Fast Company

Laundered Somali Pirate Money a Boon for Kenyan Arrr-chitecture

Nairobi

For Sale: Perfectly cozy pirate hideout located in non-descript, high-rise condo in Nairobi aka "Little Mogadishu." Perched close the Somali border but far enough from the coast to assuage suspicion*, this posh modern abode has large windows perfect to survey police stake outs and tons of closet space to conceal weapons, munitions, and extortionist treasure. Large parrots welcome. Additional underground parking available for your car or boat upon request.

(*Please ask us about Kenya's lenient money laundering laws!)

It's not that transparent, but Kenya is fast becoming a real estate mecca for pirates looking to stash their booty. This, after Somalia's motley crews have recently formed their own brazen in-country brokerages to fund more assault missions. The reason: The country is known to be lax about investigating money laundering and, unlike civil strife torn Somalia, actually somewhat stable.

Because the backers of many transactions have remained anonymous, it's hard to figure out just what sort of arrr-chitecture these bad guys prefer. The only trend: Somali pirates have earned north of $100 million in ransoms in the last two years, according to the Associated Press. So they are than willing to pay double the going rate to get transactions done quickly and quietly, creating a bubble that is forcing local land lubbers out. Per the AP: Prices have nearly tripled in five years, meaning is four-bedroom home that would have sold for $200,000 now goes for $500,000. Some of the swashbucklers are even building their own apartment buildings, which will shiver potential tenants' timbers no doubt.

[ Via io9 ]

Image: http://www.flickr.com/photos/strupler/ / CC BY 2.0

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2 Comments

  • Aly-Khan Satchu

    It certainly makes a Great Story and the Image that these Modern Day Brigands on the high Seas, being dropped a $100m from Helicopters and high tailing it to Kenya, with their Swag and paying twice the market rate is obviously a very powerful one but lets try and unpick this a little.

    1. It is highly unlikely that all of the $100m makes its way to our shores. Lets assume 33% and would be $33m which in the scheme of things is material but not really supersized.

    2. $200,000 to $500,000 is actually a 250% return over 5 Years and not 300% and You will find that these sort of returns are replicated across most Sub Saharan Real estate Markets so whilst it might look optically large to someone who is being pummelled in the West, it actually is on par with the rest of the Capital Cities in Africa. It is a Dark Continent especially when it comes to hard and fast statistics and the comparison with other markets startling but African Rela Estate has proven low Beta and hence to those who have taken the trouble to study the Tea Leaves a very safe repository for your hard earned Money.

    3. Kenya is in a tough Neighbourhood. You will find may East Africans have parked their Families in Nairobi. I have Friends in Juba and other Places and their Wives and Children reside and are being educated here and therefore, Kenya Real estate is floating on its advantage that it is the Natural Hub and this has created extra Demand in a situation where there is already a structural shortage.

    4. Kenya has implemented a Free Exchange Rate for some years now unlike other Places I can care to mention where there is an Official Rate of Exchange and an Unofficial One. This Policy was encouraged by the IMF. The Bid Offer Spread for buying and selling the Shilling versus the Dollar is a maximum of 50 cents. This is not Manna for Money Launderers but a sound Policy which makes it attractive to Investors to participate in the Bond, Stock and Real estate markets.

    5. The Kenyan Diaspora is probably the biggest Buyer of Real estate here. Our Greatest Natural Capital is our People and we have exported them all over the World. You will note Remittances were at 0 in the 1990s and probably negative as Folk exported their Capital. Today it is estimated this number is about $1b inward a Year. Many of these Funds are invested by Kenyans in Bricks and Mortar. I live in an estate where five out of 11 Homes are owned by Kenyans abroad.

    When You take all these Phenomena in toto, you get a very powerful cocktail to keep prices going higher.

    Aly-Khan Satchu
    www.rich.co.ke
    Nairobi