IFC, Proparco and MIGA back Kasada to support Kenya’s hospitality sector
A financing package has announced from IFC and Proparco to Kasada Hospitality Fund LP will inject new life into a 206-room hotel in Nairobi, Kenya, with green and sustainable building practices and renovations, supporting the city's important hospitality sector. In addition, MIGA, a member of the World Bank Group, will provide political risk insurance to the project.
Kasada will use the financing package to refurbish, modernize, and expand the former Crowne Plaza in Nairobi's Upper Hill, a business district that hosts embassies, international organizations, and the headquarters of some of East Africa's largest corporations. Following this revamp, the property will re-open as a dual branded Pullman & Mercure property and also include a state-of-the-art co-working space under the brand WOJO, which will cater to a growing demand in the market for more flexible workspaces.
The financing package includes an $11 million loan from IFC and an $11 million parallel loan from Proparco. In addition, MIGA will provide $27.5 million in political risk insurance to the project.
The travel and tourism sector accounts for an estimated 9 percent of Kenya's GDP, with Nairobi contributing a significant portion due to its status as a commercial center within Eastern Africa and a hub for many regional and global organizations. Demand from corporations is a key driving factor behind the hotel market.
The hotel aims to become EDGE certified, an innovation from IFC that helps clients reduce their environmental footprint by using more environmentally friendly building materials and less water and energy.
"We look forward to bringing our multi-disciplinary expertise in creating value and impact at the Pullman & Mercure Upper Hill. With the support and commitment from this long-term financing solution from IFC and Proparco, we will reposition, expand, and enhance the building and its facilities to bring them to today's modern hotel industry and highest ESG standards. This asset is about to enter a new life cycle and contribute to the revitalization of the Kenyan hospitality sector post the COVID-19 pandemic," said Olivier Granet, Kasada's Managing Partner and CEO and David Damiba, Kasada's Managing Partner and CIO.
"IFC invests in the hotel and tourism industry because it is a major contributor to employment, foreign exchange earnings, and tax revenues. IFC's partnership with Kasada is supporting the development of a strong and resilient hospitality sector across key markets in Africa including Kenya," said Henrik Elschner Pedersen, IFC Regional Industry Director in Africa for Manufacturing, Agribusiness, and Services.
"Tourism is vital for developing economies, helping support employment, strengthening supply chains, and bringing in foreign exchange. MIGA's partnership with Kasada contributes to the current recovery of the tourism and hospitality sector from the impact of COVID-19 across sub-Saharan Africa," said Muhamet Bamba Fall, MIGA's Director of Operations.
The financing is part of a broader partnership announced in July 2021 between the Kasada Hospitality Fund and IFC, where IFC committed to invest up to $160 million in Kasada's fund to help it build a strong and resilient hotel portfolio across sub-Saharan Africa as the industry recovers from the effects of the COVID-19 pandemic on tourism and business travel.
The MIGA guarantees are part of a master contract issued by MIGA in 2021 to cover the Kasada Hospitality Fund's equity investments in the redevelopment and construction of hotels in Sub-Saharan Africa. The guarantees provide coverage against the risks of transfer restriction, expropriation, and war and civil disturbance for up to 15 years. To date, MIGA has issued guarantees for 12 hotel projects in six countries under the master contract, for a total of about $180 million.
