The inclusion of already concessioned Tafawa Balewa Square (TBS), Lagos in the list of national assets to be sold to fund the 2018 budget a few weeks after the revocation of the concessioning of International Trade Fair Complex, is brewing concerns among investors and stakeholders. Dayo Ayeyemi reports
From the revocation of Lagos-Ibadan Express road’s project over non-performance to the stop-work order on Federal Secretariat Complex, Ikoyi, Trade Fair Complex in Lagos and recently, Tafawa Balewa Square (TBS), Nigeria is recording a lot of minus in public-private partnership (PPP).
While the dust over other failed projects is yet to settle, especially that of Trade Fair Complex, the Federal Government, through the Director-General, Budget Office, Mr. Ben Akabueze, last week, listed TBS among other national assets to be sold to fund the current budget.
The DG stated this at the public hearing organised by the House of Representative Joint Committees on Finance, Appropriation, Loans, Debts and Aids and Legislative Budget and Research on the 2018- 2020 Medium Term Expenditure Framework and Fiscal Strategy Paper.
In a swift reaction, the concessionaire of TBS Lagos, BHS International Limited, expressed shock over plans by the Federal Government to sell the edifice as part of the national assets to generate sufficient revenue to finance Nigeria’s annual budgets between 2018 and 2020.
According to the Chief Executive Officer, BHS International Limited, Otunba Olu Adenodi, TBS had been concessioned to the company for a period of 30 years since 2008.
He insisted that there was no basis of listing the edifice as part of assets that the government wants to sell to fund the budget.
Expressing shock over the announcement, he explained that the Federal Government through the Bureau of Public Enterprises (BPE) had just granted the company an indemnity to reassure their investors.
“What government should have done was to confirm from BPE before making such announcement,” he said.
Adenodi wants the government to issue a rejoinder before the company takes the next action, noting that BHS International Limited would have turned around the fortune of TBS by now if not for the obstacles posed earlier by Lagos State Government.
“Federal Government has just granted us an indemnity to reassure our investors. I came back from Abuja last Friday with the indemnity, which I showed to my staff and we all rejoiced over it.
“Our investors are happy,” Adenodi said, wondering why the government would list TBS among properties it wants to sell after it was concessioned a few years ago.
The BHS boss said the TBS complex remained the property and commonwealth of all Nigerians held in trust by the government, but leased to BHS under the privatisation policy.
“The concession of TBS to BHS International Limited is for 30 years,” he explained.
Adenodi recalled that before BHS International took over the TBS, the complex provided a haven for miscreants, street urchins and hoodlums, who used the place as a hide out to perpetrate various social vices in central Lagos.
Since the concession in 2008, Adenodi said his firm has been upgrading the facilities in the complex, creating employment for Nigerians in the process, paying taxes to the government, generating income for the Federal Government and keeping the environment clean and safe.
Meanwhile, stakeholders in the construction sector, especially investors, who had earlier subscribed to the government’s PPP projects are currently regretting their decision.
Until early this year that the court ruled in favour of concessionaire of Festac Phase II project, subscribers abandoned the mixed used housing scheme because of issues bordering on ownership between the land owners and the Federal Government.
Also recently, Hotel Presidential, Enugu joined the league, following protracted litigation after its concession four years ago.
The issues surrounding the concession of Federal Secretariat Complex, which was concessioned to Wale Babalakin-led Resort International Limited, is also yet to be resolved.
Justifying the revocation of the concession of the Lagos International Trade Fair Complex (LITFC) penultimate week, the Federal Government said it took the decision because the concessionaire, Aulic Nigeria Limited, grossly breached the concession agreements.
Top on the contract breach is that Aulic Nigeria Limited is yet to pay a lease indebtedness of N6.542 billion accumulated over the years to the Federal Government.
The 322-hectares LITFC was concessioned to Aulic in 2007 for N40 billion lease fees to be paid over 30 years.
The concessionaire, it was gathered paid just an entry fee of N200 million and another N12.73 million for the moveable assets till date.
Consequently, the National Council on Privatisation (NCP) has directed the relevant government authorities to recover the over N6.5 billion lease indebtedness as quickly as possible.
Reasons such as unfavorable policy, lack of continuity in government, inappropriate financial details, lack of depth of conception and absence of wider environmental implications among others, have been adduced for failure of PPP projects in Nigeria by experts.
According to industry’s practitioners, failure of these projects in which investors’ funds are trapped, is denting the country’s image on the international scene.
Lending credence to the above-stated factors, Managing Director, Kola Akomolede and Company, Mr. Chief Kola Akomolede, mentioned lack of continuity in the government and budget’s overload among reasons for their delay.
He said: “This also affects new Falomo Shopping Mall project, which former Governor Babatunde Fashola signed its concession, but abandoned by the incumbent.”
Rather than terminating these projects, Akomolede, a former President of Nigeria’s International Real Estate Federation (FIABCI), advised that the government renegotiate them for their completion.
First Vice President, Nigerian Institute of Town Planners, Mr. Toyin Ayinde, noted that various reasons might be responsible for the failure of PPP projects in Nigeria.
He said the truth is that some of the project proponents have not worked out all the financial requirements of the projects in question, while others have not seriously considered the wider environmental implications of the projects they seek to pursue.
There must be intellectual investment in PPP projects before the deals are signed. The proponents should always dialogue with representatives of the government so they can know how their minds are working in order to evolve workable projects.
2018: Experts predict vibrant real estate
As oil prices stabilise at 17 per cent higher than 2017 average and direct foreign investment increases, experts see surge in real estate activities in 2018. DAYO AYEYEMI reports
Following improvement in the economy, things are beginning to look up in Nigeria’s real estate sector with market operators getting set to tap into the opportunities, which exist in various segments of the market.
They were, however, particular about the low and middle income residential, millennial and student accommodation sections. Apparently equipped with the dynamism of happenings in the economy, they stated that investors (both local and foreign) were prepared to launch into pockets of opportunities in real estate market. Investors’ hope has been further boosted by the latest Bismack Rewane-led Financial Derivative Company (FDC)’s report on review of third quarter of 2017, which showed that Foreign Capital Inflows (FCI) to Nigeria increased by 148 per cent to $4.15 billion.
This positive trend, analysts said, happened as a result of renewed investor confidence in the economy. Also, the experts noted that oil prices had climbed to 17 per cent higher than 2017 average, expressing confidence that if the situation persists, oil revenues might help mitigate consequences of capital flight.
This newspaper gathered that while some developers are entering into Joint Ventures (JV) with the government to provide affordable housing units for citizens, others are currently repackaging their products to attract financiers and buyers.
In exclusive neighbourhoods such as Ikoyi, Victoria Island and Lekki, where landlords can no longer wait without getting tenants and buyers for their dormant properties, they have been converting their vacant houses to smaller apartments such as one-bedroom, studio and condos to attract people in need of smaller accommodation. This innovation by landlords, according to experts, has caught the attention of working-class singles who want to live very close to their workplaces.
Taking a look at what 2018 holds for the sector, experts, which comprised developers, institutional investors, mortgage providers, media practitioners, property consultants and brokers at Fine and Country West Africa’s investors series, agreed that the outlook was bright and promising for real estate, hinging their prediction on improved economic climate. According to them, the economy has started looking up with pockets of opportunities emerging in the residential segment of the market.
They observed that low to middle income market remained strong all through the recession period while the upper market struggled. “But developers are adopting creative ways of dealing with the persisting challenge with a view to stimulating demand and sustaining their business,” they said.
Setting the pace, Sales Consultant, Fine and Country in Lagos, Mr. David Mba, said that he saw a more vibrant residential market coming as a result of an improved economy in 2018, adding that what were considered challenges in the past have become opportunities. According to him, developers in their bid to share risk and also raise more capital were going into joint ventures, citing Brains and Hammers Limited’s example.
“Only recently, Brains and Hammers Limited, one of Nigeria’s leading real estate and infrastructure development companies, entered into a joint venture agreement with Lagos State Government,” he said. This move, he explained, is believed to be the company’s response to pressing demands from its clients who wanted to acquire property in Lagos.
He said: “The move will see the company developing 750 housing units, comprising 132-tower units and 618 units that will be part of the Jubilee Estate development in Iganmu area of Lagos.
“The Phase 1 of the project comprises 129 units made up of 12 units of 2-bedrooms, 24 units of 4-bedrooms terrace and 93 other units. There are also twin towers made up of 132 units, comprising 60 units of one bedroom, 24 units of two bedroom, and 24 units of 3-bedroom maisonette.”
Other market trends, Mba said, included increase in demand for good value three or four bedroom apartments in Ikoyi precincts, selling within the range of N120 million to N150 million; increase in demand for houses including terraces, semi and fully detached units. Publisher/CEO, BusinessDay, Frank Aigbogun, is of the view that improvement in the economy means increased business activities that will in turn trigger more demand for real estate products such as commercial office, retail and residential buildings.
Fine & Country’s CEO/Vice Chair, Udo Okonjo, stated that the sector’s positive outlook would come with opportunities for only investors who are ready to understand that the market had changed.
From market survey, she stated that there would be opportunities across various segments of the real estate’s market including residential, commercial office and retail. “Lifestyle communities are the new face of residential real estate.
These communities have the advantages of economies of scale and security,” the Fine and Country’s CEO said. She hinted that opportunity currently existed in millennial and student housing, adding that many investors were tapping into these areas.
Dean, Faculty of Environmental Sciences, University of Lagos, Professor Timothy Nubi, confirmed that many investors had already taken position around the university campus and were delivering one-bedroom self-contained apartments for N500,000 per annum.
In a bid to maximise the value of their property, a recent Northcourt Real Estate report 2018 outlook, noted that land owners looked more favourable to joint ventures with developers.
This newspaper also discovered that many developers and investors have been taking advantage of the ongoing construction of Dangote Refinery in Ibeju-Lekki, Lagos to acquire more lands in the axis for housing estate development.
As the business investment climate gets betters, necessary actions must be taken by the government to improve ease of doing business in the country.
How to attract finance into real estate, by experts
Real estate venture is capital-intensive. While this huge capital is often difficult to come by, experts and advisors have propounded guiding principles for developers. DAYO AYEYEMI reports
One major thing the Federal Government needs to tackle urgently is developing the real estate sector, which has not shown any sign of recovery from recession going by the number of abandoned projects dotting the landscape.
As investors are beginning to show confidence in the Nigerian economy due to the government’s intervention in forex, rebound in the capital market and rising oil price, real estate developers are overwhelmed with dearth of funds to complete their projects and start new ones as banks are still skeptical to grant loans. While some of the developers are currently talking to banks for project finance, others have taken the campaigns to Nigerians in diaspora and working class home seekers.
However, some industry experts have tasked developers to package their products (projects) very well to attract financiers or investors. Understanding critical problems with financiers of real estate projects, Managing Director, MCO Real Estate (MCORE), Mr. Munachi Okoye, said that developers must package themselves by following strict guidelines to attract project finance.
MCORE is a real estate investment and advisory firm that offers services and solutions to investors, developers and other third parties towards the development of and investment in large scale real estate and infrastructure projects. For any developer seeking funding for a project, Okoye stated that certain basic principles must be applied. For starters, he pointed out that funders would not finance the acquisition of land, enjoining developers to bring land with clean title to the table as their equity contribution. For debt, he said that funding would always exchange against title, which, according to him, acts to secure the loan.
“Without title, there is no collateral to secure the loan,” he said. In addition to land, the MCORE boss explained that developers were also expected to contribute cash as their equity investment. Okoye said: “This is called having ‘skin in the game’ and gives the investor the comfort that the developer is fully committed to the project’s success and would not walk away if the project is challenged.”
He also wants developers to know that funder would need to know that the project is attractive to its target market, pointing out that this would be evidenced by pre-sales. “Pre sales backed up by deposits reduce the need for external funding hence improving returns,” he said.
Besides all these, Okoye stated that financiers would need to know that developers and his team have the experience to successfully deliver the project on time and within the budget, saying, “If a funder is not comfortable with a contractor he may ask that the contractor be replaced with a more experienced one that has a track record of delivery.”
The MCORE boss reminded developers of the need for a good and well-written feasibility report about the project, saying that funders would require a feasibility study particularly for large projects. According to him, a well written feasibility study will provide a window through, which an investor would be able to view the opportunity presented by a proposed project better.
“A good feasibility study is far more likely to attract funding from investors than a poor presentation,” he said. Okoye stated that investors would always focus on their return at the end of the project, adding, “if return is not attractive, no investor will invest.”
In relation to joint ventures, the managing director said that developers must ensure that the JV partner are not overcompensated, stating that if this happens, there would not be adequate return for the investor.
He said: “It is imperative that the developer looks at all the revenue generating aspects of his business – lettable areas, units for sale, land for sale, advertising revenues etc and seeks to design in such a way that revenues are maximised while costs are managed. “Costs such as lifts, swimming pools, fittings and fixtures and sub-structure costs among others, should be engineered wherever possible to minimise costs while delivering value.”
According to him, real estate developers must be opened to multiple exit strategies since market would determine how a deal is ultimately executed.
He noted that residential developers undertaking a JV might seek to compensate investor with units, adding that in certain cases, some investors might not want the trouble of selling units but preferred to receive cash. Exits for larger developments such as hotels, shopping malls and commercial office developments, Okoye said, would require additional expertise, adding that such project are usually sold by private equity investors to international companies or funds.
“In recent times developers have sought to sell commercial office developments on a per floor basis making it easier to sell in the local market,” he said.
In the final analysis, he advised that a good developer has to juggle costs, land acquisition, regulatory issues, funding, design, revenue generation, business requirements, construction and deliver a successful project that meets or exceeds the requirements of the user while providing an attractive return to the investor. Nigeria received up to $21 billion inflow in 2017 through Diaspora remittances. It has also been estimated that remittances to developing countries would grow by 4.8 percent to $450 billion.
In a move to attract funding, the Director of Homework Development and Properties Limited, Jide Adekola, has restored the trust of foreign investors in Nigeria’s real estate sector.
This is the major outcome of the recent conference, organised by the Association of Nigerian Physicians in the Americas (ANPA) in Atlanta, Georgia, United States, where the Lagos-based leading real estate company showcased its affordable housing units and promoted the recent positive developments in real estate industry in Nigeria.
Adekola said the forum provided a platform that helped to change the perception that foreign investors would not get value for money or might get scammed in Nigeria.
Besides, he said it has also created the awareness that there are professionals in the sector who are able to provide quality products in due time. “The change in perception, which we have created, would in no small measure boost businesses and increase the volume of foreign direct investments that can engender increase in gross domestic product of the country, “Adekola said.
Principal Partner, Kola Akomolede and Company, Chief Kola Akomolede, stated that when things happened in the economy, it would take time for real estate sector to rebound.
While he urged developers to package their products for would-be investors, Akomolede said: “It will take time for property development projects that have been stopped to resume and be completed.
On how he attracts funds for estate development, Group Managing Director, Adron Homes, Emmanuel King, the developer of Treasure Parks and Gardens, said he had spread his tentacles to Nigerians in diasporas, especially in United Arab Emirates, United Kingdom and United States of America, targeting them for home-ownership in the country. King said that many of them came for site visitation, subscribed and convinced their friends, who are now potential homeowners in his estates.
Apart from good feasibility report and project packaging, a good developer needs a good team to help his business grow.
Housing: Developers adopt strategies to cut deficit
To reduce Nigeria’s 17 million housing deficit, real estate developers are taking up pragmatic marketing strategies to help Nigerians realise their homeownership dream. Dayo Ayeyemi reports
Housing is more than mere shelter as it encompasses all basic infrastructures such as road network, power supply, clean water and other services that make life enjoyable.
Besides, the number of quality houses in any nation is one of the criteria for measuring its level of development and quality of life.
Real estate sector has been seen by experts as a mirror of the economy as it directly reflects the economic status of the nation.
However, despite the huge housing deficit of 17 million in Nigeria and the need to build 740,000 housing units annually to bridge the gap, statistics have shown that over 60 million residents are living in indecent houses across the federation.
According to the United Nation’s statistics, 60 per cent of households in the developing world don’t have access to clean water.
Besides, the UN report says 30 per cent of urban population in the developing world live in slums, while 4.5 million move into slum each week.
Bracing to reduce homelessness among Nigerians and improve living condition, some real estate developers have mapped out pragmatic sale strategies to simplify and help Nigerians in need of accommodation fulfill their dream of home ownership.
From site and services scheme to introductions of easy flexible payment, concession and high discounts among others, home seekers now have options to choose from.
Group Managing Director, Adron Homes And Properties Limited, Oba Adetola Emmanuel King, said that successful strategy required hard work, critical thinking and strong execution skills.
He hinted that from Lagos to Abuja and Ibadan, he had mapped out strategies through the company’s forthcoming ‘Lemon De Val Party’ to help families seeking accommodation realise their dream at low entry point.
He stated that first and second editions of the programme, which were held on Valentine Day, had helped 3,000 families to realhse their home ownership dream in his various housing estates across Nigeria.
As part of the strategies, the Adron boss introduced some Nigerian musicians and Nollywood practitioners such as Ajibola Alabi popularly known as “Pasuma” and “Small doctor,”, Saheed Balogun and Fathia Williams as the company’s ambassadors.
According to king, Nigerians need housing, stressing that he had discovered that the best way the company could make it possible at affordable rate was by ensuring that the entry point is reduced to N500 for easy accessibility.
“We have new estates coming on board. In a few days, we will be doing ground breaking ceremony of Town Park and Gardens in Imota, Ikorodu, Lagos,” he said.
“We are also going to be doing ground breaking in Kuje in Central Park and Gardens in Abuja and also in Ibadan. It is also in our plans to extend to the eastern part of Nigeria and also in northern Nigeria.”
The Adron boss disclosed that the company had acquired about 10,000 hectares of land, totaling 120,000 plots, with about 100,000 subscribers in its portfolio for home ownership scheme.
He said the company’s total assets is worth N100 billion.
He revealed that 2018 Valentine Day event had become necessary as construction of housing units by the company is meant to tackle the acute shortage of shelter in Lagos state and the FCT.
According to professionals in the sector, there are no shortcuts to marketing real estate products. Some tips, they said, included core abilities development, promotion of value, conpromotio, creation goals mindset, relationship management and development, leveraging other platforms and inbound marketing.
Director of Homework Development and Properties Limited, Mr. Jide Adekola, an architect, is restoring the trust in foreign investors in real estate sector. His firm now has affordable housing units in different locations in Lagos.
Adekola, in Atlanta, Georgia, United States, disclosed this to Nigerians in Diaspora, while showcasing the products and promoting recent positive development.
He added that he has helped to change the perception that foreign investors would not get value for money or might get scammed in Nigeria.
He also said that there were professionals in the sector who are able to provide quality products in due time.
He said the forum had increased networking among customers, adding that it has increased trust in foreign investors in real estate market and boosted awareness.
Shedding light on some of the innovations being adopted to encourage Nigerians to own their homes while celebrating the Valentine season, King said that his firm would be offering incentives such as 14 per cent discount in all the estates, easy and flexible traditional payment system and supply of 100 bags of cement in some instances.
He explained: “Pay an initial deposit of N140.000 for a plot, spread the balance over a period of 14 months and you qualify for a free ticket to our Lemon De Val Promo 2018. Pay outright for a plot of land and you are qualified for a raffle draw to win a set of sofa, king sized bed and 100 bags of cement.”
Besides, he said the company had partnership with some mortgage institutions, while encouraging its clients that subscribed to National Housing Fund (NHF) to access it.
Since construction of housing is capital-incentive, Nigerians need easy access to cheap and effective mortgage system to attain their housing dreams.
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