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STANBIC IBTC and experts solicit enhanced REIT transactions

In order to facilitate the establishment of an efficient and viable Real Estate Investment Trust (REIT) regime in the country, experts have urged the authorities to fashion out a new tax regulation that will enhance equitable administration of value in the real estate sector.

They also called for an urban planning processes to create an improved enabling environment, which will continue to support the creation of new real estate assets, as well as instituting an efficient and speedy judicial process.

The experts met last week in a roundtable for key industry stakeholders and regulators in Lagos organised Stanbic IBTC, in partnership with Actis, Persianas Group, and Resilient Africa, to engender quality REIT assets and attract capital inflow into the real estate market.

The forum, themed “Creating Investment Grade Real Estate Assets in Nigeria”, attracted participation from domestic and international investors, developers, pension fund administrators, real estate consultants as well as regulators from the Securities and Exchange Commission (SEC), the Federal Inland Revenue Service (FIRS), the Nigerian Stock Exchange (NSE), and the National Pension Commission (PENCOM).

Chief Executive Officer, Stanbic IBTC Capital Limited, Yewande Sadiku; Head, Real Estate Finance (West Africa), Stanbic IBTC, Adeniyi Adeleye; Director, Real Estate, Actis, Funke Okubadejo; Asset Manager, Stanlib Africa Direct Property Development Fund, Nnema Byrd; and Director, Java Capital, Andrew Brooking; who facilitated the sessions, took participants through a wide range of topics on asset valuation, land acquisition and zoning considerations, REIT structures and characteristics, REIT regime in Nigeria, amongst others.

Sadiku said the need to develop an efficient, viable and sustainable REIT market necessitated the introduction of the yearly forum. She reiterated that Stanbic IBTC, a member of the Standard Bank Group, will continue to engage stakeholders at different levels to develop a viable REIT market. “The forum is part of Stanbic IBTC’s overall strategy to facilitate the establishment of an efficient and viable REIT regime in Nigeria,” Sadiku said.

Adeleye, who gave the keynote presentation, highlighted the apparent illiquidity of the existing REITs and explained that the predictable and sustainable rental cash flow is one of the most important elements of the vehicle, which is primarily designed to pool rental assets. “Well structured rental obligation with regular collection cycles from credible tenants creates sustainable rental cashflow, which is the most important driver of the underlying property value as well as the quality of REITs – which is a portfolio of such properties. This is counter intuitive to the market norms that tend to have an over-weighted attention on indicators such as contractor, high construction cost, property appearance, and perceived building quality,” Adeleye said.

Other speakers identified some key areas that must be given priority attention to incorporating investment grade real estate assets into REITs in Nigeria to include: the review and alignment of securities regulations, resolution of tax regulations for equitable administration of value in the real estate sector, amongst others.

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