.85%
2,479.20
42.51%
2,095.34
37.28%
1,791.47
32.94%
1,547.58
29.30%
1,349.79
26.24%
3,262.34
50.08%
2,612.45
42.24%
2,119.67
35.85%
1,736.86
30.57%
1,434.03
26.18%
1,191.18
22.49%
994.48
19.39%
2,885.06
44.17%
2,235.18
36.21%
1,742.39
29.69%
1,359.58
24.28%
1,056.75
19.76%
813.91
15.96%
617.20
12.75%
2,501.10
38.55%
1,851.21
30.39%
1,358.43
23.66%
975.62
18.06%
672.79
13.35%
429.94
9.37%
233.09
5.99%
2,112.10
33.06%
1,462.21
24.61%
969.43
17.61%
586.62
11.73%
283.79
6.75%
40.78
2.52%
(155.92)
1.75%
1,719.49
27.58%
1,069.60
18.76%
576.82
11.38%
193.83
5.13%
(109.00)
1.73%
(351.84)
1.69%
(548.55)
1.65%
30.00%
1,324.26
22.00%
674.37
12.72%
181.40
4.85%
(201.41)
1.69%
(504.24)
1.64%
(747.09)
1.59%
(943.79)
1.56%
In the above scenario the construction period is extended by 6 months i.e. the total construction period changes from the base
case of 24 months to 30 months. A 0% deviation of the construction cost and 0% deviation sales price over the 36 months would
yield a profit of KES 975.62 million and an IRR of 18.06%.

30.00%
Sales: Price / Unit
20.00%
10.00%
0.00%
-10.00%
-20.00%
-30.00%
-30.00%
-20.00%
-10.00%
0.00%
10.00%
20.00%
30.00%
3,392.67
57.73%
2,741.57
49.02%
2,247.57
41.89%
3,043.65
50.67%
2,392.55
41.95%
1,898.55
34.82%
2,683.05
44.27%
2,031.94
35.47%
1,537.95
28.24%
2,314.98
38.24%
1,663.88
29.27%
1,169.88
21.88%
1,941.78
32.41%
1,290.68
23.19%
796.68
15.56%
1,564.09
26.64%
912.99
17.09%
418.82
9.12%
1,183.47
20.84%
532.37
10.85%
38.18
2.45%
1,863.55
1,514.53
1,153.92
785.85
412.49
34.79
(345.85)
36.00%
1,559.50
31.08%
1,315.44
26.95%
1,117.52
23.48%
28.91%
1,210.48
23.98%
966.42
19.84%
768.50
16.37%
22.24%
849.87
17.23%
605.81
13.02%
407.75
9.49%
15.72%
481.66
10.56%
237.59
6.23%
39.67
2.59%
9.17%
108.45
3.80%
(135.61)
1.76%
(333.53)
1.69%
2.42%
(269.26)
1.69%
(513.32)
1.61%
(711.24)
1.54%
1.65%
(649.90)
1.55%
(893.96)
1.48%
(1,091.88)
1.42%
69

30.00%
Sales: Price / Unit
20.00%
10.00%
0.00%
-10.00%
-20.00%
-30.00%
-30.00%
-20.00%
-10.00%
0.00%
10.00%
20.00%
30.00%
3,181.58
2,846.08
2,498.48
2,142.41
1,780.54
1,413.75
1,043.48
59.32%
51.74%
44.88%
38.47%
32.30%
26.22%
20.11%
2,532.65
2,197.32
1,849.94
1,494.13
1,132.55
766.05
396.10
49.66%
42.08%
35.15%
28.58%
22.16%
15.74%
9.17%
2,040.52
1,705.45
1,358.17
1,002.62
641.20
274.97
(95.92)
41.70%
34.13%
27.13%
20.42%
13.78%
7.05%
1.82%
1,658.33
1,323.27
976.22
620.73
258.53
(107.66)
(477.23)
35.08%
1,355.88
29.54%
1,113.40
24.90%
917.04
21.01%
27.53%
1,021.05
22.04%
778.58
17.45%
582.22
13.62%
20.49%
674.00
14.97%
430.90
10.36%
234.56
6.55%
13.66%
317.76
8.03%
75.51
3.38%
(120.62)
1.83%
6.81%
(43.40)
1.87%
(285.51)
1.72%
(481.64)
1.61%
1.82%
(409.46)
1.65%
(651.42)
1.53%
(847.45)
1.44%
1.61%
(778.80)
1.48%
(1,020.74)
1.38%
(1,216.58)
1.31%
20.2.5 Post Development Period: + 6 Months

30.00%
Sales: Price / Unit
20.00%
10.00%
0.00%
-10.00%
-20.00%
-30.00%
-30.00%
-20.00%
-10.00%
0.00%
10.00%
20.00%
30.00%
4,062.66
47.21%
3,411.63
41.99%
2,917.69
37.76%
2,533.72
34.28%
2,229.73
31.39%
1,985.70
28.97%
1,787.78
26.95%
3,713.94
41.67%
3,064.06
36.41%
2,571.28
32.13%
2,188.46
28.60%
1,885.63
25.66%
1,642.79
23.20%
1,445.73
21.13%
3,326.52
36.99%
2,681.36
31.57%
2,191.99
27.15%
1,812.58
23.51%
1,512.18
20.46%
1,270.94
17.91%
1,075.67
15.75%
2,895.58
32.78%
2,254.08
27.12%
1,769.69
22.48%
1,395.27
18.63%
1,100.83
15.42%
866.37
12.72%
676.09
10.45%
2,456.91
28.56%
1,815.42
22.61%
1,331.02
17.70%
956.60
13.59%
662.16
10.13%
427.70
7.21%
239.39
4.74%
2,014.62
24.24%
1,373.13
17.93%
888.73
12.66%
514.31
8.21%
219.87
4.43%
(14.59)
1.40%
(202.90)
1.40%
1,570.05
19.74%
928.55
12.99%
444.16
7.26%
69.74
2.36%
(224.70)
1.39%
(459.16)
1.39%
(647.47)
1.39%
The above scenario assumes that the post development period is extended by 6 months i.e. the total post development period
changes from the base case of 12 months to 18 months. A 0% deviation of the construction cost and 0% deviation sales price
over the 36 months would yield a profit of KES 1,395 million and an IRR of 18.63%.
70

30.00%
Sales: Price / Unit
20.00%
10.00%
0.00%
-10.00%
-20.00%
-30.00%
-30.00%
-20.00%
-10.00%
0.00%
10.00%
20.00%
30.00%
4,268.86
41.36%
3,617.83
37.26%
3,123.89
33.94%
2,739.92
31.21%
2,435.93
28.95%
3,920.14
36.55%
3,270.26
32.40%
2,777.47
29.02%
2,394.66
26.24%
2,091.83
23.92%
3,532.72
32.43%
2,887.56
28.14%
2,398.19
24.65%
2,018.77
21.76%
1,718.38
19.35%
3,085.95
28.76%
2,449.94
24.26%
1,971.03
20.57%
1,599.69
17.52%
1,307.02
14.97%
2,611.00
25.13%
1,974.99
20.36%
1,496.08
16.41%
1,127.14
13.13%
838.18
10.37%
2,132.13
21.37%
1,496.11
16.25%
1,017.20
11.98%
648.27
8.38%
359.31
5.33%
1,650.78
17.40%
1,014.77
11.86%
535.86
7.16%
166.92
3.15%
(122.04)
1.19%
2,191.90
27.07%
1,993.98
25.51%
1,848.99
21.98%
1,651.93
20.35%
1,477.14
17.33%
1,281.86
15.63%
1,072.57
12.84%
882.29
11.04%
609.21
8.06%
426.38
6.12%
130.34
2.75%
(52.49)
1.20%
(351.01)
1.19%
(533.84)
1.19%
over the 36 months would yield a profit of KES 1,599.69 million and an IRR of 17.52%.

30.00%
Sales: Price / Unit
20.00%
10.00%
0.00%
-10.00%
-20.00%
-30.00%
-30.00%
-20.00%
-10.00%
0.00%
10.00%
20.00%
30.00%
4,475.06
37.19%
3,824.03
33.87%
3,330.09
31.19%
2,946.11
29.00%
2,642.12
27.18%
2,398.10
4,126.34
32.90%
3,476.45
29.53%
2,983.67
26.78%
2,600.86
24.53%
2,298.03
22.65%
2,055.18
3,738.92
29.20%
3,093.76
25.71%
2,604.39
22.86%
2,224.97
20.52%
1,924.58
18.56%
1,683.34
3,290.15
25.89%
2,656.13
22.21%
2,177.23
19.21%
1,805.89
16.72%
1,513.22
14.65%
1,278.77
2,778.09
22.67%
2,148.01
18.74%
1,675.04
15.51%
1,312.04
12.83%
1,029.02
10.59%
805.99
2,259.60
19.30%
1,629.53
15.05%
1,156.56
11.52%
793.56
8.55%
510.54
6.06%
287.51
1,738.44
15.70%
1,108.37
11.06%
635.40
7.13%
272.40
3.79%
(10.62)
1.04%
(233.65)
25.68%
2,200.18
24.44%
21.09%
1,858.13
19.78%
16.91%
1,488.06
15.54%
12.92%
1,088.48
11.46%
8.73%
628.80
7.18%
3.96%
110.61
2.20%
1.04%
(410.55)
1.04%
over the 36 months would yield a profit of KES 1,805.89 million and an IRR of 16.72%.
71
21 FRED - Commercial Valuation and Valuation Basis

21.1 Valuation Summary
million units are issued, the value of each unit is estimated

to be Ksh 38.69.
In preparation for the listing of the units of Fusion Real

Estate Development Trust - Commercial on the Nairobi
Securities Exchange, NIC Capital prepared a valuation of
the units in FRED - COMMERCIAL. The valuation is for
100.00% of the voting diluted common units of FRED COMMERCIAL as of March 13th 2016. This valuation
was performed in preparation of the listing of units on the
Nairobi Securities Exchange and the resulting estimate of
value should not be used for any other purpose or by any
other party for any purpose.
In arriving at this opinion of value, NIC Capital relied on

a value in use or going-concern premise. This premise
assumes that the Company is an ongoing business
enterprise with management operating in a rational way
with a goal of maximizing shareholder value.
NIC Capital used various valuation approaches to estimate
the value of FRED - COMMERCIAL as shown in the
summary below and weight each of the valuation estimates
to arrive at a weighted average equity valuation.
NIC Capital estimates that the Fair Market Value of FRED

- COMMERCIAL to be Ksh 3,869 million. Assuming 100
It should be noted that this is only a summary of the valuation report. A detailed Valuation report is available for
inspection at the offices of the Trustee.

Calculated Value
Weight
Weighted Value
Income Approach
DCF EBIT Multiple Method
3,986.79
25.00%
996.70
DCF Perpetuity Growth Method
4,129.83
15.00%
619.47
Capitalization of Earnings
4,266.18
10.00%
426.62
Market Approach
Price / Revenue
3,626.32
2.50%
90.66
Price / EBIT
3,988.61
30.00%
1,196.58
Price / Earnings
2,271.42
15.00%
340.7
Price / Book
2646.14
7.50%
198.46
Total Weighted Equity Value
21.2 Overview of Valuation Approaches and Methods
3,869.20
(a) Income Approach; and

(b) Market Approach.
The most common method under this approach and the

method used in this analysis in the Discounted Cash flow
(DCF). The Discounted Cash Flow method discounts
projected future earnings back to present value at a rate
that reflects the risk inherent in the projected earnings.
Income Approach
The Income Approach serves to estimate value by considering
the income (benefits) generated by the asset over a period of
time. This approach is based on the fundamental valuation
principle that the value of a business is equal to the present
worth of the future benefits of ownership. The term income
does not necessarily refer to income in the accounting
sense but to future benefits accruing to the owner.
Market Approach
The Market Approach compares the subject company to the
prices of similar companies operating in the same industry.
Comparable companies can be privately owned or publicly
traded where the valuation multiples are determined from the
purchase/sale price for the company. Valuation multiples of
publicly traded comparable companies are derived from the
trading price for the public companies stock as of the date
of the valuation.
Various approaches have been used to value FRED COMMERCIAL. The approaches, described below, are the:
100.00%
72
22 Asset Valuation and Valuation Basis

Subject to the success of this Offer, the following properties will be vested in the Trust:
Asset
Project
Date of Transfer
to The Trust
100% of the issued

share capital in Meru
Greenwood Park
Limited
Greenwood City being

developed on Title
Number Meru Town
Block I/3
Within 180 days of the close

of FRED - COMMERCIAL
offer.
Upon completion of the transfer of the entire issued capital

in Meru Greenwood Park Limited to the REIT, FRED COMMERCIAL will own the entire real estate asset.
Consideration
(Cash / Securities)
868,858,099
37,776,440 Units
The estimated market value of the assets is often determined

by making adjustments to the book value (carrying value)
of assets and liabilities. The theory underlying the assetbased approach is that the value of a business is equal to
the sum of the value of the businesss assets.
22.2 Assets Valuer
Burbidge Capital Limited carried out an assessment of

the fair market value of the SPV (the assets) as at 28th
September 2015.
Burbidge Capital defines fair market value as the price
which might reasonably be expected to be obtained in
money or moneys worth, in a sale between a willing buyer
and a willing seller, each of whom is deemed to be acting
out of self-interest and for gain and both of whom are
equally well informed about the business and the markets
in which they operate.
Valuation
(Kes)
The asset-based approach is defined in the International

Glossary of Business Valuation Terms as a general way
of determining a value indication of a business, business
ownership interest, or security using one or more methods
based on the value of the assets net of liabilities.
22.4 Valuation Summary
The valuation of the assets is based on the application

of the International Private Equity and Venture Capital
valuation guidelines (Guidelines). These Guidelines
are based on the requirements and implications of the
International Financial Reporting Standards (IFRS) to
ensure consistency and comparability of valuation outputs.
In providing their fair market value opinion, Burbidge

Capital adopted the Asset-Based Valuation methodology.
Implicit in the use of this valuation methodology is the
assumption that the business is a going concern.
The valuation is as at 28th September 2015 and it is based

on the asset-based valuation methodology. The valuation
consists of:
22.3 Valuation Basis
(a) The market value of the land based on professional

valuation report issued by Ngotho Property
Consultants Limited in September 2015;
(b) Construction work in progress; and
(c) Net assets (current).
Asset-based valuation methodology estimates the intrinsic

value of a common share from the estimated value of the
assets of a corporation minus the estimated value of its
liabilities and preferred shares.
Special Purpose Vehicle Valuation Methodology
Fair Value
NAV
KES 868,858,099
Total Fair Value
KES 868,858,099
73
22.5 Implications of failure to invest within 180 days

The Regulations outline the implications of failure to
invest within 180 days in Regulation 77 as follows:
(77) Where an investment in real estate has not been
completed of the period specified under regulation 76, the
trustee shall call a meeting of the REIT securities holders
within twenty eight days of the expiry of the period for
investment for the purpose of -
a) Considering the report by the REIT manager on the

reason for the delay in completion;

Failure by the trustee to
a) Complete the proposed investment in real estate shall
not constitute an offence; or

b) Call the required meeting or to refund monies within

the specified period shall constitute an offence on
the part of the promoter, the trustee and the
REIT manager.
22.6 Policy in relation to revaluations

The fair value of the properties of the REIT will be determined
annually at the reporting date by an independent professionally
qualified valuer. In determining the valuations the Valuer refers
to current market conditions including recent sales transactions
of similar properties. In estimating the fair value of the
properties, the highest and best use of the property is their use at
the end of the project development adjusted by the completion
factor to reflect the condition as of the balance sheet date.

b) The implications for the holders of investment in
the D-REIT;

c) Determining, by special resolution whether
i) The period for registration should be extended and
the period of extension; or

ii) All monies paid into the fund together with any
interest or earnings should be refunded within
fourteen days of the date of the meeting; and

iii) What other action should be taken by the trustee
or REIT manager.
74
23 Investment Considerations
23.1 Opportunity for portfolio diversification
Investment in the REIT will give investors an exposure
to real estate thus opportunity to diversify the investors
portfolios.
Investment in infrastructure
The Government of Kenya and its development
partners have continued to make huge investments in
developing infrastructure across the country. Investment
in infrastructure has a knock on effect on the real estate
sector by enhancing the capital appreciation potential of
real estate properties as well as creating redevelopment
opportunities for areas that were hitherto considered
inaccessible. Further, investment in infrastructure such
as roads, sewerage systems and water utilities reduces
construction costs incurred by the private sector.
23.2 Liquidity
Publicly listed REITs are expected to be relatively liquid.
23.3 Opportunities in the real estate sector

Kenyas real estate sector is geared for growth arising from
emerging opportunities including:
23.4 Experienced and incentivized team
Government devolution
FRED - COMMERCIAL will be managed by an experienced

and dedicated team of professionals with experience in asset
management, property management, property acquisitions
and disposal and development.
Following the promulgation of the new Constitution in

2010, Kenya is in the process of implementing devolved
government structures. It is anticipated that this will open
up the country to investment including increase in real
estate property development.
Promoter, REIT Manager and Property Transferors

The Promoter and the REIT Manager are experienced in
investment management as well as acquisition and redevelopment of real estate properties. Further the Transferors
of the properties are retaining a significant equity portion in
the REIT ensuring that interests are aligned.
Growing population
Increase in population especially in the urban and periurban areas as well as a rising middle class has continued
to push up the demand for real estate developments such as
housing units and shopping malls.
75
24 Economic Overview
Country Overview
46
Population, July 2015 est. (mn)

Area (sq km)
580,367
GDP, 2015 (US$ bn)
60.94
GDP Growth, 2014
5.3%
Inflation, February 2016
6.84%
Source: CIA World Factbook, World Bank, Kenya National Bureau of Statistics
24.1 Kenya Economic Performance
2014. The quarter was characterized by a fairly stable

macroeconomic environment supported by a slowdown in
inflation and robust growth in Agriculture; Construction;
Financial and Insurance; Wholesale and Retail sectors.
The countrys real Gross Domestic Product (GDP) is

estimated to have expanded by 5.8 per cent during Q3
2015 compared to 6.0 per cent in the same quarter of
GDP Growth Rates
7.0%
6.0%
5.8%
5.0%
4.4%
4.6%
4.7%
2012
2013
5.3%
5.4%
2014
2015(F)
4.0%
3.0%
2.0%
1.0%
0.0%
2010
2011
Source: World Bank, Kenya National Bureau of Statistics
24.2 Macro-Sector Overview

Financial Intermediation
In Q3 2015, the sector grew by 10.1 per cent compared
to 7.1 per cent growth in Q3 2014. Domestic credit by
commercial banks rose by 23.3 per cent in the third quarter
of 2015 to 2,785.3 billion. Credit to the private sector
expanded by 20.9 per cent to KES 2,206.3 billion during
the same period of 2015. Broad money supply grew by
13.5 per cent in the third quarter of 2015 compared to a
growth of 19.4 per cent recorded in a similar period in
2014. The net foreign asset of the banking system declined
by 12.8 per cent to KES 436.5 billion in the review period
compared to a growth of 19.8 per cent over a similar period
in 2014.
Construction
The sector grew by 14.1 per cent during the third quarter of
2015 compared to that of 8.8 per cent during the same period
in 2014. The growth was on account of increased public
infrastructure projects and private sector development in
the real estate sector. Commercial bank credit extended
to the sector grew by 27.9 per cent from KES 78,804
million during Q3 2014 to KES 100,827 million during Q3
2015. Cement consumption, a key indicator for the sector,
increased by 9.4 per cent in 2015 to reach an estimated
1,443,544 metric tonnes from 1,304,257 metric tonnes
recorded in Q3 2014.
76
Cement Consumption (000 Metric Tonnes)
5,687
6,000
1%
5,197
R 10.
CAG
5,000
4,000
3,870
3,937
2011
2012
4,266
3,000
2,000
1,000
2013
2014
2015
Source: Kenya National Bureau of Statistics
Automotive Industry
The sector is estimated to have grown by 8.7 per cent
compared to the 7.8 per cent recorded during the same quarter
of 2014. This was attributed to a higher demand for freight
services and lower fuel prices. The consumption of light
diesel, a key indicator of the sector, increased from 449.3
thousand tonnes in the Q3 2014 to 556.6 thousand tonnes.
narrowed by 43.5 per cent to KES 112,377 million during

the quarter under review from KES 198,864 million in Q3
2014 attributable to the increase in export value and lower
import bill. The value of total exports increased by 23.2 per
cent compared to the import bill which decreased by 9.7
per cent in the third quarter of 2015. The increase in the
value of exports was mainly due to increases in the value
of exports of food and live animals; manufactured goods,
and crude materials.
Manufacturing
The manufacturing sector expanded by 2.8 per cent during
the quarter under review compared to a growth of 1.5
per cent recorded during the Q3 2014. This was partly
attributed to the reduced cost of inputs such as electricity
and declined interest rates during Q3 2015. Indeed, credit
to the manufacturing sector increased to KES 280.4 billion
in Q3 2015 compared to KES 235.1 billion in Q3 2014
Electricity
The sector recorded a growth of 11.0 per cent in Q3 2015
compared to that of 7.2 per cent recorded in Q3 2014. This
was mainly attributed to increased share of both geothermal
and hydro-electric power generations coupled with a
significant reduction in generation of the more expensive
thermal electric power. Generation by thermal contracted
by 44.7 per cent. Geothermal, and hydro expanded by 40.4
and 12.7 per cent during the third quarter of 2015.
International trade in services registered a surplus of KES

20,468 million in the third quarter of 2015 from a surplus
of KES 14,964 million recorded in a similar period of
2014. Net financial flows excluding reserves decreased by
26.5 per cent from a surplus of KES 214,464 million in the
third quarter of 2014 to a surplus of KES 157,615 million
in Q3 2015.
24.3 Macro-Economic Overview

Inflation
The Overall inflation had been on an upward trend in the
last quarter of the year 2015 but remained below the CBK
medium term upper range target. Month-on-month overall
inflation was 6.84 percent in February 2016, down from
7.78 percent in January. The decline was as a result of
declines in food prices. The Alcoholic Beverages, Tobacco
& Narcotics index continued to remain higher than in
January 2016 mainly due to higher Excise duty.
Balance of Payments
The balance of payments position worsened to a deficit of
KES 76,804 million during Q3 2015 KES 51,356 million
in the second quarter of 2014. The current account deficit
77
Inflation
9%
8%
8%
7%
7%
6%
6%
5%
5%
4%
Feb-15
Jan-15
Mar-15
Apr-15
May-15 Jun-15
Jul-15
Overall Inflation
Aug-15
Sep-15
Oct-15
Nov-15
Dec-15
Jan-16
Feb-16
Annual Average Inflation
Short Term Interest Rates

The monetary policy stance during January 2016 was
mostly restrictive. The MPC maintained the Central Bank
Rate at 11.5 per cent in January 2016 since July 2015. This
was largely necessitated by the need to anchor inflationary
expectations in light of increasing aggregate demand
pressures and the persistent volatility in the global foreign
exchange markets. The short term interest rates and the
lending rates increased significantly between September
and October 2015 but eased off towards the end of 2015
closing the year at 10.8%, 12.8% and 13.3% for the 91 day,
182 day and 364 day T-Bill respectively. In 2016, short term
rates have decreased significantly. The 91 day, 182 day and 364
day T-Bills closed February 2016 at 9.31 per cent, 11.93 per
cent and 11.93 per cent respectively. The interbank rate stood
at 13.25 per cent. We expect that CBK will continue to closely
monitor and reign any adverse volatility in the currency and
inflationary expectations. In order to ensure market stability, the
CBK reviewed the Kenya Banks Reference Rate (KBRR) and
decided to retain it at its current level of 9.87 percent.
Short Term Interest Rates

28.0%
23.0%
18.0%
13.0%
8.0%
3.0%
15
b-
Fe
13
-1
ar
-M
13
-1
pr
-A
13
-1
ay
13
15
n-
-Ju
13
Interbank Rate
l-1
-Ju
13
-1
ug
-A
13
91 day T-Bill
Source: Central Bank of Kenya
78
-1
ep
-S
13
15
ct-
-O
13
182 day T-Bill
15
v-
No
13
-1
ec
-D
13
16
n-
-Ja
13
364 day T-Bill
-1
eb
-F
13
Exchange Rates
The shilling fluctuated during the fourth quarter of 2015,
trading within the KES. 100-104 range to the USD. In
Q4 2015 the shilling gained against the dollar to close
the quarter at KES 102.26 against the USD. Furthermore,
the shilling continued to gain ground against the GBP
and the Euro in the period to close at 149.71 and 109.85
respectively. In the first two months of 2016, the local unit
has generally strengthened against the major currencies. It
closed February 2016 at 101.7, 141.6 and 111.5 against the
US Dollar, Sterling pound and Euro respectively.
The foreign exchange market was stable in the last quarter

of 2015 supported by CBKs monetary policy operations.
Furthermore, the current account deficit narrowed, mainly due
to a lower oil import bill, and a slowdown in consumer imports.
Diaspora remittances remained strong. The Central Bank of
Kenyas foreign exchange reserves stands at USD 7,162.2
million (4.58 months of import cover) as at 25th March 2016.
These reserves, together with the Precautionary Arrangements
with the International Monetary Fund (IMF), continue to
provide an adequate buffer against short-term shocks.
Exchange Rates
180.00
160.00
140.00
120.00
100.00
80.00
USDKES
EURKES
24.4 Economic overview of Meru
2-Mar-16
2-Feb-16
2-Jan-16
2-Dec-15
2-Nov-15
2-Oct-15
2-Sep-15
2-Aug-15
2-Jul-15
2-Jun-15
2-May-15
2-Apr-15
2-Mar-15
2-Feb-15
2-Jan-15
2-Dec-14
2-Nov-14
2-Oct-14
2-Sep-14
2-Aug-14
2-Jul-14
2-Jun-14
2-May-14
2-Apr-14
2-Mar-14
2-Feb-14
2-Jan-14
60.00
GBPKES
The main economic activity is agriculture with a majority

being smallholder farmers. The County is also home to a
number of national parks and conservation areas, including
the massive Meru National Park and the Nyambene
National Reserve. The County has a population of 1.5
million with 74,000 people living in Meru town. This
population is estimated to grow at 2.1%. The commercial
real estate development is still in its nascent stages while
residential real estate is mostly confined to single dwelling
units within residents land. Growing population, tourism
and improved infrastructure are expected to spur growth in
the real estate sector.
Meru is centrally located in Kenya with close proximity

to Nairobi. The road network covers 3,640 km with 350
km being paved, while 500 km are all-weather (gravel)
roads and the remaining are dirt roads. The County enjoys
good road network connectivity to neighbouring economic
hubs - Nanyuki, Nyeri, Isiolo and Embu. Further, Isiolo
airport project is at an advanced stage, with the runway
and passenger terminal already finished. The runway will
be extended for larger aircraft, making it Kenyas fifth
international airport. Another key infrastructure project
is the Isiolo Resort City and Lamu Port Southern Sudan
Transport (LAPSSET) Corridor which will pass through
the County. These planned infrastructure developments
will enhance accessibility and further open up the County
to real estate development.
79
25 Real Estate Sector Overview

Retail Market
2015 continued to see a proliferation of decentralized urban
shopping malls in major cities and towns. Buoyed by an
expanding middle class, improved infrastructure and an
enduring property boom, shopping malls have continued to
extend their penetration outside the capital city as they become
the preferred shopping outlets for many middle and highincome consumers in towns. This is further supported by the
influx of international brands such as Dominos, Cold Stone
and Zara setting up shop locally. Demand for retail space has
been driven by the increasing spending power of Kenyan
consumers and rising demand for overseas brands.
Real Estate is considered as one of the principal sectors that

not only enhances quality of life but also spurs economic
growth in Kenya through the sectors multiplier effect
on the countrys Gross Domestic Product. At present, the
housing sector is characterized by inadequate affordable
and decent housing as current demand of 200,000 units per
annum continues to outstrip the annual supply of 35,000
units. Furthermore, only about 6,000 of annual housing
supply caters for the low income population. This shortage
in housing is manifested by overcrowding, proliferation
of slums and informal settlements in urban areas and poor
quality housing in rural areas. Currently, the levels of
home ownership are low at 16% of the population (Source:
Ministry of Housing). Real Estate has been on a bullish
trend across all segments.
Knight Frank estimates that prime retail rents remain at about

USD 48 per sqm per month. Other developments that broke
ground in 2015 are 40,000 sqm Karen Waterfront, 20,000 sqm
Crystal Rivers in Athi River and Cedar Mall in Nanyuki. The
other major completion was Ananas Mall in Thika. Two Rivers
Mall is expected to open in Q1 of 2016.
25.1 Property Market Segments

Residential Market
The residential market in Kenya remains resilient with
values and rents maintaining their upward trajectory. The
Hass composite letting index showed rents have fallen 0.1
per cent since Q3 2015 but have risen by 5.4 percent in the
last year. The sales index showed that sales prices increased
by 9.6 per cent in 2015 marginally lower than 8.3 per cent
increase witnessed in 2014. The Kenya Bankers Association
Housing Price Index shows that Q4 2015 saw prices rise
by 1.14 per cent compared to the 1.25 per cent increase
during the Q3 2015. The low to middle-income residential
market remained resilient, with demand for such housing
still outstripping supply while the uptake of residential
mortgages remained low during 2014.This phenomenon
may persist in the present high interest environment as
mortgage rates and rent yield spread increases. The property
mix is heavily skewed towards apartments. According
to Hass Consult, In December 2015, Apartments took up
59.6% of the market, Semi-detached Houses took up 13.1%
of the market and Detached Houses took up 27.3% of the
market. The value drivers in the residential Real Estate
market as reported by the Kenya Bankers Association are
the property size as measured by plinth area number of
bedrooms, bathrooms and presence of domestic servant
quarters. Underlying demand for development land is still
very high despite the skyrocketing land prices. Of interest
is the demand for land outside Nairobi. Indeed Satellite
town land price growth rates track Nairobis growth rates.
Furthermore, the performance of land has outpaced all other
asset classes such as equities, bonds and savings and select
commodities according to report by Hass Consult Q4 2015
Land Index.
Property segment
Offices
Retail
Industrial
Residential
Office Market
Demand has continued to be driven by the trend of large
corporates setting up regional headquarters in Nairobi, in
preference to the traditional regional hub of Johannesburg.
Knight Frank reports that there was however lower uptake
of Grade A office space in H1 2015. This is attributed to the
low supply of Grade A office space and the downsizing of
operations by Multinational firms. Additionally, government
agencies have been decentralizing their operations from
Nairobi to the Counties. Consequently, prime commercial
real estate rents have stabilized at around USD 21 per sqm per
month in the first half of 2015.
The 2015 Office Space Kenya report conveyed an annual
increase of about 8.67 per cent in rents and 2.92 per cent in
sales prices across the main submarkets of Nairobi. They
cite demand driven by Banking, Insurance, Financial and
Professional Services sectors.
Industrial Market
The industrial Real Estate market has largely been owner
occupied and far from mature. There has been significant
development along Nairobis Mombasa Road. Additionally
there is a growing pipeline of developments in this segment
such as Wrigley proposed KES 5.8 billion plant in Machakos
County; Proctor and Allans KES 1.8 billion plant in Limuru;
Tatu City in Kiambu and Tilisi in Limuru.
Prime rents
US$ 21 per sq m per month
US$ 48 per sq m per month
US$ 4.20 per sq m per month
US$ 4,720 per month*
*4 bedroom executive house in a prime location

Source: Knight Frank Africa Report 2015.
80
Prime yields
8 per cent
10 per cent
8 per cent
6 per cent
25.2 Trends in the Housing Market

Number of Completed Buildings
7,000
6,026
6,000
5,000
5,447
4,824
4,512
4,000
3,000
2,015
2,000
1,000
0
20
0
2011
926
876
637
505 587
2012
376
2013
Nairobi (Private Buildings) Residential
Countrywide (Public Buildings) Residential
Nairobi (Private Buildings) Non Residential
Countrywide (Public Buildings) Non Residential
243
2014*
Source: Kenya Economic Survey 2015

Note: 2014 statistics are provisional.
Due to the continued improvements in infrastructure by
GoK especially on roads, electricity and water, accessibility
to the Central Business District (CBD) will be easier and
hence reduce congestion in the CBD and its proximity. This
will lead to establishment of further property developments in

the Nairobi metropolitan areas including Kitengela, Ruiru, Thika
and Kiambu. The figure below shows that the governments
expenditure on Roads is on an upward trend.
81
Expenditure on Roads
140
120
KES Billions
120
109
92
100
88
80
61
60
40
20
0
2010/11
2011/12
2012/13
2013/14
2014/15
Source: Kenya Economic Survey 2015
25.3 Private Sector Players in the Housing Sector
billion in 2010 to 59 billion in 2014. Furthermore approved

private plans increased by a CAGR of 21 per cent from
KES 96 billion in 2010 to KES 205 billion in 2014.
Private sector players have continued to invest in the

housing sector attributed to the lucrative returns from
investment. The value of completed buildings by the
private sector grew by a CAGR of 35 per cent from KES 35
250
KES Billions
200
150
100
50
0
205
191
135
113
96
35
2010
52
44
40
2012
2011
Building Plans Approved
2013
59
2014*
Building Works Completed
Source: Economic Survey 2015

Note: 2014 statistics are provisional.
25.4 Growth in value of approved building plans
The value of building plans increased in 2015 from 228

billion in 2013 to 242 billion representing a growth of
about 6.1 per cent. This may be attributed to the increased
construction cost by the county government of Nairobi.
According to a report by the Kenya Property Developers

Association (KPDA), the construction permit fees increased
by a factor of between 250 and 1250, from between 0.001
and 0.006 per cent to 1.25 percent of construction costs.
82
Value of Approved Building Plans
400
350
KES Billions
300
250
200
58
150
100
115
154
50
0
115
96
95
141
132
147
2013
2014
2015
75
2012
2011
Residential
Non Residential

Source: Leading Economic Indicators 2015
25.5 Housing market projections

With increasing investment in housing and a number of incentives provided to the private sector, it is estimated that 4.3m
housing units will be produced between 2008 and 2030.
600
550
Housing Projections (000)
500
448
400
336
300
231
200
164
100
0
332
282
69
29
109
97
24
2008-2010
Low-Low Income Houses
332
321
238
211
190
145
96
61
2011-2015
2016-2020
Upper-Low Income Houses
Source: Ministry of Housing
83
Middle Income Houses
2021-2025
High Income Houses
2026-2030
25.6 Regulatory framework
The Capital Markets Authority introduced a regulatory

framework to promote pooling of investments in real estate
assets through Real Estate Investment Trusts (REITs).
This is expected to encourage mobilization of savings
for investment in the housing sector as well as introduce
additional capital markets instruments for retail and
institutional investors.
National Income. The size of the economy was determined

to be 25 per cent larger than previously thought. Kenya is
now the 5th largest economy in Sub-Saharan Africa behind
Nigeria, South Africa, Angola and Sudan.
The countrys housing market continues to be driven by
middle class Kenyans desire to own homes, with demand
from them pushing up prices and sales volumes in the first
half of 2015. Property developers now focus on high-end
properties targeting the new middle class which has
increased enormously in size in recent years
In 2012, three Acts of Parliament were enacted and came

into force on 2nd May 2012 The Land Act 2012; Land
Registration Act 2012; National Land Commission Act
2012. The new legislation has brought changes including
classification of land; ownership of land by non-Kenya
citizens, creation of charges on land among other changes.
The rise in both prices and rents in the middle income

segment of the market is expected to exert more pressure
on the budgets of middle income households that are
experiencing higher-level inflation in housing and energy
costs this year.
25.7 Analysis of Demand for Housing

Rebounding Economy
Kenyas economic growth in the last 10 years and improving
macroeconomic environment owing to prudent monetary
and fiscal policies has led to greater economic stability,
making the country a prime investment destination in the
region. Furthermore, GoKs investment in infrastructure
development has opened up previously inaccessible
regions. A combination of these factors indicates that the
outlook for the property market appears promising.
Over the last ten years, a number of Kenyans have joined the
middle income class due to improved economic activities
that have opened up new job opportunities. The wage bills
have also grown over the period thus leaving the middle
income class with reasonable disposal income to invest in
capital goods such as housing. The growth in the middle
income class on the back of improved economic conditions
has resulted in increased demand of residential housings
that so far outstretch the current market supply.
Growing Middle Income Class Putting Pressure on

the Residential Segment
In Q2 2014, Kenya crossed the threshold to become a lowmiddle income country following the rebasing of its National
Accounts, including gross domestic product and Gross
Consequently, residential property mostly in the middle

and upper income category has seen a price surge. The
sales prices are in an upward trend indicating continued
appreciation of property values.
Figure 1: Hass Composite Sales Index
Hass Composite Sales Index
410
390
370
350
330
310
290
270
250
Q1 2011 Q3 2011 Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015 Q3 2015
Source: Hass Consult Real Estate

*Sales Index 2001=100
84
KBA Housing Price Index

110
108
106
104
102
100
98
96
94
Q1 2013
Q3 2013
Q1 2014
Q3 2014
Index with Fixed Base
Q1 2015
Q3 2015
Index with moving Base
Source: Kenya Bankers Association

*Housing Price Index 2013=100
Remittances from abroad

Diaspora remittances continue to increase as shown in the figure below. Part of the remittances has remained invested in the
property market. This trend is expected to continue in the near future creating more demand within the housing sector.
Diaspora Remittances
4.8%
1,800
1,600
USD Millions
1,400
1,428
2013
2014
1,291
1,171
1,200
1,000
R1
CAG
1,548
891
800
600
400
200
2011
2012
2015
Source: Central Bank of Kenya
East African Community Hub

The East African Community is one of the fastest growing
regions in the world. Economic growth in the East African
region in 2015, according to the African Development Bank
is expected to outpace that of Sub-Saharan Africa (SSA) as
a whole, and is expected to accelerate over the next five
years. EAC partner states in 2015 are expected to grow at
an average rate of 5.6 per cent, compared with 4.6 per cent
for SSA. Services are overtaking agriculture as drivers of
growth on a region-wide basis, with an increasing amount
contributed by financial services and communications.
The EACs growth has been fuelled by rapidly growing
trade between the EAC countries, which tripled in value
over the last decade and could increase further. The EAC has
also experienced unprecedented demographic growth, as the
population has grown more than 54 per cent over the last 13
years, from 110 million people in 2002 to 170 million people in
2015.
The growth of the East African Community will also auger well
for Kenya as the central hub for the other member countries.
This will lead to international corporates with interest in the East
African market to set up shops in Kenya. This would at the same
time create new opportunities both for Kenyans and for other
East Africans, leading to further demand for housing as more
people look to settle in Nairobi and its neighbouring towns.
85
26 Accounts & Financial Statements

Board of Directors
Fusion Captital Limited
ACK Garden House,
Ground Floor, Wing A
Nairobi
Dear Sirs,
FINANCIAL PROJECTIONS REPORT FUSION REAL ESTATE DEVELOPMENT TRUST COMMERCIAL FOR THE YEARS ENDING 31 DECEMBER 2016 TO 31 DECEMBER 2019
We have reviewed the accompanying financial projections of Fusion Real Estate Development Trust - Residential for the years
ending 31 December 2016 to 31 December 2019 in accordance with the International Standard on Assurance Engagements
applicable to the examination of prospective financial information.
Management is responsible for the preparation and fair presentation of the financial projections including the accuracy of the
assumptions on which they are based. Our responsibility is to issue a report on the financial projections based on our review.
Based on our review of the evidence supporting the assumptions, nothing has come to our attention which causes us to
believe that these assumptions do not provide a reasonable basis for the financial projections. Further, in our opinion, the
accompanying projections are properly prepared and presented in accordance with the accounting policies normally used by
Fusion Real Estate Development Trust - Commercial.
Actual results are likely to be different from the financial projections since anticipated events frequently do not occur as
expected and the variation may be material.
Yours faithfully,

Nairobi, Kenya.
6 April 2016
86

PROJECTED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE
YEARS ENDING 31 DECEMBER 2016 TO 31 DECEMBER 2019

2016 2017 2018 2019

Sh000
Sh000
Sh000
Sh000

Income
-
-
904,780
4,025,240
Cost of sales
-
-
(619,950)
(2,758,090)

Gross profit
-
-
284,830
1,267,160

Expenditure:

Management fee
(23,340)
(46,680)
(46,680)
(7,780)
Trustee fee
(5,840)
(11,670)
(11,670)
(1,950)

Total expenditure
(29,180) (58,350) (58,350) (9,730)

Loss for the year
(29,180)
(58,350)
226,480
1,257,430

-
-
-

(29,180)
(58,350)
226,480
1,257,430
PROJECTED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2016 TO 31 DECEMBER 2019

2016 2017 2018 2019

Sh000
Sh000
Sh000
Sh000

Non current assets
Construction and work in progress
1,784,800
3,443,540
-
-
Current assets
Inventory
-
-
2,878,410
486,020
-
65,510
3,696,380

486,020
- 2,943,920 3,696,380
Total assets
2,270,820
3,443,540
2,943,920
3,696,380

Equity and liabilities

Share capital
2,300,000
2,300,000
2,300,000
2,300,000
Accumulated (deficit)/reserves
(29,180)
(87,530)
138,950
1,396,380

Shareholders funds
2,270,820
2,212,470
2,438,950
3,696,380

Non current liabilities
Borrowings
-
1,231,070
504,970

2,270,820
3,443,540
2,943,920
3,696,380
87

PPROJECTED STATEMENT OF CASHFLOWS FOR THE YEARS ENDING 31 DECEMBER 2016 AND
31 DECEMBER 2017

2016 2017 2018 2019

Sh000
Sh000
Sh000
Sh000

Cash flows from operating activitites

(Loss)/profit before taxation
(29,180)
(58,350)
226,480
1,257,430
Cost of construction and work in progress
(1,784,800)
(1,658,740)
-
Transfer of work in progress to inventory
-
-
3,443,540
(Increase)/decrease in inventory
-
-
(2,878,410)
2,878,410

Net cash (used in)/generated from
operating activities
(1,813,980)
(1,717,090)
791,610
4,135,840

Cash flows from financing activitites

Funding received from REITs issue
2,300,000
-
-
Funding received from borrowings
-
1,231,070
-
Loan repayment
-
-
(726,100)
(504,970)

Net cash generated from/(used in)
financing activities
2,300,000
1,231,070
(726,100)
(504,970)

Increase/(decrease) in cash
and cash equivalents
486,020
(486,020)
65,510
3,630,870

At the beginning of the year
-
486,020
-
65,510

At the end of the year
486,020
-
65,510
3,696,380
88
27 Risk Factors
There are certain risk factors inherent in an investment in the REIT units and the
activities of FRED - COMMERCIAL. Investors are therefore advised to carefully
consider the risks described below as well as other information contained in this
Offering Memorandum prior to making an investment decision.
The risks described below are not the only risks which the
REIT faces. Additional risks and uncertainties not currently
known to the REITs management or that it currently
deems to be immaterial may also materially adversely
affect the REITs business, financial condition or results
of operations. The order of the risks described below is
not intended to be an indication of the probability of their
occurrence or the magnitude of the risk.
The economic growth is dependent on the formulation of

policies and procedures to support the initiatives of the
public and private sectors to remain profitable and yield net
returns that will maintain current investments and attract
other foreign direct investments, bilateral and multilateral
aid.
In February 2016, International Credit rating agency firm
Moodys retained the countrys B1 rating with a stable
outlook driven by:
(a) A substantial level of infrastructure spending which is
expected to boost productivity;
(b) A rapidly expanding services sector; and
(c) A near-term improvement in the countrys terms of
trade. Kenya is well-positioned to benefit from greater
economic integration in East Africa over the coming
years further cementing its economic position within
the region.
27.1 Risks Related to the Assets of FRED - Commercial

Political Risk
Kenya, like the majority of developing countries, is subject
to certain political, economic and social events that may
individually or collectively, create risks for investors.
These risks are more difficult to predict and measure than
in developed countries.
As a mitigant, Kenya has a history of relative political
stability.
According to Moodys February report, Kenyas sizeable

fiscal and current account deficits will begin narrowing
from FY2016/17 over the next three years as policymakers
pursue a contractionary stance of fiscal policy. This is
expected to reduce Kenyas reliance on external debt
financing and ensure fiscal sustainability. Also, as a net oil
importer, Kenyas external position is already benefitting
from the decline in oil prices.
Insecurity Risk
There has been a rise in the level of insecurity in Kenya due
to recent terrorist attacks. The attacks have mostly been
concentrated in urban centers of Nairobi and Mombasa.
In Mombasa these attacks have had a negative effect on
the tourism industry which is the major economic driver of
the region. The downturn in the tourism sector has had an
effect on the demand of housing in and around Mombasa.
Additionally, the World Banks Kenya Public Expenditure

Review December 2014 report noted that: devolution
and increased investment in infrastructure are improving
Kenyas prospects for growth and shared prosperity...
and notes further that: Kenyas economy has recovered
from the negative shocks that it experienced in 2008-09
posting an average growth rate of six percent for the past
five years, and adds that growth will remain between 6-7
percent to 2017.
The initial development project of FRED - COMMERCIAL

is located in an area that is not heavily dependent on
the tourism sector. The REIT will take such steps as are
appropriate to enhance security within its project sites.
Land Acquisition Risk

Acquiring land in Kenya can be risky due to frequent
incidents of titles being forged or duplicated and poor
record keeping at the Ministry of Lands.
Execution Risk
Project managers and/or contractors not executing their
work in a timely and efficient manner could lead to
increased development costs and/or delayed development
period. Cost overruns could lead to a reduction or total
wipe out of the projected margins.
Before any land is acquired by FRED - COMMERCIAL,

the REIT Manager will ensure that the property undergoes
thorough due diligence process to ensure that the title is
clear and marketable. In addition in areas that have been
known to have land issues in the past, the REIT Manager
will seek clearance from the National Land Commission
before acquiring such property.
The REIT Manager aims to mitigate this risk by entering

into fixed price contracts with the contractor to control
costs. In addition, the REIT Manager will employ its
resources, skills and experience in development project
management on all the projects in the D-REIT to enhance
delivery of projects to specification, on time and within
cost.
Economic Risk
The growth in the real estate sector is dependent on the
continued economic and infrastructure developments
with the support of both the public and private sectors.
89
Demand Risk
Economic or local conditions could lead to decline in
demand for the REITs properties.
Backed by market surveys the REIT Manager is confident
that demand and prices for housing and commercial space
in the area will continue to rise over the investment period.
In addition, the REIT Manager will continually monitor
the market so as to stay aware of developing trends and
react to any potential adverse changes appropriately. The
REIT Manager has a good working relationship with major
property selling agents in Kenya, which will be useful in
making property sales. The REIT Manager will also look
to pre-selling and/or pre-letting the properties as and when
possible.
Market Risk
Market conditions are beyond the control of the REIT and
are subject to many factors, including economic conditions,
government regulations, market sentiment, exchange rates,
local and international political events and environmental
and technological issues. Market risk may have different
impacts on each strategy employed within the REIT.
Performance could vary as a consequence despite the
REITs best efforts to mitigate risk.
The REIT Manager will continually monitor the macroeconomic environment so as to stay aware of developing
trends and react to any potential adverse changes
appropriately.
Currency Risk
The REIT may take on exposure to the effects of fluctuations
in the prevailing foreign currency exchange rates on its
financial position and cash flows. Further, the REIT may
raise funds in foreign currency. As a result, fluctuations in
foreign currencies could have a material adverse effect on
the REIT as well as returns to international investors
Real Estate Market Downturn

This is the risk that the real estate market experiences a
slowdown in activity such as:

(a) Depressed housing prices in the residential and

commercial real estate markets leading to decline
in the pace at which real estate is bought and sold.

(b) Decline in the pace of real estate development,

which has an effect on the number of construction
and contracting jobs that are available.

FRED - COMMERCIAL seeks to use a conservative
financing structure, with a targeted debt to equity ratio of
40:60, well below the limit provided for by regulations, in
order to cushion the trust from adverse effects of volatility
in debt pricing
Financing Risk
The real estate industry is capital intensive. The REIT will
require access to capital to fund its growth strategy and
significant capital expenditures from time to time. There is
no assurance that capital will be available when needed or
on favorable terms. Failure to access required capital could
adversely impact investments, cash flows, operating results
or financial condition and ability to make distributions on
the Units.
The REITs access to third-party financing will be subject
to a number of factors, including:

(a) General market conditions;

(b) The markets perception of the REITs growth

potential;

(c) Current and expected future earnings;

(d) Cash flows; and

(e) The market price of the Units.
The Lead Transaction Advisor selected for this transaction
has had a good track record raising funds through
public offers over the last 5 years. In addition the Lead
Transaction Advisor has notable good relationships with
key leaders of the pack institutional investors in Kenya.
The Lead Transaction Adviser and REIT Manager have
been speaking to large Kenyan institutional investors that
are deemed to have a pull effect among their peers. Their
reception so far has been encouraging.
The REIT Manager will endeavor to match currencies

in financing and operations as closely as possible. The
REIT Manager will also deploy other available currency
risk hedging techniques to the benefit of the trust and the
investors.
Interest Rate Risk

The REIT may raise debt to finance a portion of the REITs
projects. Terms for interest payments on debt funding
exposes the REIT to interest rate risk. An increase in
interest rates could result in a significant increase in the
interest payments resulting in a decrease in distributions
to REIT Unit Holders, and could impact the market price
of the units. In addition, increasing interest rates may
put competitive pressure on the levels of distributable
income paid by us to unit holders, increasing the level
of competition for capital, which could have a material
impact on the trading price of the Units.
Further, the REIT Manager has a proven track-record

in raising capital for real estate projects. The REIT will
employ multiple strategies to raise required capital and rely
on best in class advisors to obtain financing as required.
The REIT Manager uses a flexible financing model that
allows the use of debt funding, as required.
Counterparty Risk
The FRED - Commercial will often engage developers,
contractors, management or operating companies and joint
venture partners in connection with its real estate projects.
Challenges or issues with such counterparties could have a
material adverse impact on those real estate holdings and
on the REIT generally.
FRED - COMMERCIAL seeks to use a conservative

financing structure, with a targeted debt to equity ratio of
40:60, well below the limit provided for by regulations, in
order to cushion the trust from adverse effects of volatility
in debt pricing.
All parties retained to provide services and goods to the

Trust and its projects will be screened to ensure that no
party with credibility or reputational issues is retained.
90
27.2 Risks Related to FRED - Commercials Securities

Price Risk
Publicly-listed real estate investment trust securities may not
necessarily trade at values determined solely by reference to
the underlying value of the REITs real estate properties.
Accordingly, the Units may trade at a premium or a discount
to values implied by the valuations of the underlying assets.
The market prices of the Units could be subject to wide
fluctuations. Further, there is no assurance that an active
trading market will develop after the Offer.
may result in the REIT not being able to maintain or grow

dividend levels in the future.
The Distribution Policy requires that the REIT Manager
distribute any realized capital gains of the scheme or invest
any capital gains in new assets or development projects
within two years of the gain realization.
Dilution Risk
The number of units the REIT is authorized to issue is
unlimited. The REIT Manager may issue additional REIT
Units from time to time. Any REIT issuance Units, including
Units issued in consideration for properties acquired by the
REIT, may have a dilution effect on existing unit holders.
The REIT Manager will keep the market updated with

appropriate information on the projects. The Lead
Transaction Advisor and REIT Manager will target the
widest possible investor base during the initial offer in order
to improve chances of active trading. D-REITs are expected
to offer substantial number of units, at relatively low offer
price, to enhance ease of trade. The Lead Transaction
Advisor and REIT Manager are exploring permissible
market making strategies to deploy post listing to enhance
trading and liquidity.
The REIT Manager will ensure that any future issues of

Units by FRED - COMMERCIAL will not to the extent
possible, lead to an adverse effect on existing unit holders
beyond dilution. Further, the Trust Deed provides that all
additional issues will be subject to the approval of the
Securities Holders in general meeting. The Regulations only
allow this to be overriden where any issue is exchanged for
real estate assets (which must not exceed 20%) and to fund
cost overruns.
Regulatory Risk
Future changes in applicable laws and regulations or
changes in their enforcement or regulatory interpretation
could result in changes in the legal requirements affecting
us (including with retroactive effect. Further, a REIT that
fails to meet requirements may lose various tax advantages.
Growth Risk
The REIT may need to obtain financing in order to make
acquisitions or new investments. The REIT may experience
difficulties in obtaining financing for its projects thus slow
growth. Additionally, a REIT may face challenges in acquiring
new properties on acceptable terms due to competition.
The REIT Manager will keep watch on the regulatory

environment throughout the life of FRED - COMMERCIAL
and in the event of a proposed change of regulations that
would result in an adverse impact on the D-REIT, use
channels (such as lobbying) to address concerns. The REIT
Manager will keep FRED - COMMERCIAL compliant to
ensure that the tax benefits due accrue.
FRED - COMMERCIALs distribution policy permits for the

reinvestment of income subject to unit-holders approval. The
REIT Manager will carefully evaluate the trusts financing
needs, and taking in to account financing alternatives
(including reinvestment of incomes) and finance market
conditions, make recommendations to unit holders on
the best financing alternatives to deploy. The Promoters
reputation and network in the real estate industry should
ensure that a healthy deal pipeline is always available.
In addition there is a lack of clarity about the tax treatment

of REIT fully owned Investee Companies. The Regulations
stipulate that distributions from an authorized REIT scheme
are exempted from taxation. It is not clear if this tax
treatment applies to the fully owned investee companies of
a REIT scheme.
The Promoter has raised this concern with the Kenya
Revenue Authority and is in the process of getting this
issue clarified. If the determination on this matter would
be unfavourable to the REIT, the REIT Manager would
recommend, to the REIT Trustee, the conversion of the
property-holding investee companies of the REIT into a
more tax-efficient vehicle.
Reputation Risk
This is the risk that loss of business and/or public confidence
will arise as a result of ethical misdemeanours by the REITs
management or staff, failure to meet regulatory standards
or other reputational damage. The REIT will mitigate
reputation risk by instituting robust regulatory compliance
procedures as well as oversight on the REITs activities.
Distribution/Dividend Risk
Although REITs are required to make annual dividends or
distributions of their net investment income, the amount
of cash available for distribution by a REIT will fluctuate
based on the performance of the REITs projects, which
The REIT Manager will mitigate reputation risk by

instituting robust regulatory compliance procedures as well
as oversight on FRED - COMMERCIALs activities.
91
28 Fees, Costs and Expenses

28.1 Fees, Costs and Expenses in Relation to the Issue or Offer of the REIT Securities
The costs of the Offer are analyzed as follows:
Table 1: Expenses of the Offer
Expense
Total (KES)*
Lead Transaction Advisor costs

Legal costs
Reporting Accountants costs
Selling commission**
CMA approval fees
NSE admission fees
Public Relations costs
Advertising costs including advertising firms fee*
Printing costs
Registrar fees
Other consultants fees
Processing centre costs
Total
30,000,000
6,000,000
700,000
35,000,000
7,500,000
1,250,000
2,000,000
8,000,000
3,000,000
1,000,000
3,000,000
2,000,000
99,450,000
Party Responsible
for Payment
FRED Commercial
FRED Commercial
FRED Commercial
FRED Commercial
FRED Commercial
FRED Commercial
FRED Commercial
FRED Commercial
FRED Commercial
FRED Commercial
FRED Commercial
FRED Commercial
FRED Commercial
*These figures are inclusive of VAT (where applicable) and may be subject to change.
** Selling Commission of 1.5% is payable to members of the NSE (subject to a minimum of KES 100) and 1% for
non-NSE selling agents.
The expenses of the Offer amount to 4.32% of the Offer amount or KES 0.99 per Unit.
28.2 Fees, Costs and Expenses Payable by the Trustee
There will be running expenses and other costs associated

with FRED - COMMERCIAL going forward as outlined
below:
(a)

(b)

(c)

Development fee payable to the Promoter being 2.00%

of the value of the Properties on completion and sale of
the development, at the point of sale;
Annual Asset management fee, payable to Fusion

Investment Management Limited as the REIT Manager
being 2.00% of the Net Asset Value of FRED -

COMMERCIAL; and
Annual Trustee fees of 0.5% of the Net Asset Value
Management of FRED - COMMERCIAl as defined
in the Trust Deed.
28.3 Statement of the Estimated MER of the REIT

This is not applicable to FRED - COMMERCIAL
28.4 Limits imposed by the Regulations on the charging

of fees or reimbursement of expenses
The Trustee and the REIT Manager have the power to

deduct fees in accordance with the Regulations. Provisions
on the remuneration of the Trustee, REIT Manager and
other parties to the REIT are set out in Part XV of the
Regulations. In particular, you should note that:
(a)

(b)

92
The overheads and costs of services expected to be

provided by a REIT Manager in its capacity as REIT
manager shall not be charged to the Fund;
If a REIT Manager chooses to defer its fees payable,
no interest shall be payable in respect of any
deferred payment.
29 Distribution Policy and Factors Determining Distribution

29.1 Distribution Policy per the Trust Deed
This is set out in Clause 23.1 of the Trust Deed. The main
particulars on this are as follows:
(a)

FRED - COMMERCIAL shall make the distributions of

income upon the recommendations of the REIT
Managerand in accordance with the Scheme
Documents. In making distributionss FRED -

COMMERCIAL shall take into consideration
the following:
(i) Income for the period;

(ii) Total returns for the period;
(iii) Liabilities and financial obligations;
(iv) Cash flow available for distribution;
(v) Need to preserve and maintain the condition of

the assets of the fund and to provide for asset

replacement;
(vi) Stability and sustainability of distribution of

income;
(vii) Investment objective of the D-REIT;
(viii) Distribution policy of the D-REIT; and
(ix) Requirements of the scheme documents.
29.2 Distribution of Realized Capital Gains
The Regulations do not require FRED - COMMERCIAL,

a D-REIT Scheme under the regulations, to make annual
distributions to the REIT Unit Holders. However, the REIT
Manager may recommend to the Trustee and the Trustee
may distribute any realized capital gains to the REIT Unit
Holders if and when the capital gains are realized.
The Promoter understands from the initial REIT Manager

that the REIT Manager intends to recommend for
distribution about 30% of any realised capital gains at
the end of each project subject to the then current cash
requirement of the Scheme.
29.3 Retention of Realized Capital Gains
The REIT Manager may retain any realized capital

gains and invest in new income producing real estate,
developments or buy to rent housing provided that:
(a)

(b)

The REIT Manager has received approval from the

REIT Unit Holders to retain the capital gains by way of
ordinary resolution; and
Any retained capital gains will be reinvested within two
years of the date of their realization.
Should the REIT Manager fail to reinvest any realized

capital gains within two years, the REIT Manager will be
required to distribute the capital gains to the REIT Unit
Holders within two months of the second anniversary of
the realization of the gains.
29.4 Powers and Obligations of the REIT Manager and

the Trustee with respect to Distributions
These, in summary, are as follows:

(a) The Trustee shall make the distributions of income

upon the recommendation of the REIT manager;
(b) The Trustee may where the distribution is proposed

other than on an annual basis based on audited
financial accounts require an audit to be undertaken;
(c) Where the trustee is of the opinion that the level

of distribution recommended by the REIT manager is

not in the interests of REIT Securities Holders, the

Trustee shall call a meeting of REIT Securities Holders

to approve, by way of ordinary resolution, a lower
distribution.
(d) The REIT Manager may propose and make distributions

in excess of the current income where the REIT Manager,

upon consultation with the Trustee, certifies, on

reasonable grounds that (i) Immediately after the making of such distribution

FRED - COMMERCIAL shall be able to pay from

the assets of the fund, the liabilities incurred on behalf

of FRED - COMMERCIAL as and when they fall

due and the projected liabilities for at least the next

year; and

(ii) The payment shall not adversely affect the capacity

to maintain and preserve the assets of FRED -

COMMERCIAL.
(e) If the REIT Manager proposes payment of distributions

in excess of the current income, they shall:

(i) Disclose to the Trustee the basis of the calculation

of the distribution proposed;

(ii) Report such proposal as part of the continuing

disclosure requirements under the applicable
regulations.
(f) Concerning capital gains, the REIT Manager may

recommend to the Trustee and the Trustee may

distribute any realized capital gains;
(g) The REIT Manager, with the approval of the REIT

Unit Holders, may retain capital gains and invest in

new acquisitions or development and construction or

buy to rent housing income producing real estate.

However, if any realized capital gains have not been

invested within a period of two years from the

date of realization, this shall be distributed to REIT

Securities Holders within two months of the second

year of such realization;
(h) REIT Securities Holders by way of ordinary resolution

may approve a lower distribution than what the REIT

Manager has recommended.
29.5 Implications of failure to make distributions as

per the Regulations
Where the Trustee fails to make the distribution as per the

Regulations-
(a)

(b)

(c)

93
The D-REIT may cease to be classified as a real estate

Subject to the Scheme Documents, the REIT Securities
Holders may institute a cause of action against the
Trustee or the REIT manager; and
The Authority may revoke the authorization issued to
the REIT under the Regulations.
30 Taxation, Discretion as Regards Distributions &

Implications for Taxation Treatment of the REIT
and Distributions
The comments below are of a general nature based on taxation law and practice in
Kenya as at the date of this Offering Memorandum and are subject to any changes
thereafter. They relate only to the position of persons who are the absolute beneficial
owners of the Offer Units.
This section does not purport to be a complete analysis of all
tax considerations relating to the Offer Units and so should
be treated with appropriate caution. Prospective investors
should consult their own professional advisors concerning
the possible tax consequences of purchasing, holding and/
or selling Units and receiving payments of dividends and/
or other amounts in respect of the Offer Units under the
applicable laws of their country of citizenship, residence
or domicile.
resident unit holders of FRED - COMMERCIAL as well as

citizens of the East African Community Partner States and
at 10% for non-resident shareholders in terms of prevailing
legislation as set out in the Kenya Income Tax Act (which
is subject to revision through changes in Government
policy). Non-residents may be entitled to a tax credit in
their country of residence, either under domestic law or
under the tax treaties referred to below. If an Applicant is
tax exempt, the person or company or institution will be
required to provide a certified copy of the Tax Exemption
Certificate.
30.1 Taxation treatment of the REIT
Section 20 of the Income Tax Act exempts the income of

a REIT from payment of income tax. It states as follows:
(1) Subject to such conditions as may be specified by the

Minister under section 130

(a) A unit trust; or

(b) A collective investment scheme set up by an

employer for purposes of receiving monthly

contributions from taxed emoluments of his

employees and investing them primarily in shares

traded on any securities exchange operating in
Kenya;

(c) A real estate investment trust, registered by the

Commissioner, shall be exempt from income tax

except for the payment of withholding tax on

interest income and dividends as a resident person

as specified in the Third Schedule to the extent that

its unit holders or shareholders are not exempt

persons under the First Schedule.
(2) All distributions of income, and all payments for

redemption of units of sale of shares received by unit

holders or shareholders shall be deemed to have been

already tax paid.
30.2 Tax on Distributions to Investors
Withholding tax at the rate of 5% will be deducted by FRED

- COMMERCIAL from dividend payments made to Kenya
30.3 Stamp Duty
So long as the Offer Units are listed on a securities

exchange, and for as long as there is no change in law in
this regard, no stamp, registration or similar duties or taxes
(including capital gains tax) will be payable in Kenya in
connection with the transfer of such Units in accordance
with current legislation.
30.4 Tax Treaties
Kenya has entered into double taxation treaties with

Canada, Denmark, Germany, India, Mauritius, Norway,
Sweden, the United Kingdom and Zambia. Treaties with
Italy, Uganda and Tanzania have been signed but are not
yet in force.
30.5 Expert opinions on tax treatment

None has been obtained by the Trustee
30.6 Circumstances in which Taxation Treatment may

Vary
The above tax treatment for the REIT may vary if:
(a)

(b)

(c)
94
The REIT fails to register with the Commissioner of

Income Tax; or
For any reason, FRED - COMMERCIAL ceases to
be a REIT; or
If there is a change in the relevant tax legislation.
31 Transferability of REIT Securities, Listing

and Redemption
31.1 Restriction on the transferability of the REIT Securities
The Offer Units will be transferable to Professional Investors in accordance with the provisions relevant to D-REITs under the
Regulations and the NSE Trading Rules.
31.2 Listing of the REIT Securities

The Units in FRED - COMMERCIAL will be listed on a restricted market segment of the NSE on which only professional investors
will be permitted to trade.
NB: INVESTORS WILL NOT BE ENTITLED TO SEEK REDEMPTION OF THEIR UNITS.
95
32 Expert Opinions
32.1 Summary of SPV Valuers Report
Special Purpose Vehicle
Valuation Methodology
Fair Value
NAV
868,858,099
Total Fair Value
868,858,099
32.2 Summary of Pre-Feasibility Report

The units will be serviced and furnished, and will enjoy
premium hospitality services from the operator.
Axis Real Estate Limited (Axis RE) was invited by Meru

Greenwood Park Limited in March 2015, to carry out a market
and pre-feasibility study on L.R. NO. Meru Municipality
Block 1/3 in Meru County, Kenya. A preliminary study is
undertaken to determine if it would be worthwhile to proceed
to the feasibility study stage which is informed by the final
project concept.
For this proposed project, Axis RE initially undertook an
option analysis to consider offering high-end residential
apartments, hotel, retail and office development. After
undertaking the market study, the research findings led to the
recommendation that the proposed project comprises of an
urban mixed-use development. The idea was to look beyond
the borders of Meru County and undertake a project that will
have both national and international recognition, without
compromising on the returns of the investors. To this end the
proposed development should include:

(a)

(b)

(c)

A retail, entertainment and lifestyle facility, measuring

not more than 25,000 sqm that would be the centre of
attraction in Meru County for many years to come;
A modern high grade office block, measuring not more
than 20,000 sqm which would accommodate high
grade corporate tenants;
High-end luxurious apartments comprising 70% of two
bedroom units and 30% of three bedroom units, which
the buyers (investors) may use as hotel apartments

all under the management of a reputable operator.
The project as proposed by the report would cost circa Kshs

3.5 billion excluding the cost of construction finance, and
subject to firmed up designs and bill of quantities. In terms
of the optimal exit strategy, the financial viability considered
the following options;

(a) Option A - Outright sale of the retail, office and

residential components;

(b) Option B - Rental of both retail and office components,

and the outright sale of the residential component;

(c) Option C - Rental of the retail component only, and the

outright sale of both office and residential components.

The table below gave a summary of the financial viability of
the proposed project with different exit options considered.
It should be noted that the outright sale of the project was
determined to be the best option. However given the fact
that it may complicate management under multi-tenancy,
a suitable single buyer should be considered for the retail
component. Since this might take a lot of time and the
probable buyer may require that the retail mall is fully let
first, its advisable that option C be considered at the onset.
This is where the retail component is rented out and the other
components are sold.
Other than having a good project and equity IRR, option C also has a better debt service coverage ratio (DSCR).
Financial Viability Options Summary
Project IRR
Equity IRR
Owner Payback
Period (Years)
Option A
22.7%
17.6%
3 years
Option B
16.9%
15.1%
9 years
Option C
16.7%
15.6%
7 years
In conclusion, it was considered that this would be a viable

project that would set the pace for premium mixed use
developments in Meru County.
The report recommended that Greenwood City is developed
based on Option A with slight modifications: outright sale of the

residential component with rental and income stabilization of
office and retail space in the short term prior to sale leading to a
projected IRR of 20.28 per unit.
96
33 Meetings, Reports, Accounts and REIT Securities

Holders Rights
Please take note of the following:
33.1 Requirement for meetings and the rights of

REIT Securities Holders to require the calling of
meetings;
The provisions relevant to the calling of meetings are
summarized in Section 17 of this Offering Memorandum.
33.2 Notices and Voting

General meetings for securities holder require at least 21
days notice. The Authority shall receive at least 7 days prior
notification of the intended proposal to seek REIT securities
holders approval prior to the circulation of any notice.
The vote required to pass ordinary resolutions is a simple
majority being 50% plus one vote. The voting level for
special resolutions is a majority of not less than threefourths of such unit holders who, being entitled so to do,
vote in person or by proxy at a general meeting of which
at least 21 days written notice specifying the intention to
propose the special resolution has been given.
33.3 Matters which require a Special Resolution

(a) Appointment of a new Trustee on resignation of the

immediate former trustee;
(b) The removal and replacement of the Trustee unless an

order of the Court has been issued for the same;
(c) The approval of special circumstances under which the

REIT Manager may, with the approval of the CMA,

remove a Trustee without need to revert to

the Securities Holders;
(d) If an investment in real estate has not been completed

within 180 days of the close of the initial offer, a special

resolution will be required to determine whether:

(i) The period for registration should be extended
and the period of extension;

(ii) All monies paid into the fund together with any

(iii) What other action should be taken by the trustee
or REIT manager.
(e) Winding up of the REIT;
(f) The conversion of the D-REIT into an I-REIT; and
(g) The alteration of Scheme Documents.

33.4 Matters which must be put to a vote of REIT

Securities Holders
(a) The imposition of an obligation to Securities Holders to

provide additional funds necessary to enable the Trustee

to pay any costs and expenses necessary in connection

with the REIT Assets;
(b) Appointment of a new Trustee on resignation of the

immediate former trustee;
(c) The removal and replacement of the Trustee unless an

order of the Court has been issued for the same;
(d) The approval of special circumstances under which the

REIT Manager may, with the approval of the CMA,

remove a Trustee without need to revert to the

Securities Holders;
(e) The acquisition of real estate at a price which exceeds

the price in the valuation report by more than 10%;
(f) The disposal of real estate at a price lower than 90% of

the value assessed in the valuation report;
(g) The entry, by the Trustee into a contract for the disposal

of an asset where such disposal exceeds 50% of the

total asset value of the REIT;
(h) If an investment in real estate has not been completed

within 180 days of the close of the initial offer, a

special resolution will be required to determine
whether:

(i) The period for registration should be extended
and the period of extension; or

(ii) All monies paid into the fund together with any

(iii) What other action should be taken by the trustee
or REIT manager.
(i) Borrowing or the entry by the Trustee into a financing

arrangement of amounts greater than 60% but not

more than 75% of the total asset value, for a temporary

purpose for a term not exceeding six months;
(j) The approval of a lower distribution than that proposed

by the REIT Manager;
(k) The conversion of the D-REIT into an I-REIT;
(l) The alteration of scheme documents;
(m) The approval of any proposed material increase in fees

or change in the method of calculating the fees

charged by the REIT Manager, if the same is not

deemed fair and reasonable by the Trustee;
(n) Appointment and re-appointment of the REIT Manager

by the Securities Holders;

97
(o)

(p)
(q)
Removal of the Auditor (Trustee may act on its

own instance too);
Winding up of the REIT;
Additional acquisitions or disposals if:

(i) The proposed acquisition or disposal is from/to a
person who is not the promoter or connected
person and the total consideration represents more

than 15% of the latest published net asset value;

(ii) The proposed acquisition or disposal is from/to the
promoter or a connected person and the total

consideration represents more than 5% of the

latest published net asset value;
(r) Removal of the Valuer;
(s) Connected party transactions where the supply of goods

or services is not subjected to an open bidding process

and the value of the contract when aggregated with

all other transactions conducted with connected

persons relating to the provision of goods and services

in the immediately preceding twelve months exceeds or

would exceed 15% of the amount spent on connected

party provided goods and services; and
(t) Approval of the issue of additional REIT Securities to

persons other than existing securities holders or in a

manner other than on pro rata basis to existing holders;
(u) Retention of Realized Capital Gains for the purpose of

reinvesting in new assets or developments.
33.5 REIT Securities Holders right to receive Reports

and Financial Statements
The rights of REIT Securities Holders are set out in the
Trust Deed and are summarized in Section 17.1.6 and
17.1.7 of this Offering Memorandum.
33.6 Statement on the key rights of REIT Securities

Holders
The REIT Units shall be personal property and shall confer
upon the holders thereof the interest attached thereto
including the enjoyment of distributions if and when these
are made. The REIT Units will be freely transferable
subject to the requirements of the restricted market
segment on which they are listed.
NB: The rights of REIT Securities Holder will be limited
to their interest in the assets of the REIT as represented by
the REIT Units held. No Securities Holder has or shall be
deemed to have any right of ownership in any of the REIT
Assets.
REIT Securities Holders are also entitled to receive notice
of, attend and vote at general meetings of Securities
Holders of the REIT.
The rights of REIT Securities Holder will be

limited to their interest in the assets of the REIT
as represented by the REIT Units held. No
Securities Holder has or shall be deemed to have
any right of ownership in any of the REIT Assets.
98
34 Additional Information
FRED - COMMERCIAL was approved by the CMA on February 29, 2016
and was issued with a Certificate of Registration Number 4/2016.
34.1 Material Contracts
The main contracts to which the Promoter or the Trustee is a party on behalf of the REIT
include the following:

(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
Trust Deed;
Management Contract with REIT Manager;
Contract with Lead Transaction Advisor;
Contract with Legal Advisor;
Contract with Reporting Accountant;
Contract with Property Valuer;
Contract with Project Manager Certifier;
Contract with Structural Engineer; and
Agreement for purchase of 100% of the issued shares in Meru Greenwood Park Limited.
99
35 Consents
The following persons have given their consent to being named in the Offering
Memorandum in the form and context in which their names appear and have
not subsequently withdrawn their consent:
i. Fusion Capital Limited, The Promoter
ii. The Co-Operative Bank of Kenya Limited, The REIT Trustee
iii. Fusion Investment Management Limited, The REIT Manager
iv. NIC Capital Limited, The Lead Transaction Advisor
v. Mboya Wangongu & Waiyaki, The Legal Advisors
vi. Deloitte Consulting Limited, The Reporting Accountant
vii. Ngotho Property Consultants Limited, The Property Valuer
viii. Burbidge Capital Limited, The SPV Valuer
ix. Citiscape Valuers & Estate Agents Limited, The Property Manager
x. Multiscope Consulting Engineers, The Structural Engineer
xi. Beeque Consultants Limited, The Project Manager Certifier
xii. Axis Real Estate Limited, The Pre-Feasibilty Consultant
xiii. Deloitte Consulting Limited, The Tax Consultant
xiv. Knight Frank Valuers Limited, The Project Valuation Update Consultant
xv. Howard Humphreys Limited, The Project Status Update Consultant
Their written consents are available in the Documents Available for Inspection.
100
36 Documents Available for Inspection

For a period of not less than three years from the date of the approval of the Offering
Memorandum by the Authority, copies of the documents listed below shall be
available for inspection at the registered office of the Trustee or such other address as
the Authority may approve and subsequently shall be made available by the Trustee
for inspection for a period of eight years from the date of approval of the Offering
Memorandum on the giving of fourteen days notice in writing to the Trustee.
Copies of the following documents will be available for
inspection at the offices of the Promoter, Trustee and REIT
Manager.
The REIT Manager will also run a virtual data room with
copies of all the below documents for the duration of the
Offer.
(a)
(b)

Trust Deed establishing the REIT;

Signed copies of consents, dated not more than
thirty days prior to the date of publication of this
Offering Memorandum of:
(i) Promoter
(ii) Trustee
(iii) REIT Manager
(iv) Lead Transaction Advisor
(v) Legal Advisor
(vi) Reporting Accountant
(vii) Property Valuers
(viii) SPV Valuer
(ix) Structural Engineer
(x) Project Manager Certifiers
(xi) Pre-feasibility Consultant
(c)

Consultant Profiles for each of the following parties:

(i) Promoter
(ii) Trustee
(iii) REIT Manager
(iv) Lead Transaction Advisor
(v) Legal Advisor
(vi) Reporting Accountant
(vii) Property Valuer
(viii) Structural Engineer
(ix) Project Manager Certifier
(d) Legal Opinion;

(e) REIT Valuation Report by the Lead Transaction Advisor;
(f) Market and Pre-Feasibility Study for a Proposed

Development on L.R. No. Meru Municipality Block

1/3 Meru County, Kenya;
(g) Meru Greenwood Park Limited Valuation Report;
(h) Property Valuation Report on L.R. No. Meru

Municipality Block 1/3;
(i) Lock-in Agreements between the REIT

and the Asset Transferors;
(j) Share Purchase Agreement between FRED - Commercial

and the Share Transferors;
(k) Audited Financial Statements for the period ending 31st

December 2015 of Trustee;
(l) Audited Financial Statements for the period ending
31st December 2015 of REIT Manager;
(m) Audited Financial Statements for the period ending
31st December 2014 of the Property Manager;
(n) Copy of title for L.R. No. Meru Municipality Block 1/3
(o) Reporting Accountants Report;
(p) Certification from the Project Manager Certifier on the

Construction Cost Budget;
(q) Report of the Structural Engineer (Within 180 days

of the close of the Offer);
(r) Report of the Project Manager Certifier (Within

180 days of the close of the Offer);
(s) Bill of Quantities by Project Manager Certifier

(Within 180 days of the close of the Offer);
(t) Material Contracts;
(u) Greenwood City Project Status Update - May 2016

valuation report;
(v) Greenwood City Project Status Update - May 2016

project status report.
101
37 Application for REIT Securities & Application Form

37.1 Acceptance and Application Procedures

(a) Copies of this Offering Memorandum, with the

accompanying Application Form as appears in section
39.4 of the Offering Memorandum, may be obtained

from the Authorized Selling Agents referred to in
Section 38 of this Offering Memorandum or from

Fusion Capital offices or from the Trustee;

(b) Persons wishing to apply for Units in the REIT must

complete the appropriate Application Form and, every

Applicant is required to have a CDS account. The

Application Form must be completed in accordance with
the provisions contained in this Offering Memorandum

and the instructions set out on the Application Form and

returned to one of the Authorised Selling Agents listed
in Section 38 of this Offering Memorandum. In the
event of a rejection, for any of the reasons set out in

the Rejections Policy below, any such Application

Forms shall be returned to the Authorised Selling

Agent to which the Application Form was submitted

for collection by the relevant Applicant. The return

or refund of any payment received in respect of any

rejected Application will be effected by way of

Electronic Funds Transfer (EFT) provided that EFT
details have been provided and are accurate;

(c) Save in the case of negligence or willful default on the

part of the REIT, its Advisors or any of the Authorised

Selling Agents, neither the Promoter, nor any of the

Advisors nor any of the Authorised Selling Agents shall

be under any liability whatsoever should an Application

Form not be received by the offer closing date as

indicated in section 8.4 of this Offering Memorandum.

(d) Joint applications may only be made by individuals (not

corporations) and in all cases Joint Applicants submitting

an application must fall within the same Allocation

category. Joint applications must not be used to defeat

the Allocation Policy. For purposes of the minimum

initial allocation under the Allocation Policy, the

Promoter reserves the right to consider each Joint

Application as an Application by each Joint Applicant
alone, namely two separate applications, jointly for the
number of Units applied for;

(e) Receipt of funds transferred shall not amount to the

acceptance of any Application;

(f) All alterations to the Application Form, other than the
deletion of alternatives, must be authenticated by
the full signature of the applicant;

(g) Applications sent by facsimile or by any means other
than the methods stipulated in this Offering
Memorandum will not be accepted;

(h) Applications once given are irrevocable and may not be
withdrawn once submitted;

(i) By signing an Application Form, each Applicant:

(i) Agrees that having had the opportunity to read this
Offering Memorandum, it/he shall be deemed
to have had notice of all information and
representations concerning the REIT contained
herein;

(ii) Confirms that in making such Application it is
not relying on any information or representation
in relation to the REIT other than those contained
in this Offering Memorandum and accordingly
agrees that no person responsible solely or jointly
for this Offering Memorandum or any part thereof
shall have any liability for any other information or
representation;

(iii) Accepts to receive any communication from the
Trustee, including notices for meetings, through
electronic means including but not limited to email
or placement of such notices on the REITs

website, as well as notification through the mass
media;

(iv) Represents and warrants that, except in cases

where the Applicant is licensed to apply for and

hold Units for other persons, the Applicant applies
for the Units on his/its own account, will be the

beneficial owner of the Units, has not represented
himself/itself as a different person in any other
application nor applied for Units under a different
name, and is not applying for the Units on the
instructions of or on behalf of any other person
and has not instructed any other person to apply for
Units as his nominee;

(v) Acknowledges that the Promoter and/or the Lead

Transaction Advisors reserve the right to reject any

Application found to be in contravention of

subparagraph (iv) above.

(j) Applicants will receive Units in dematerialised form

by way of their CDS Accounts being credited with the
number of Units allocated and issued to them.
By signing an Application Form, an Applicant agrees to the

allotment and issue of such number of Units (not exceeding
the number applied for) as shall be allotted and issued to
the Applicant upon the terms and conditions of the Offering
Memorandum and subject to the REIT Trust Deed, and
agrees that the Trustee may enter the Applicants name in
the Register of Securities Holders of the REIT as holder of
such Units.
37.2 Opening and Closing Date of the Offer
The Offer will open at 9:00 a.m. on Thursday, 23rd June 2016
and close at 3:00 p.m. on Friday, 15th July 2016.
37.3 Application Money

(a)

102
A prospective investor wishing to apply for the Units

must duly complete and sign the accompanying
Application Form and return the same in its entirety
so that it is received by an Authorised Selling Agent
by the Closing Date, together with either bankers
cheques, RTGS slip or deposit slip. For prospective
investors applying for Units who wish to make
payment after the allotment of Units, payment must be
secured by an irrevocable on demand bank guarantee
from a licensed commercial bank, for the value of the

Units applied for, which bank guarantee must be valid

until and expire no earlier than Friday, 22nd July 2016.

Qualified institutional investors applying for Units who
wish to make payment fter the allotment of Units may
also make payment by a letter of undertaking in the

format set out in section 39.5 for the value of the Units
applied for, which bank guarantee must be valid until

and expire no earlier than Friday, 22nd July 2016;

(b) Payment for the Units allotted will be made as per the
section titled 8.4 following the Promoter notifying the

Applicant of its proposed allocation of Units. If such
payment is not made, then the Promoter shall reserve
the right to call in the Bank Guarantee. Units shall only

be issued to Applicants after payment in full for the
Units (in cleared funds net of any bank transfer charges

and inclusive of any CDS expenses) has been received
by the REIT;

(c) In accordance with the Central Depository (Regulation

of Central Depositories) Regulations, 2004, the cost of
postage of the statement issued on each CDS account
upon issue of the Units will be borne by the respective

Applicant at the rate of KES 30.00 per statement (CDS

expenses). This cost should be included in payment for
the Units is made;

(d) Payment for Units must be effected by RTGS to the

Receiving Bank provided that the Applicant completes

the relevant section of the Application Form, EFT
and RTGS payments should be made to Account Name:
Fusion D-REIT Offer; Bank: NIC Bank; Branch:
NIC House, Masaba Road; Account No: 1003535588;
SWIFT Code: NINCKENA Reference: Application
Form Number [XX];

(e) The Authorised Selling Agents and the Receiving Bank

are entitled to ask for sufficient identification to verify

that the person(s) making the Application has authority

or capacity to duly complete and sign the Application

Form. The Authorised Selling Agents are therefore

expected to undertake all Know your Client
procedures and activities on nominee accounts as

required by law. The Lead Transaction Advisor and
the REIT Trustee have the right to demand and be
provided with the details of the nominee accounts

held by the Authorised Selling Agents to ascertain the

eligibility of any Application by nominees. In default,
the REIT Trustee may at its sole discretion treat such
applications as invalid;

(f) Every Applicant is required to tick the appropriate box

on the Application Form as regards his/her residency

and or citizenship/other status, where applicable.

(g) No interest will be paid on monies received in respect
of applications for Units, nor will interest be paid on
any amounts refunded or deposited at the time

of Application;

(h) Commission at the specified rate of 1.5% of the Offer

price of the Units allocated per Application will be paid

to Authorised Selling Agents that are members of
the NSE on all allocations made in respect of

Application Forms received for the Units and which

bear the stamp of the Authorised Selling Agent. No

commission will be paid on Application Forms which

bear more than one or no Authorised Agents stamp

or which are rejected. Commission of 1.0% of the Offer
Price of Units allocated will be paid to any Authorised

Selling Agent which is not a member of the NSE;

(i) All transactions relating to the Offer shall be
transacted in Kenya Shillings.
37.4 Rejections Policy

(a)

(b)

(c)

(d)

The Authorised Selling Agents will present to the

Receiving Bank through the Registrar all Authorised

Payments received on behalf of the REIT Scheme.
Delivery of an Application Form accompanied with

evidence of RTGS remittance or deposit slip or,
in the case of Qualified Institutional Investors, a

Letter of Undertaking in the form set out in section 39.5
to the Registrar will constitute a warranty that the
payment will be honoured on first demand;
The Promoter and the Trustee shall not be under any

liability whatsoever should any Application Form fail
to be received by the Registrar or by any Authorised

Selling Agent by the Closing Date. In this regard,

such Application Forms and accompanying cheques

shall be returned to the Authorised Selling Agent where
the Application Form was submitted, for collection by
the applicable Applicants;
Applications shall be rejected if full value is not
received; and
Applications may also be rejected for the following

reasons:

i. Incorrect CDS Account Number;
ii. Missing or illegible name of primary or joint

applicant in any Application Form;

iii. Missing or illegible identification number, including
corporation registration number, or in the case of

Kenyan residents (other than citizens), missing or
illegible alien registration number;
iv. Missing or illegible address (either postal or

street address);

v. Missing residence and citizenship indicators for

primary Applicant in the case of an individual

or missing residency for tax purposes for corporate
investors;

vi. Missing or incomplete CDS 5 Form in the case of

financed applications where the Units are to be

taken as collateral;

vii. Insufficient documentation forwarded, including

missing tax exemption certificate copies for

Applicants that claim to be tax exempt;
viii. In the case of nominee applications, incomplete
information, failure to satisfy the Issuer of nominee
status or lack of declaration from the agent

submitting the Application;

ix. Missing or inappropriately signed Application

Form including:

103
Primary signature missing from Signature Box 1;

Joint signature missing from Signature Box 2
(if applicable);
Two directors or a director and the respective company
secretary having not signed or seal having not been
affixed in the case of a corporate application;
Foreign Investors are advised to consult their own

professional advisors as to whether they require any
governmental or other consents or need to observe any
applicable legal, tax or regulatory requirements to enable
them to apply for and purchase the Units.

x. Amount as payment for number of Units applied for
is less than the correct calculated amount;
xi. Bankers cheque has unauthenticated alterations; or
xii. Such other reason as the Issuer may provide to the

Applicant upon rejection of an application.
37.5 Refund Policy
37.8 How to Complete the Application
Please find included in this OM, a copy of an Application

Form for illustrative purposes. Do note that applications
for REIT securities can not be made on the Application
Form attached to the Offering Memorandum.
Applicant/s monies will be refunded through EFT and will

apply as follows:

(a)

(b)

(c)

Refunds will only apply where funds for the Application

are not pledged through guarantees or letters of
undertaking on behalf of the Applicant;
No interest will be paid on any application monies

received in respect of applications for Units, nor
will interest be paid on amounts refunded to the
Applicant. Interest, if any, earned on application monies
is payable to the CMA Investor Compensation Fund
in accordance with CMA regulations. Refunds in respect
of unsuccessful Applications (if any) shall be made by
the REIT in the form of EFT;
EFTs will only be credited to accounts held at

commercial banks. In the case of Applicants whose
Units are pledged, refund money/monies in the name of
the Applicant will be delivered to the financier indicated
on the Application Form.
Refunds to Foreign Investors and East African investors

outside Kenya will be effected through EFT in Kenya
Shillings (net of transaction charges) to the Applicants bank
account provided on the Application Form. Any exchange
rate differences will be for the account of the Applicant.
37.6 Allocation Policy

(a)

(b)

FRED - COMMERCIAL will allocate the Units on a first-

come first served basis but reserves the right to achieve

a balanced distribution of the Units between institutions,
companies and individual members of the public;
FRED - COMMERCIAL will announce the manner in
which the Offer Units have been allocated to applicants on
the date set out in section 8.4 of the Offering Memorandum
titled Timetable of Principal Events for announcement of
allocation results. The announcement will be published in at
least two newspapers with national circulation in Kenya.
37.7 Foreign Investors
The Offer to Foreign Investors may be affected by laws

and regulatory requirements of the relevant jurisdictions in
which the Foreign Investors reside. Any Foreign Investors
wishing to apply for the Units must satisfy themselves as to
the full observance of the laws of the relevant territory and
governmental and other consents to ensure that all requisite
formalities are adhered to, and must pay any issue, transfer
or other taxes due in such territory.
37.9 Minimum number and value of REIT Securities

that can be applied for
The REIT is subject to a minimum aggregate subscription

of fifty percent (50%) of the entire Offer, that is, KES
1,150,000,000 or 50,000,000 Units.
Each investor must subscribe for a minimum of 218,000
units that is REIT Units worth at least KES. 5,014,000.
37.10 Allocation of Units
The allocation will be made on a first come first served basis.

The Issuer may exercise some discretion with regard to
the allocations. In particular and subject always to the
provisions of the Regulations, the Issuer may:
(a)

(b)
(c)

Determine the number of REIT securities to be issued

or allocated to any applicant;
Extend the closing date for the issue or offer; and
Withdraw the offer in the event that a minimum

subscription is not reached.
37.11 Qualification of an Investor as a Professional

Investor
In order to qualify as a professional investor investors

will need to qualify under one of these categories. The
investor would require to be either:

(a)
(b)
(c)

(d)

A person licensed under the Act;

an authorized scheme or collective investment scheme;
A bank or subsidiary of a bank , insurance company, co-
operative, statutory fund, pension or retirement fund; or
A person including a company, partnership, association
or a trustee on behalf of a trust which, either alone, or
with any associates on a joint account subscribes for
REIT securities with an issue price equal to at least five
million shillings.
NB: The REIT Units purchased in this Offer may only

be transferred to another professional investor.
104
38 Authorised Selling Agents

Fusion Capital Limited (FCL) has appointed specific Authorised Selling Agents in
connection with the Offer. The Authorised Selling Agents are Members of the NSE that
are issued with annual licenses by the CMA. These Authorised Selling Agents in Kenya
are listed below.
Licensed Investment Banks

African Alliance Kenya Investment Bank Limited
1st Floor, Trans-national Plaza
Mama Ngina Street
PO Box 27639,00506 Nairobi
Tel: 2762000/2762557
securities@africanalliance.co.ke
Genghis Capital Limited

PWC Tower, 4th Floor, Waiyaki Way
P.O. Box 9959-00100, Nairobi
Tel: 2774750/1/2
customerservice@genghis-capital.com
Barclays Financial Services Limited

Barclays Plaza M6
Loita Street
Tel: 310843
barclays.kenya@barclays.com
KCB Capital Limited

Kencom House
Tel: 2287000
contactcentre@kcb.co.ke
CBA Capital Limited

Mara and Ragati Roads, Upper Hill
PO Box 30120, 00100 Nairobi
Tel: 2884444
contact@cbagroup.com
NIC Capital Limited

PO Box 44599, 00100, Nairobi.
Tel: 2888000
info@nic-capital.com
Dyer & Blair Investment Bank Limited

10th Floor, Loita House, Loita Street
PO Box 45396, 00100, Nairobi. Tel: 3240000/2227803
shares@dyerandblair.com
Renaissance Capital (Kenya) Limited

6th Floor, Purshottam Place, Chiromo Road
PO Box 40560-00100 Nairobi.
Tel: 3682000/3754422
info@rencap.com
Equity Investment Bank Limited

Equity Center
Hospital Road, Upper Hill
PO Box 74454, 00200 Nairobi
Tel: 2262000
SBG Securities Limited

CFC Stanbic House
2nd Floor, CFC Centre, Chiromo Road,
PO Box 47198, 00100 Nairobi. Tel:3638900,
cfcfs@cfcgroup.co.ke
Faida Investment Bank

1st Floor, Windsor House, University Way
Tel: 2243811-13
info@faidastocks.com
Standard Investment Bank Limited

16th floor, ICEA Building, Kenyatta Avenue
Tel: 2228963/2228967
info@standardstocks.com
105
Licensed Stockbrokers
ABC Capital Limited
5th Floor, IPS Building, Kimathi Street
headoffice@abccapital.co.ke
Kingdom Securities Limited

5th Floor Co-operative House, Haile Selassie Avenue
PO Box 48231- 00100, Nairobi.
Tel: 3276000
info@kingdomsecurities.co.ke
AIB Capital Limited

9th Floor, Finance House, Loita Street
info@afrikainvestmentbank.com
NIC Securities Limited

PO Box 63046, 00200, Nairobi. Tel: 2888444
info@nic-securities.com
ApexAfrica Capital Limited

4th Floor, Rehani House, Koinange Street
P.O. Box 43676, 00100, Nairobi. Tel: 2242170/2220517
invest@apexafrica.com
Old Mutual Securities Limited

6th Floor, IPS Building, Kimathi Street
PO Box 50338, 00200, Nairobi. Tel:2241350/4/79
info@reliablesecurities.co.ke
Francis Drummond and Company Limited

2nd Floor, Hughes Building, Kenyatta Avenue,
info@drummond.com
Sterling Capital Limited

11th Floor, Finance House, Loita Street
P.O. Box 45080, 00100, Nairobi. Tel: 2213914/244077
info@sterlingstocks.com
Genghis Capital Limited

PWC Tower, 4th Floor, Waiyaki Way
Tel: 2774750/1/2
customerservice@genghis-capital.com
Suntra Investment Bank Limited

10th Floor, Nation Centre, Kimathi Street
Tel: 2870000
info@suntra.co.ke
Kestrel Capital (E.A) Limited

5th Floor, ICEA Building, Kenyatta Avenue
info@kestrelcapital.com
106
39 Schedules/Appendices
39.1 TRUSTEE AUDITED FINANCIAL STATEMENTS FOR THE PERIOD ENDING 31ST DECEMBER 2014
39.1.1 STATEMENT OF COMPREHENSIVE INCOME

GROUP
31-Dec-14
KSHS.000
Audited
31-Dec-13
KSHS.000
Audited
BANK
31-Dec-14
KSHS.000
Audited
31-Dec-13
KSHS.000
Audited
1.0 INTEREST INCOME

1.1
1.2
1.3
1.4
Loans and advances

Government securities
Deposits and placements with banking institutions
Other interest income
24,713,355
4,331,262
307,394
-
20,045,346
4,126,061
370,318
-
24,669,606
4,309,901
287,900
-
20,044,538
4,107,495
358,889
-
29,352,011
24,541,725
29,267,406
24,510,922
5,957,719
215,306
1,903,128
5,103,060
146,220
666,535
5,957,045
206,410
1,903,128
5,103,054
146,220
666,535
8,076,154
5,915,815
8,066,583
5,915,809
21,275,858
18,625,910
21,200,823
18,595,113
2,148,888
6,565,180
1,417,692
5,958
672,187
1,935,527
5,225,451
1,471,977
53,551
577,386
21,148,888
5,933,931
1,201,739
258,101
639,416
1,935,527
4,894,638
1,443,649
53,551
625,615
4.6 Total non-interest income
10,809,905
9,263,893
10,182,074
8,952,980
5.0 TOTAL OPERATING INCOME
32,085,762
27,889,803
31,382,898
27,548,093
1,175,598
8,438,158
161,129
1,304,859
1,953,657
342,444
6,722,174
778,157
8,013,780
131,734
1,123,891
1,528,961
178,812
5,627,393
1,133,519
8,060,096
116,235
1,102,060
1,840,599
304,166
6,311,493
773,291
7,825,352
110,274
1,062,895
1,514,249
176,176
5,380,400
6.8 Total other operating expenses
20,098,019
17,382,727
18,868,168
16,842,637
7
8
8
Profit/(Loss) before tax and exceptional terms

Exceptional items - early retirement costs
Exceptional items - share of profit of associate
11,987,743
(1,342,509)
270,976
10,507,075
-
365,368
12,514,729
(1,342,509)
-
10,705,457
-
Profit/(Loss) before tax
10,912,210
10,872,444
11,172,221
10,705,457
1.5 Total interest income

2.0
2.1
2.2
2.3
INTEREST EXPENSE
Customer deposits
Deposits and placements from banking institutions
Other interest expense
2.4 Total interest expense

3.0 NET INTEREST INCOME/(LOSS)
4.0 NON-OPERATING ICOME
4.1 Fes and commissions on loans and advances
4.2 Other fees and commissions
4.3 Foreign exchange trading income/(loss)
4.4 Dividend income
4.5 Other income
6.0 OTHER OPERATING EXPENSES

6.1 Loan loss provision
6.2 Staff costs
6.3 Directors emolments
6.4 Rentals charges
6.5 Depreciation charge on property and equipment
6.6 Armortisation charges
6.7 Other operating exepenses
10 Current tax
11 Deferred tax
3,453,288
(552,075)
1,996,713
(232,454)
3,373,937
(553,043)
1,958,092
(231,826)
12 Profit/(Loss) after tax and exceptional items
8,014,997
9,108,185
8,351,326
8,979,191
107
39.1.2 STATEMENT OF FINANCIAL POSITION
BALANCE SHEET

GROUP
31-Dec-14
KSHS.000
Audited
31-Dec-13
KSHS.000
Audited
BANK
31-Dec-14
KSHS.000
Audited
31-Dec-13
KSHS.000
Audited
A ASSETS
1 Cash (local and foreign)
2 Balances due from Central Bank of Kenya
3 Kenya Government and other securities held

for dealing purposes
4 Financial assets at fair value through profit and loss
5a.a Investment securities: held to maturity
Kenya Government securities
a.b Investment securities: held to maturity
other securities
b.a Investment securities: available for sale
Kenya Government securities
b.b Investment securities: available for sale
other securities
6 Deposits and balances due from local

banking institutions
7 Deposits and balances due from banking

institutions abroad
8 Tax recoverable
9 Loans and advances to customers (net)
10 Balances due from banking institutions in the group
11 Investments in associates
12 Investments in subsidiary companies
13 Investment in join ventures
14 Investment in properties
15 Property, plant and equipment
16 Prepaid lease rentals
17 Intangible assets
18 Deferred tax asset
19 Retirement benefit asset
20 Other asset
9,455,086
14,880,245
9,196,193
11,516,976
8,970,240
13,954,693
8,908,316
10,388,172
30,009
559
30,009
557
30,009
501
30,009
501
24,643,526
13,983,393
24,460,192
13,820,482
45,000
16,068,108
19,560,640
15,960,083
19,560,640
5,072,361
5,746,273
5,072,361
5,746,273
7,847,333
2,968,294
7,845,769
3,003,578
4,963,526
-
179,486,355
207,361
1,907,722
-
-
-
10,078,698
37,570
1,712,901
618,629
-
8,386,078
7,072,622
97,029
137,087,227
-
1,688,888
-
-
-
11,447,430
38,180
1,616,772
66,658
-
9,053,219
4,969,092
-
178,978,586
207,361
755,118
1,806,449
-
-
9,253,832
37,570
1,363,209
609,156
-
8,414,876
7,053,215
99,631
137,051,537
109,379
755,118
1,748,494
10,641,897
38,180
1,094,514
56,113
8,768,434
21 TOTAL ASSETS
285,396,067
231,215,359
282,689,098
228,874,484
B LIABILITIES
22 Balances due to Central Bank of Kenya
-
23 Customer deposits
217,698,323
24 Deposits and balances due to local banking institutions
3,159,444
25 Deposits and balances due to banking institutions abroad
-
26 Other money market deposita
-
27 Borrowed funds
18,269,487
28 Balances due to banking institutions in the group
-
29 Tax payable
149,821
30 Dividends payable
-
31 Deferred tax liability
-
32 Retirement benefit liability
-
33 Other liability
2,706,082
-
175,425,121
5,462,337
-
-
10,252,392
-
-
-
-
-
2,937,252
-
216,174,313
3,159,444
82,282
-
18,269,487
-
129,171
-
-
-
2,523,282
174,776,225
5,462,337
10,252,392
2,731,485
34 TOTAL LIABILITIES
194,077,101
240,337,979
193,222,439
C
35
36
37
38
39
40
41
42
SHAREHOLDERS FUNDS
Paid up/Assigned capital
Share premium/(discount)
Revaluation reserve
Retained earnings/Accumulated losses
Statutory loan loan loss reserve
Other reserve
Proposed dividends
Capital grants
43 TOTAL SHAREHOLDERS FUNDS
241,983,157
4,889,317
2,889,789
439,517
32,206,653
718,421
(793,356)
2,444,658
535,792
4,190,844
3,588,262
460,752
26,409,433
718,026
(1,243,357)
2,095,422
554,268
4,889,317
2,889,789
403,407
31,264,373
717,844
(794,062)
2,444,658
535,792
4,190,844
3,588,262
407,035
25,354,077
717,844
(1,255,707)
2,095,422
554,268
43,330,791
36,773,649
42,351,119
35,652,045
82,118
364,608
285,396,067
231,215,359
282,689,098
228,874,484
43.1 Non-Controlling interest

44 TOTAL LIABILITIES & SHAREHOLDERS FUNDS
108
39.2 REIT MANAGER AUDITED FINANCIALS FOR THE PERIOD ENDING 31ST DECEMBER 2014

2014 2013
Note
Sh000
Sh000
Fees and commissions

3
26,712,883
15,629,146
Interest income
4
856,293
555,878
Other income

1,045,119
-
Staff costs
5
(26,480,721)
(11,695,105)
Operating and other expenses
6
(8,985,086)
(11,941,554)
Foreign exchange gain
53,606
589,165
Loss before taxation
7
(6,797,906)
(6,862,470)
Taxation (charge)/credit
8(a)
(777,501)
1,955,164
Loss for the year
(7,575,407)
(4,907,306)
-
(7,575,407)
(4,907,306)
39.2.2 STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2014

2014 2013
Note Sh000 Sh000

ASSETS
Non current assets
Equipment
Intangible assets
Deferred tax asset

9
10
11
3,898,641
136,724
98,807
4,693,156
239,267
2,121,927
4,134,172
7,054,350
Current assets
Trade and other receivables
12
9,161,504
4,896,513
Due from related parties
13(b)
2,106,714
1,639,320
Taxation recoverable
8(c)
1,509,555
75,001
Deposits with financial institutions
14
8,976,613
10,248,763
17(b)
6,741,555
5,012,733

28,495,941
21,872,330
Total assets
32,630,113
28,926,680
30,000,000
(12,503,882)
19,500,000
(4,928,475)
17,496,118
14,571,525
13(c)
16
12,414,614
2,719,381
9,730,915
4,624,240
Total liabilities
15,133,995
14,355,155
32,630,113
28,926,680
EQUITY AND LIABILITIES

Share capital
Revenue deficit
15

Current liabilities
Due to related parties
Trade and other payables
109
39.3 PROPERTY MANAGER AUDITED FINANCIALS FOR THE PERIOD ENDING 31ST DECEMBER 2014
2014 2013
Note
Sh000
Sh000
Revenue
11
Direct costs

Gross Profit
11
Administrative Expenses
12
Exchange gain
Profit before taxation

Taxation
7
Profit for the year

Other Comprehensive Income
Total Comprehensive Income
66,449,448
(19,317,722)
47,131,726
(11,245,913)
13 2,363
35,888,176
(4,225,259)
31,662,917
31,662,917
8,810,958
(26,931,345)
(18,120,387)
(4,409,780)
(22,530,167)
20,767
(22,509,401)
(22,509,401)
39.3.2 STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2014

2014 2013
Note
Sh000
Sh000
ASSETS
Non-Current Assets
Property, plant and equipment
4
1,862,223
2,075,261
Deferred Tax asset
14
205,032 3
116,80
2,067,255
2,192,064
Current Assets
Trade and other receivables

5 369,374
192,822
Tax recoverable
7

436,285
Due from directors
15
3,882,427
Cash and Bank balances
8
4,228,736
156,292

8,480,537
785,399
Total Assets
10,547,792
2,977,463

EQUITY AND LIABILITIES

Share capital
2 81,000
81,000
Revenue Reserves
3
8,941 , 056
{22,721 , 861}

9,022,056
(22,640,861)
Non-Current Liabilities
Due to Directors
15

20,942,822
20,942,822
Current Liabilities
Trade and other payables
6
621,901
4,675,501
Tax Payable
7
458,462
Clients Fund Account
16
445,372

1,525,735
4,675,501
Total Liabilities
1,525,735
25,618,323
10,547,792
2,977,463
110
39.4 Offer Application Form
Fusion Real Estate Development Trust Commercial

Approved in Kenya under the Capital Markets Act (Chapter 485A, Laws of Kenya) Reg. No. [xxx]
OFFER APPLICATION FORM

In respect of the Public Offer of Kenya Shillings 100,000,000 Fusion Real Estate Development Trust Commercial Units at
an Offer Price of KES 23.00 per Unit as promoted by Fusion Capital Limited and listing of the Units on the Nairobi Securities
Exchange Limited.
Offer opens at 9.00 am on the 23rd June 2016
Offer Closes at 5.00 pm on the 15th July 2016
The Trustee shall reject any application in whole or in part if the instructions as set out in the Offering Memorandum and the
Application Form are not complied with.
APPLICANTS STATEMENT
By signing the Application Form overleaf, I /We the applicant(s) herein state that:-
1.

2.

3.

4.

5.
I/We have full legal capacity and having read the Offering Memorandum and this Application Form including the
notes at the back I/we hereby irrevocably apply for and request you to accept my/our application for the under
mentioned value of Units in Fusion Real Estate Development Trust - Commercial, or any lesser value of Units that
may, in your sole and absolute discretion, be allotted to me/us subject to the Terms and Conditions as contained in the
allocation policy under the Offering Memorandum.
I/We authorize the Trustee to enter my/our name in the register of Unit holders of Fusion Real Estate Development
Trust Commercial as holder(s) of Units to me/us and to issue any refunds due to me/us via Electronic Funds
Transfer in accordance with the terms and conditions in the Offering Memorandum.
I/We agree that this application shall be irrevocable and shall constitute a contract which shall become binding upon
receipt by Fusion Real Estate Development Trust - Commercial, and shall be governed by the terms and conditions
of the units.
I/We acknowledge that Fusion Real Estate Development Trust - Commercial reserves the right to reject any application
found to be in contravention of above declarations.
I/We confirm that all information provided by me/us on the Application Form is true.
GENERAL INSTRUCTIONS ON COMPLETING THE APPLICATION FORM

6. Applications can only be made through NIC Capital Limited or the authorised selling agents.
7. NIC Capital Limited will be pleased to assist in understanding the application process and subsequently filling in
the Application Form.
8. Where necessary, applicants are requested to consult their financial advisor. The offer closes on 15th July 2016.
9. Use original Application Form only. Photocopies will not be accepted.
10. Use capital letters with only black/blue biro/ink, within the grid spaces provided. Alterations (other than deletion
of alternatives) must be authenticated by the full signature of the applicant or preferably a new form used.
11. No individual or organization can make any promises contrary to the allocation criteria specified in the

12. Receiving Bank details: Bank: NIC Bank; Branch: NIC House, Masaba Road; Account No: 1003535588;

Account Name: Fusion D-REIT Offer; SWIFT Code: NINCKENA
111
OFFER APPLICATION FORM
PRINT ONLY WITHIN BOXES

G OOD
S T
Serial No:
A:
B:
PLEASE COMPLETE IN CAPITAL LETTERS USING BLUE/ BLACK INK
APPLICANT POOL: (Tick as applicable)

Applicant type:
Retail/ Individual
Institutional
Tax status:
Taxable
Exempt
Residence:
Resident
Non Resident
Citizenship:
Kenyan
East African
(i) PRIMARY APPLICANT DETAILS: (Names as per National ID / Passport)

Surname (Last Name)
Foreigner
CDS A/C No.
First Name and Other Names
Passport Number / ID Number / Alien ID Number
Country of Issue
(ii) JOINT APPLICANT 1 DETAILS: (Names as per National ID / Passport)

Surname (Last Name)
CDS A/C No.
Country of Issue
(iii) JOINT APPLICANT 2 DETAILS: (Names as per National ID / Passport)

Surname (Last Name)
CDS A/C No.
Country of Issue
(iv) CORPORATE / INSTITUTIONS: (Name as per Certificate of Registration / Incorporation)

Name
Registration / Incorporation No.
CDS A/C No.
Counrty of Registration / Incorporation
For Nominee Applicants Only:

Account Name / Number
C:
VALUE OF UNITS APPLIED FOR:

Number of units applied
Minimum Application Amount of KShs 5,000,000 (Add KShs 35 for CDSC)

Multiply by price per Unit (KShs)
D:
FULL MAILING ADDRESS AND CONTACT DETAILS FOR ALL APPLICANTS:

P.O. Box
Postal Code
Street
City/ Town
Country
Telephone Number
Mobile Number
Email Address
Fax Number
112
BAD
S T
REFUND & DIVIDEND DISPOSAL DETAILS

Serial No:
E:
REFUND/ DIVIDENDS PAYMENT :

Please provide Bank details for EFT/SWIFT Transfers
(Bank details must be confirmed either by attaching a voided cheque or provision of a bank statement)
Electronic Fund Transfer Only
Name of Bank
Bank Code
Name of Branch (e.g. MOI AVENUE)
Account Number
F:
SIGNATURES
Signature 2
Signature 1
Date (DD / MM / YYYY)
G:
Company Seal
/ 2 0 1 6
FOR OFFICIAL USE ONLY:

Authorised Placement Agent Stamp
&
G: INVESTOR RECEIPT:
Serial No:
Number of Units:
Selling Agents Name:
Name (Separate Names by one box)
Amount Paid (KShs):
CDA Code:
Stamp:
Account Number (No leading zeros):
LI/LC/FI/FC
Date:
NOTES TO THE FUSION REAL ESTATE DEVELOPMENT TRUST - COMMERCIAL UNITS APPLICATION FORM
A
B
C
D
E
F
Tick the appropriate investor pool whether retail/individual or Institutional. Tick appropriate residence and citizenship status.
Fill in the value of Units being applied for
Fill in your current contact details; your mailing address including the postal code, telephone number, mobile telephone number and email address
For refunds (if any), Dividends payments, fill in your bank details i.e name of bank, branch name, bank code( the five-digit code indicating bank & branch codes)
and the correct account number. Refunds will be payable via Electronic Funds Transfer(EFT)
Institutional applications must be signed by Authorized Signatories and the company seal appended in the space provided. Applicants signing by thumbprint must
have the thumbprint witnessed next to it, and the witness should provide his/her full names and identification number within the signature box
This section is reserved for the official use of the Placement Agent and the Receiving Agent
Please note that the application forms received by CDSC Registrars Limited after the closing date will be automatically rejected.
113
39.5 Letter of Undertaking

[ON LETTERHEAD OF BANK/CUSTODIAN/QUALIFIED INSTITUTIONAL INVESTOR (QII)]
The Trustee
Fusion Development Real Estate Investment Trust - Commercial
P O Box 48231 00100
Nairobi, Kenya.
Date:

Dear Sirs
UNDERTAKING IN RESPECT OF PAYMENT ON ALLOCATION OF UNITS TO [name of QII]
WHEREAS [name of investor] (the Investor) have applied for [xxx] Units worth KES [xxx] in Fusion Development
Real Estate Investment Trust Commercial (FRED COMMERCIAL) being offered by you for subscription as set out in
the Offering Memorandum dated [xxx]. (Capitalised terms used in this letter of undertaking shall have the meaning and
interpretation given to such terms in the FRED COMMERCIAL Offering Memorandum.
NOW at the request of the Investor and in consideration of FRED COMMERCIAL allotting to the Investor on the terms
set forth in the Offering Memorandum AND in consideration of FRED COMMERCIAL allotting to the Investor Units
worth KES [xxx] that we have applied for or such lesser amount as you shall in your absolute discretion determine, we
hereby undertake to pay you without delay or argument and without the need to prove, forthwith upon your first written
notice specifying how much has been provisionally allotted to the Investor, such sum requested not exceeding KES [xxx].
Should such payment not be made within two business days following the deemed service of such notice then FRED
COMMERCIAL shall be entitled without further notice to either: treat the Investors application as having been
repudiated and cancel the provisional allotment to it and re-allocate the provisionally allotted Units on such terms and
conditions as it shall think fit without prejudice to any rights to damages for such repudiation or; to allow us further
time for payment on such terms and conditions as it shall think fit in which event we shall pay default interest on all sums
outstanding at the rate of 15% per annum calculated on daily balances and compounded monthly.
Any notice to be served on us shall be in writing and shall be deemed to have been properly served on us if delivered by
hand or sent by fax or email to us at the address specified in our Application Form.
Any notice shall be deemed to have been received, if delivered by hand, at the time of delivery or, if sent by fax, on the
completion of transmission or if by email receipt of a confirmed delivery notice.
This undertaking shall be governed and construed in accordance with the laws of Kenya and we irrevocably submit to the
non exclusive jurisdiction of the Courts of Kenya. If we are not a Kenyan Company and in addition to any other permitted
means of service, we hereby irrevocably appoint the Authorised Selling Agent submitting our Application for the Offered
Units as our agent for the receipt of any legal process.
IN WITNESS WHEREOF THIS LETTER OF UNDERTAKING HAS BEEN EXECUTED BY US THIS ______DAY
OF _____ 2016
Signed By:
1) Name __________________________________ Signature_____________________
Title __________________________________
2) Name __________________________________ Signature_____________________
Title __________________________________
Note: Qualified Institutional Investors are Fund Managers, Authorized Depositories and Investment Banks licensed
under the Capital Markets Act and Insurance Companies who manage life funds and licensed by the Insurance
Regulatory Authority.
114
39.6 Legal Opinion
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Fusion Real Estate Development Trust - Offering Memorandum

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Fusion Real Estate Development Trust - Offering Memorandum

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20th JUNE 2016

Fusion Real Estate Development

Should the Trustee exercise its authority to borrow on behalf

The investment in REIT Securities is an equity investment and

LEAD TRANSACTION ADVISOR

AGE QUOD BENE AGIS

NGOTHO PROPERTY CONSULTANTS LTD

LEAD SPONSORING BROKER

CONSULTANTS AND ADVISORS

DEFINITIONS AND INTERPRETATIONS

FREQUENTLY ASKED QUESTIONS

THE STRUCTURAL ENGINEER

Overview and Background

THE PROPERTY VALUER

THE PROJECT MANAGER CERTIFIER

KEY TERMS OF THE TRUST DEED AND SCHEME DOCUMENTS

Key aspects of the Trust Deed

OVERVIEW OF PROJECTS TO BE UNDERTAKEN

PRO-FORMA FINANCIAL INFORMATION

KEY ASSUMPTIONS AND SENSITIVITY ANALYSIS

FRED - COMMERCIAL VALUATION AND VALUATION BASIS

ASSET VALUATION AND VALUATION BASIS

Assets to be vested in the Trust

Opportunity for portfolio diversification

Kenya Economic Performance

REAL ESTATE SECTOR OVERVIEW

Property market segments

ACCOUNTS & FINANCIAL STATEMENTS

Risks Related to the Assets of FRED - Commercial

FEES, COSTS AND EXPENSES

DISTRIBUTION POLICY AND FACTORS DETERMINING DISTRIBUTION

Distribution Policy per the Trust Deed

TAXATION, DISCRETION AS REGARDS DISTRIBUTIONS & IMPLICATIONS FOR

Taxation treatment of the REIT

TRANSFERABILITY OF REIT SECURITIES, LISTING AND REDEMPTION

Restriction on the transferability of the REIT securities.

Summary of SPV valuers report

MEETINGS, REPORTS AND ACCOUNTS & REIT SECURITIES HOLDERS RIGHTS

Matters which must be put to a vote of REIT securities holders

DOCUMENTS AVAILABLE FOR INSPECTION

APPLICATION FOR REIT SECURITIES & APPLICATION FORM

Acceptance and Application Procedures

AUTHORISED SELLING AGENTS

It is expected that the trading of the Units will commence on

Legal Advisors Opinions

Mboya Wangongu & Waiyaki, the Legal Advisors, have given

Reporting Accountants Opinion

This Offering Memorandum contains statements from Deloitte &

Application has been made to the Capital Markets

This Offering Memorandum contains forward-looking statements

The NSE has given permission for listing of the Units.

This Offering Memorandum is dated: 20th June 2016

Each expert named in the Offering Memorandum shall be

3 Corporate Information of the Main Parties

CONTACT INFORMATION FOR THE PROMOTER

Fusion Capital Limited,

Dr. Philip Goodwin Executive Chairman

P.O. Box 47538 - 00100, Nairobi