Contributed By MMC Africa Law
The main investment structures for real estate include limited liability companies (LLCs), limited liability partnerships (LLPs) and real estate investment trusts (REITs).
An LLC is a company limited by shares with legal personality to own property distinct from its owners, the shareholders. This could be a private or public LLC organised in accordance with the provisions of the Companies Act.
On being registered, an LLP becomes a body corporate with perpetual succession with legal personality separate from that of its partners.
REITs are real estate companies or corporations which own, develop or manage different types of properties. RElTs are investment instruments that source funds to build or acquire real estate assets which they sell or rent to generate income.
Income REITs (I-REITS) are where investors pool their resources into a trust with the aim of investing in income-generating real estate such as residential, commercial and any other profitable real estate segment. Development REITs (D-REITs) involve pooling assets together procuring qualified land for improvement and development ventures which may incorporate residential and other commercial projects.
There is only one I-REIT that is listed on the Nairobi Securities Exchange. This is because the REIT legislation is recent and is yet to be understood by investors in this market.
For a long time, LLCs have been the preferred investment vehicles. However, with the enactment of the LLP Act, LLPs are gaining popularity for the following reasons: