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Why Sh5B Old Mutual Tower in Nairobi is being sold

Old Mutual to sell iconic Sh5 billion tower in Nairobi

UAP Old Mutual Tower in Nairobi.

Old Mutual Group Holdings is proposing the sale of its renowned UAP Old Mutual Tower in Nairobi.

This decision comes in the wake of a 96 percent surge in finance costs attributed to the depreciation of the Kenya shilling.

In a notice to shareholders on Monday October 30 the company revealed plans to address mounting finance costs.

The insurer has been exploring avenues such as converting shareholder Sh8.8 billion loans into preference shares to alleviate financial pressures.

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The company also plans approve the sale and transfer of the 31-storey office block at the upcoming Annual General Meeting scheduled for November 14.

The move by the South African financial giant to restructure loans aligns with a broader trend among corporations grappling with inflated finance costs amid currency depreciation.

The UAP Old Mutual Tower, encompassing 324,881 square feet, is currently the company's most significant investment property.

It was opened in 2016 and constructed at a cost of Sh5 billion. UAP Old Mutual Tower stands at an impressive height of 163 meters, making it one of the tallest buildings in Nairobi.

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Despite experiencing a 50% reduction in its half-year loss to Sh348 million in the first six months of 2023, compared to Sh1.1 billion in the previous year, finance costs surged nearly twofold.

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

The firm highlighted the impact of the Libor moving from 0.59 percent in June 2022 to five percent in June 2023, coupled with a 14% depreciation of the Kenyan shilling against the US dollar during the same period.

The global upswing in dollar interest rates, fueled by central banks worldwide combatting inflation, has contributed to the heightened expense of carrying dollar-denominated loans.

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