In line with its strategic initiative to promote and create enabling environment for sustainable development of Real Estate Investment Trust (REITs) in Nigeria and sub-Saharan Africa, The Nigerian Stock Exchange (NSE) hosted the maiden edition of its REIT Conference at the NSE Event Centre, Lagos on Tuesday May 23, 2017.
The Conference themed,
Real Estate Investment Trust in Sub-Sahara Africa: The Role of the Capital Market, brought together key decision-makers, policy-makers, government officials, private sector players, property developers, asset managers, dealing members, investors and thought leaders to dimension the current state of the Real Estate sector and the opportunities inherent in REITs.
In his opening remarks, Oscar N. Onyema, OON, CEO, NSE noted that the African REITs market is presently valued at US$29b and is available in four (4) countries (Ghana, Nigeria, South Africa and Kenya). “There are only 32 REITs in Africa with South Africa being the largest REIT market having 27 REITs and Nigeria second with three REITs listed. In 2015, an estimated $265m worth of transactions were concluded in Kenya, Nigeria and Ghana, a big improvement to the $65m seen in all three markets during 2012. This indicates an increasing market as a larger number of investors are beginning to take increased interest and participation in the Real Estate Investment sector”.
Onyema further stated that “Whilst the Nigerian market may not be as developed as other emerging markets such as Mexico, South Africa and Singapore, this asset class has definitely come to stay. Today we have about N40b in REITs market cap listed on the NSE and a total of N96b in the Construction/ Real Estate sector of our equity market”.
“To create a more transparent, liquid and accessible market structure in line with global best practices for REITs, the Exchange recently started the process of implementing some changes in terms of reporting and valuation of REITs and other collective investment schemes listed on the NSE”, Onyema remarked.
Delivering his keynote address, the Honourable Minister of Power, Works and Housing, Federal Republic of Nigeria, Babatunde Raji Fashola, SAN who was represented by Ayo Gbeleyi, Managing Partner of GA Capital Limited, remarked that “It is difficult, if not impossible, for Government to provide all Housing solutions given the diverse demands. The truth, which we must accept, is that 100% home ownership is an ideal, but the reality is that, best practices in places like the UK, US, Canada and Singapore are stories of a mixture of ownership and rental arrangements”.
On the sources of funding for housing projects by the Ministry, the Minister stated that ”In the medium term, we intend to raise more capital outside direct Government Treasury, working with the Federal Ministry of Finance, through Infrastructure Bonds, REITS and other forms of real estate financing instruments, leveraging as most appropriate the platform of the Nigerian Stock Exchange”.
He added that other funding sources such as pension funds, private equity funds, and the National Housing Fund managed by the Federal Mortgage Bank to finance development and also acquisition will be under consideration for the new capital issues.
The first Vice President of the National Council of NSE, Mr. Abimbola Ogunbanjo, noted in his keynote address that the Nigerian REITs market is largely underdeveloped due to lack of clarity on diverse regulatory issues which are required to stimulate greater market confidence, transparency and foreign capital inflows. “The major challenges facing the REITs industry in Nigeria include restrictive legislation, poor knowledge and understanding of the industry in addition to prolonged bottlenecks created by the Land Use Act of 1978. Nigeria’s Land Use Act is embedded in the Constitution of our country. Thus, any attempt to rectify its inadequacies requires a constitutional amendment which of itself is a major challenge”.
Ogunbanjo therefore called for the establishment of a separate and dedicated Lands registry in each viable State of the Federation, a (REITS registry of sorts) within the existing legal framework to specifically handle all REIT related transactions.
The 2017 NSE REITs Conference featured three presentations and panel discussions on the Critical Elements for a Successful REIT’s Market; Regulatory, Tax and Role of Capital Market in Developing REITs in Nigeria and Sub-Sahara Africa; and Developing sustainable capital flows for financing real estate assets moderated by Adeniyi Adeleye, Head, Real Estate Finance, West Africa, Standard Bank/Executive Director Stanbic IBTC Capital; Taiwo Oyedele, Partner, PwC West Africa Tax Leader; and Chris Godman, Executive Managing Director, Equity Capital Markets, Standard Bank International.
The 2017 REITs Conference which is sponsored by Stanbic IBTC Holdings Plc, FSDH Asset Management Limited, PricewaterhouseCoopers (PWC), United Property Development Company (UPDC) Plc, Rand Merchant Bank (RMB) Nigeria Limited, Udo Udoma & Belo-Osagie and Mixta Nigeria.