As a sector, real estate is pressed on all corners, with adverse macroeconomic conditions dampening investor interest in new developments, shrinking consumer purchasing power, and, at the same time, eroding investor margins. In this interview, Paul Onwuanibe, Group CEO, Landmark Group, takes a critical look at both the economy and the on-going reforms in the country. He highlights how all these impact the sector and what developers and investors alike are doing to remain in business in spite of everything. He also speaks of Landmark as a one-stop destination for business, leisure, and lifestyle, offering opportunities and a good return on investment. He speaks with Chuka Uroko, Associate Editor. Excerpts:
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Nigeria has seen some reforms in the last eight months that have left both the economy and the citizens confused. What are your concerns with these reforms and the general uncertainty in the economy?
The recent reforms in Nigeria have been challenging for millions of citizens, with the removal of the fuel subsidy and the unification of the official and parallel market Naira exchange rates being the most significant. This has led to a 200 percent increase in fuel costs and a surge in inflation, reaching 29.9 percent in January. Consumer spending power has not grown at the same rate, leaving millions struggling to maintain household expenses.
Landmark, a residential development company, faces the challenge of selling units at fixed prices in a climate where building costs are rising. However, these reforms also present opportunities for economic development. Focusing on local industries, such as agriculture, technology, and tourism, could help Nigeria become an export-dominant nation with diversified income streams. The increased cost of fuel should drive the market to innovate in delivering greener energy sources, reducing reliance on oil revenue and maintaining a sustainable approach to power generation.
The downturn in the economy means that real estate asset suppliers like you have to respond quickly to changing market demands. How are you making the shift as a premium luxury housing developer to meet the new market realities and still sustain your business?
Landmark, a developer, does not see itself in the luxury housing market, as it believes clients are investing in a lifestyle rather than just buying property. They define their position as the “best your money can buy” developer, offering access to a successful ecosystem for real estate investments. Landmark’s success relies on its clients’ success, as they must deliver excellent facilities to serve their needs. This symbiotic relationship allows Landmark and clients to adapt to the ever-changing market and achieve joint success. The success of Landmark depends on its clients’ satisfaction and success.
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It seems real estate is squeezed on all sides. Building materials prices are rising, the exchange rate is volatile, and the interest rate is high. Labour costs are also surging. How do you navigate all these as a developer and remain profitable?
Real estate is a challenging industry due to its capital-intensive and long-term nature, requiring developers to seek investment or debt funding for projects that take an average of 5 years to mature. The unique challenges of the Nigerian market make it increasingly difficult for developers to remain profitable.
Time is a significant risk for developers, especially in construction, as it can cost millions. Landmark, with over 25 years of experience, employs principles learned from developing real estate solutions for Fortune 500 customers worldwide to maintain its reputation as a leading lifestyle real estate developer.
Landmark Lagos prioritises quality in all its developments, including the Landmark Waterview Apartments. By partnering with top construction and service delivery companies, they maintain a strong reputation for quality assurance, allowing them to work collaboratively and creatively to find cost-effective solutions for their customers.
Ultimately, it all boils down to the people we serve, so we always take a proactive stance in working with our clients to ensure that their goals are met with every development. We work together to develop pricing structures and incentives that help us reach the needs of our clients while ensuring we can deliver value to our stakeholders.
In matters of the government’s economic policy directions, the housing sector is always a weeping child because it is neglected despite its potential, especially in the area of job creation. Why this neglect or oversight?
Well, I can’t speak on behalf of the government, as I have never worked in government and cannot speak to the complexities they contend with when making decisions for all facets of society. It is expected that there will be trade-offs, and we can only hope that our leaders are well versed in the trade-offs they inadvertently accept with each decision they make. However, some risks, such as risking the availability of jobs for Nigerians, are ones that the government should be extra-careful of when making their budgetary allocations.
Prioritising real estate would have a positive impact on the socio-economic state of our nation. For the creation of jobs, every house that is built creates an average of three jobs. With the current housing deficit of 28 million homes, the Nigerian government can kill two birds with one stone by creating over 80 million jobs while eliminating the housing crisis.
Additionally, if we focus on developing our local real estate industry and all the sub-industries that would be of benefit as a result of the value chain, from pre-construction procurement and supply to construction labour all the way down to post-construction facility management technology, we would heavily increase our ability to provide affordable housing while decreasing our reliance on imported goods, services, and labour. This means that we can deliver higher-quality housing that is cheaper, quicker, and of better quality.
Of the many problems confronting real estate investment in Nigeria, a lack of credible data stands out. What are the implications of this lack for both the sector and investors?
I have a saying that I use with my team, and it is that if it isn’t being counted, it doesn’t count. People can set many goals, but the moment they start measuring and tracking them, there is a different level of attention and priority given to that goal. At Landmark, we know how important data is, which is why we count everything. At any point in time, we know how many people have come to the ecosystem, our daily revenue, the number of Landmark Citizen App downloads, and our power consumption because we count it all.
Nigeria ranks 60th in the Global Real Estate Transparency Index (GRETI) in 2022, highlighting a data gap that hinders developers from identifying market trends and predicting project profitability. This lack of data also erodes investor confidence, making both developers and investors susceptible to fraudulent transactions. New players are emerging to fill this gap, but more efforts are needed to strengthen trust in the market.
Private capital has been the major driver of growth in the real estate sector. Landmark Group is among those pushing the frontiers of this sector. What story do you have to share in this connection?
Landmark Lagos has secured over $60 million in funding, achieving a PWC-endorsed book valuation of $250 million. The real estate industry is capital-intensive, but debt and equity financiers have supported the business. Stakeholders benefit financially and enjoy the ecosystem they helped create, making Landmark Lagos the top business, leisure, and lifestyle destination in West Africa.
However, we are now at a critical point in our journey as we are working to restructure a $30 million loan into Naira so that we can pay back our obligation and continue to create shareholder value for our investors. As mentioned earlier, the reforms have made navigating this period challenging, but we are fortunate to have grown our business substantially since we took out the loan six years ago.
So, to answer your question, our favourite story would be the one that has not yet been concluded. We have a saying that “the road to success is always under construction,” so we will keep working with eager anticipation that the business will see 5x growth in valuation in the next 5 years in business, with the onslaught of some of our ongoing and upcoming developments as we expand locally, regionally, and internationally.
One thing seems to be common among real estate developers in Nigeria. Everyone says he is in business to help bridge the country’s housing gap. How wide is this gap, and what is its market value?
As mentioned, data in Nigeria is scarce, but I reckon that the Nigerian housing deficit is about 28 million units as of 2023, and the market has been valued at an estimated N21 trillion. However, based on the steady growth of our population, at about 2.4 percent annually, we can be sure that this market will continue to grow, so work needs to start now to ensure that we do not face larger housing challenges down the road.
Beyond market value, it is important that we recognise housing as one of the top 3 necessities for human life: shelter, food, and clothing. All Nigerians have the human right to have a dignified place to call home. Understanding the affordable housing market is important, but it is equally, if not more important, to recognise that providing citizens with shelter is the least we can do for our community.
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Landmark prides itself on being a destination for business, lifestyle, and leisure. Tell us more about this destination.
Landmark, a leading one-stop shop destination in West Africa, has adapted its business, leisure, and lifestyle philosophy to the changing market due to the COVID-19 pandemic. The company aims to replicate mixed-use destinations like Landmark Lagos, which exist globally, to showcase Nigeria’s ability to create a world-class destination built by Africans, in Africa, for Africans. This approach aims to provide close proximity to work, leisure, and play.
The city offers world-class office facilities and is home to multinationals like PWC, Johnson & Johnson, and Novartis. It offers various leisure activities for the whole family, including beach clubs, water sports, art studios, cinemas, event centres, spas, gyms, and retail shopping. Additionally, it offers over 40 dining facilities, three hotel facilities, and residential accommodations, including the upcoming Landmark Waterview Apartments.
Besides the prevailing macroeconomic challenges, what are your other concerns? How do you cope at a time when luxury real estate, where you play, is not among the top three priorities for Nigerians today?
Luxury real estate developers like Landmark Waterview Apartments cater to a market for premium real estate investments. Home purchases are the single most important investment, often done once or twice in a lifetime. Despite macroeconomic challenges, customers are still cautious and do their due diligence to ensure they buy from a trusted developer with experience in delivering investor value.
Like I said previously, every problem presents its own opportunities, so while we have seen an increase in hesitation from buyers in the local market, we have also seen an increase in interest from Nigerians in the diaspora who are at the point where they want to make the important decision to invest in real estate in Nigeria and want the confidence of partnering with a known brand when making that long-term decision.
What are your projections for the real estate sector in 2024 and the next two to three years of worsening economic conditions?
The nation’s success will depend on the collaboration of private and public sectors, with the government creating an enabling environment for affordable housing through policies like finance, taxation, and infrastructure development. This will enable the private sector to flourish, creating jobs, innovation, and industries that cater to the nation’s needs.
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The real estate cycle is cyclical, with varying levels of difficulty in the long-term nature of projects. The current economic conditions are challenging, but great real estate professionals can prepare for and ride out tough times while strategically reinvesting benefits. The industry should learn from these challenges to ensure business sustainability. For example, developers should focus on introducing lifestyle elements into mixed-use projects, as the mixed-use model is here to stay.
At Landmark, we are committed to being a leader in the tourism real estate space by using our tried and tested mixed-use model to provide world-class facilities, experiences, and service to all of our Landmark citizens, both the ones with us and the ones to come.
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