Stanbic IBTC Holdings PLC and other players in Nigeria’s real estate industry are pushing for a long-term strategy for the sector to attract domestic and foreign institutional investments to establish sustainable foundation for the commercial real estate sector to support the nation’s economic growth, development and diversification efforts.
At a two-day West Africa Property Investment Summit in Lagos, recently that attracted a wide spectrum of operators in the industry, experts including property developers, design professionals, investors, bankers, regulators, pension fund administrators, property surveyors and valuers as well as representatives of the Securities and Exchange Commission (SEC), the Federal Inland Revenue Service (FIRS), the Nigerian Stock Exchange (NSE), and the National Pension Commission (PENCOM) agreed to develop the sector.
With the theme, “Changing the West African narrative,” the session examined the status of the Nigerian and West Africa real estate sector and reached the conclusion that though the Real Estate Investment Trust (REIT) market has existed for ten years in Nigeria, it remains underdeveloped and underperforming. For instance, there are just three REIT companies listed on the Nigerian Stock Exchange with market capitalisation of N46.4 billion ($130m) as at November 10, 2017, which is 0.36 percent of the Nigerian stock market.
According to the Head, Real Estate Finance (West Africa), Stanbic IBTC and Standard Bank, Adeniyi Adeleye, Nigeria is still highly undersupplied in investment grade real estate, which should be able to attract large institutional investors seeking sustainable and stabilized income, such as insurance companies and pension funds, asset managers and other private wealth management firms.
According to him, a typical investment grade real estate, he said, is characterized by sustainable rental cash-flow that come from credit worthy tenants, competitive rental yield, structured cash-flow that delivers steady and sustainable capital appreciation, property ownership that is held in well-structured vehicles that can attract capital and sound management to the property. In addition, it will also incorporate such other property features such as build quality, location, property efficiency and market appropriate building characteristics.
Another and equally critical factor to support the development of the REITs, Adeleye said, is the deepening of the capital markets through the introduction of appropriate regulatory environments to support the sustainable creation of the asset class. There is also the imperative for regulators to strengthen the capital markets via the introduction of comprehensive guidelines around the portfolio creation, characteristic of the assets, operations management post completion.
Various experts took the participants through a wide range of issues on asset valuation, approvals and consents, zoning and planning approval, REIT regime in Nigeria, bridging the Nigerian housing gap
And unlocking capital markets for real estate investments, among other topics. They identified key areas that must be given priority to enable the creation of investment grade real estate assets in Nigeria to include securitisation, liquidity, review of property and tax laws for equitable administration of the real estate sector, as well as instituting an efficient and speedy judicial process.
Senior Manager, Real Estate Finance, Stanbic IBTC Capital Limited, Tola Akinhanmi, said the development of an efficient, viable and sustainable REIT market is a project Stanbic IBTC and the Standard Bank Group are committed to, adding that the organization would continue to engage stakeholders at different levels to deepen the REIT market in Nigeria. “A well-structured and sustainable rental cash-flow driven real estate asset portfolio is the most important driver of value and quality of REITs and other real estate investments as opposed to the over-weighted attention on project construction cost, property appearance and perceived building quality. Stanbic IBTC, given its deep experience and roots in Africa, is committed to highlighting the huge potential in the real estate sector. By partnering with other stakeholders, we desire to create a win-win situation for all stakeholders by leveraging on our expertise and experience,” Tola Akinhanmi stated.
“With a population of over 185 million people, strong real estate development fundamentals and an over 8% percent contribution of real estate to GDP, we believe in the long-term potential of Nigeria’s real estate sector and are excited to host our conference in Lagos, said Kfir Rusin, Managing Director of API Events, organizers of the event.