UPDC REIT: A New Investment Window

13 Feb 2013

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CEO,  UACN, Mr. Larry Ettah,

Goddy Egene
In 1997 when the Board of Directors and shareholders of UAC of Nigeria Plc (UACN) decided to make its property/real estate division a separate company, they must have quietly asked themselves if it was a wise decision.

But almost 16 years after, the directors and shareholders of the leading conglomerate are very happy about the decision as the company - UACN Property Development Company Plc (UPDC) - has become a success story.

UPDC, which was incorporated in October as a full-fledged company, commenced operations in April 1998 and got listed on the Nigerian Stock Exchange (NSE) in November 1999.

Its main business is the acquisition, development, sales and management of high quality commercial and residential properties in the luxury, premium and classic segments of the real estate market in selected cities in Nigeria. Today, UPDC has become a leader in the real estate and property development space in the country.

Shareholding Structure
UPDC is owned 46 per cent by UACN; 12 per cent by First Trustees Nigeria Limited and 18 per cent by other corporate bodies. Individuals and trustees hold the remaining 24 per cent.

The Group Managing Director/Chief Executive Officer (CEO) of UACN, Mr. Larry Ettah, is the chairman of UPDC, while Mr. Hakeem Ogunniran is the MD/CEO of the company. Other directors include: Mrs. Folasade Ogunde; Mr. Abdul Bello; Dr. Ibrahim Mohammed; Mr. Olumide Oduntan; Mr. Babs Kasali and Mrs. Halima Alao.

Financial Performance
UPDC has recorded remarkable financial performance over the years, putting smiles on the faces of shareholders through regular dividends payout. Although its performance in the last five years has witnessed some level of fluctuation due to the challenging operating environment engendered by global financial crisis, the company continued to pay dividends.

An analysis of the performance showed that turnover, which stood at N5.676 billion in 2007, rose to N13.328 billion in 2008 and climbed further to N13.331 billion in 2009. However, the turnover fell to N8.194 billion in 2010 before recovering back to N10.754 billion.

Profit after tax has followed similar pattern of fluctuation, soaring from N425 million in 2007 to N3.683 billion in 2008. It fell to N2.828 billion in 2009. It declined marginally to N2.278 billion in 2010 before dipping further to N1.999 billion in 2011.

Shareholders have been reaping consistent returns on the investments in the UPDC over the years, including cash dividends and bonus issues.

For instance, shareholders received bonus shares in 2004 and 2010. They similarly received dividends of N536 million (49 kobo per share) in 2007; N825 million (75 kobo per share) in 2008; N550 million (50 kobo per share) in 2009; N756 million (55 kobo per share) in 2010 and N893 million (65 kobo per share) in 2011.

Addressing shareholders last year, Ettah said the real estate industry witnessed cautious improvement in 2011, explaining that some projects that were abandoned in the peak of economic crises were completed in that year; leading to an over-supply of houses in the high-end market segment.

“Monetary tightening measures adopted by the Central Bank of Nigeria (CBN) translated to persistent scarcity and high cost of funds to developers and home buyers alike. The acute shortage of homes in major Nigerian cities and the emerging middle income neighbourhoods, however, increased land value in Mainland Lagos and Abuja by up to 30 per cent,” Ettah said.

Looking forward, the chairman had said the real estate business remained exciting with the huge housing deficit of between 16 and 17 million units, the growing population and the evolving middle class. He therefore, declared that UPDC was poised to take full advantage of the emerging opportunities.

The REIT Window
In an apparent move to take advantage of the opportunities and give investors and shareholders a  new window to diversify their investments and earn more returns, UPDC will next week float a N30 billion real estate investment trust (REIT).
A REIT is a scheme which typically owns and manages predominantly rent-generating commercial, retail or residential real estate (or combination) for the benefit of investors in the scheme.

UPDC is offering by way of Initial Public Offering (IPO), 3,000,000,000 units of the REIT of N10 each at par. The completion board meeting was held last week after getting the necessary approvals from the Securities and Exchange Commission (SEC) and the Nigerian Stock Exchange (NSE). 

This is the first IPO that would hit the market in recent times. Also, while there have been two other REITs already listed on the NSE (Skye Shelter Fund and Union Homes REITs),  the UPDC REIT is the first of its kind to be sponsored by a real estate development firm.

According to Ettah, UPDC REIT is a landmark transaction as the country has not had a REIT of this nature. He said funds raised from the IPO would be used to consolidate on the company’s activities and unlock more value-generating business for the company in the next few years.

He explained that the offer would allow the company to raise enough financial firepower to develop some of the property assets which the company already has and some of its projects already in the pipeline.

“We believe that this is the right time to come into the market. Of course, things have been looking up in the market and it is wise for us to come in at this time. The company is looking at some huge projects at this time, and we will use these funds to actualise the projects. We have projects in Abuja, Lagos, and all these are existing assets,” he said.

Some of the UPDC’s upcoming projects include: Metro Gardens, Lekki; Granville, G.R.A, Ikeja; Cameron Green, Ikoyi’ Victoria Mall Plaza, Victoria Island all in Lagos; Emerald Court, Apo, and Metro City, Apo in Abuja; and Emerald Court and Nigeria Airforce Foundation (NAFF) Estate in Port Harcourt, Rivers State.

Ettah added that the REIT would also allow other investors, especially those who are looking for alternatives outside equity and outside bonds, to also have access to a new kind of asset class that they can invest and make quick returns, noting that UPDC is an investment that would deliver value to investors and shareholders.

Speaking in the same vein, the MD/CEO of the company, Ogunniran, said investors should seize this rare opportunity to invest in the REIT to benefit from the competitive yield returns they stand to gain from its disciplined investment approach.

“Investors also stand to minimise their risks as a result of property portfolio diversification as the REIT seeks to invest in other prime properties in Lagos, Abuja and other major cities in Nigeria to enhance its income generating property assets,” he said.

He explained that the REIT would benefit enormously from the superior quality of real estate portfolio to be vested in it as well as highly competent members of the investment committee comprising seasoned real estate experts with a wealth of experience spanning decades.

Tags: Featured, Nigeria, Business, Larry Ettah, NSE

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