Q:1004 Estate started out as the largest community of senior federal civil servants before it changed ownership. Casting your mind back to when you took over and now, what has the experience been like?
A:I would say it has been very challenging because the scope of what we deal with goes beyond facility management. Because the estate is the largest in the whole country with high value location in the middle of Victoria Island and high caliber of people, the quality of services that we provide have to be upscale.
At the moment, we have exceeded local standards and have to provide services like power 24/7. Any time we have any little issue, complaints from residents will be such that you will begin to think that we are no longer in Nigeria where regular power supply is a privilege.
We are forced to improve even on our already good standards and get it to the very best.
The people that stay in the estate now are of the upper-middle class because somebody that is paying N3-5 million rents in a year is no longer of the middle class.
The quality of the people in the estate is changing. A lot of our tenants are of the corporate companies who put their local and foreign staff and guests here. Our foreign and expatriate population here is approaching 50 percent and you know this class of people will not stay in a place that is not functioning, not secure or providing quality service. If this place is not good, they will be the first to leave, but on the contrary, their population is increasing by the day.
For the corporate companies, at our rate, our service charge is relatively low; they make a lot of savings compared to other locations.
Our security has also been very good; recreation facilities are good and the environment is quite clean because we clean three times a day. In meeting the needs of people living here, I would say we have been alive to our duty. Indeed, there has been a lot of improvement since the past 12-14 months that we took over the management of the estate.
Talking specifically about ownership and management of the estate, in what significant way have these differed from what it was before you came in?
Recall that the estate was bought over from the Federal Government by a consortium of companies including UAC and Union Homes. After its renovation, there has been a change in management but the companies remain the same. What has changed also is the shareholding. We have continued to provide services like water, refuse disposal, sewage and water treatment, recreation, landscaping etc.
I won’t call them basic services as you get in a block of six to eight flats where you have one borehole, generators, one refuse bin, and two security men. Given the scale on which we are operating, it is quite different.
We have 260 employees now and we are discussing with somebody who runs a hotel to see how we can partner because the only things we don’t provide here now are bed-sheet and food.
We have one million litres water treatment plant which is fully utilized; we pump water four times a day, though this is to be expected in a community where you have more than 2,000 cars that are washed everyday or twice a day if it rains.We did an analysis of human traffic into the estate and we have realized that every resident has one or two visitors in a day and more at weekends, which means that every week, we have about 5,000 visitors, giving you 20,000 visitors in a month.
Because of this, our security apparatus is over-stretched, dealing with over 4,000 residents and their visitors.
We treat our sewage for about 4,000 people here on a daily basis; power has dropped by more than 1,000 megawats nationwide. For us that is bad news because we cannot afford to put off the lifts; The lifts must walk because we have old and young residents who cannot use the staircase. The lift must walk, especially on weekends.
When all these are working, it looks easy, but nobody stops to think of what is making them work. We have 32 transformers here which is the same as the number in Lekki Phase One. Our power plant is 10,000KVA which we spend a substantial amount of
money to fuel. There are so many other things that task the management a great deal. Last year, Lagos State government sealed up this place for non-payment of land use charge. There are challenges really, but the excitement is that we are making things work.
What do you have to say about value appreciation in this estate?
From all we see, the rents are going up. In some other locations, rents are either stagnant or declining, but on the contrary, in 1004 rents are going up. The sales value is also going up. We are selling our three-bedroom apartment for N60 million to N65 million which is N10 million to N15 million above the price last year.
This is a special location. What we have here is different from what obtains in Lekki Phase One, for instance, where residents spend N40,000-60,000 a month on paying toll for their two to three cars. If you live in 1004, that amount of money which comes to N600, 000 to N700,000 a year is saved. This place is the middle of Victoria Island which means that going to work is no longer a question of traveling for two to three hours. You find that the value we provide is more than what we charge. As a matter of fact, what we charge is about the lowest in the industry.
Our occupancy rate is about 90-95 percent. We cannot achieve 100 percent occupancy rate because some people are going while others are coming. So, we have about 5 percent void at the moment.
The main reason for the increase in your rental values is the centrality of your location. Could there be other reasons for this increase?
Though real estate is all about location, location, location, we have really seen a surge in demand for our apartments mainly from the expatriate community. This is because there is a slow growth in the Western economy, making Africa a new green field. A lot of oil companies are coming into Nigeria now to get a foothold.
It is very necessary at this point that Nigeria and Nigerians begin to re-organise their mindset to be able to leverage on the emerging opportunities. So, new companies are coming and bringing in their expatriate staff to explore the market. This is responsible for the upsurge in demand for our estate. 1004 is an international location and when you go online, you see that people from all over the world are visiting our site and they find the place safe.
Again, many people who have properties in the north come here to buy our flats because they consider this place safer for them. So, we have seen increase in demand from people from that part of the country.
Recently you inaugurated what you called Club 1004. Tell us about the Club, and the 1004 Mall and Residence. What informed these developments?
Club 1004 and 1004 Mall are two different things. Club 1004 is our approach to leveraging on the number that we have in the estate. We have a very large number of residents with spending power. These people who are of the upper-middle class have certain needs in common such as insurance for their cars. All the cars we have here are SUVs and luxury cars. We therefore, thought it appropriate to partner with an insurance company that could give them discounted insurance cover. Now, we have partnership with Mansard Assurance, former GTAssur.
These residents are also within the age range of 30-55 years and so require life insurance. For the expatriate community, part of their welfare is being sure that they can be evacuated from Nigeria at short notice if t here is medical emergency. Mansard also offers that service at a lower rate because of the number involved.
Many of them also travel for holidays and so we have Reality Vacation International who offers discounted holiday rate at about 1000 hotels and 400 resorts worldwide. Those who live here enjoy all these benefits and it is for those who own the house and the tenants. The Club 1004 also gives tenants access to emergency ambulance services to go to hospitals.
The 1004 Mall is a new development which we have gone for tender. Major contractors like Cappa D’Alberto, IPP, Bouygues etc are sending their tenders. After we have finished dealing with that one, we will start construction.
The mall is also our strategy to provide services inside the estate. The estate has 1,000 flats with an average of four occupants per flat which gives us about 4,000 residents. These people have so many things they need such as food, barbing salon, hairdressing salon, grocery, bar, pharmacy, sports lounge, restaurant, confectionery, travel agency etc. These are services that we know are consumed by the residents. Their disposable income is available within the estate. It is on that basis that we have decided to put up the mall which will be on two floors.
The mall will occupy about 1,500 square metres of land. We will operate sports bar and lounge; food court, electronic and computer shops, lots of small shops and we want to ensure that whoever takes up the space will provide the services. We don’t want a situation where everybody will be doing the same thing in the same place.
We are also building two and three-bedroom apartments which is what we call the 1004 Residences. There are 50 units of these luxury apartments. This will have a separate entrance gate from the main estate. The apartments are going to be a bit of higher standard than the main estate in terms of luxury.
The services are not to be shared because the two estates are in different markets. The new building will be serving the high end market different from the existing 1004. We are therefore working on making the services distinct.
When you take a look at the property market, especially the Lagos market, you find that there are some challenges at the upper end such that vacancy rate in places like Asokoro in Abuja and Ikoyi markets have seen 25—30 percent vacancy rate. What gives you confidence that your new luxury apartments will fare better?
The Ikoyi and Victoria Island markets are two different things. Luxury apartments in Ikoyi go for N180 million to N200 million per unit and this is because land values in Ikoyi are very high. The only way to recover your investment is to sell high prices given that the land alone goes for N500 million.
If you are doing a high rise building, you will be talking about one acre of land which goes for N1.3 billion to N1.5 billion; the cost of construction should be around N200,000 to N250,000 per square metre while the cost of fund is about 21 percent.
When the developer bears all these costs, including planning approval which is about N5 million in which case if you are building 20 flats it means your planning approval is N100 million. This is just payment for a stamp from the government. The cost of building material is also there and everything is imported. Because the standard has gone up, most apartments now come with almost everything you need in a houses, thereby pushing up prices.
Victoria Island is different. Here, fewer developments come up and they are priced within N130 million to N150 million range. So, prices are actually in much more accessible range here than in Ikoyi market.
There is an argument out there that facilities management is better outsourced than the owners doing it by themselves. Those who hold this view explain that there is greater efficiency and commitment when outsourced than when it is done in-house. What is your view on this?
I differ from that view because it all depends on what the strategy of the company is. If you look at our logo, it says live, work, play, innovate. Our concept is to create a community where people will pursue their livelihood, live comfortably, be able to work, recreate and have an innovative environment where their needs are met.
If you develop your house, it becomes your means of accessing the end user. The concept that people had been using in property business is that ‘I am selling a house to you’ and they would continue to talk to you until you buy the house and once that is done, the relationship is ended and they leave you to your fate.
Our own concept is that the relationship with that buyer or occupier outlives the transaction. In our case, we don’t see the management of the estate purely on naira and kobo basis; intangibly we are deeply committed to ensuring that value is not only retained but increases for the owner; enjoyment and comfort is delivered at reasonably low cost.
In our case also, if you have a portfolio of 10 units of office blocks here and there, you need to have, not just an outsourced mindset, but a portfolio mindset so that the people that you give your property to will be looking at your entire portfolio and will be able to advise on how to bring economies of scale to managing the portfolio. This is better than having multiple agents who will be working independent of one another.
Not too far away from this estate, a new city called Eko Atlantic City is evolving with a promise of providing homes for 250,000 residents. Do you foresee any negative impact this city may have on few units holding companies like yours, or the entire Victoria Island property market?
What I will say, first and foremost, is that cities are organic—they evolve; they grow and when they consolidate, nobody remembers the time it was just growing. Take Lekki Phase One for instance. This estate started evolving in 1978/79. Up till today, it is barely consolidating. And businesses are now moving in. This has taken 30 years, and it still has large pockets of empty land.
Banana Island is also the same thing; you still have pockets of empty land there. All I can say about the new city is that if I were an investor with a choice of buying from 1004 that is ready and standing, or from Eko Atlantic that I will have to wait, I would go for an existing estate. But is it wise and good to take a position at Atlantic City, my answer is absolutely yes; you can take a position, bearing in mind that your position will take sometime to come to maturity. The beauty of this is that as it matures, it also appreciates.
The city is modeled after the cities of Dubai and Singapore. A lot of value is being created and if you look at it, you are creating value of about N100 million per plot. So, we are actually on the verge of another investment opportunity in the country because foreign funds along with foreign private equity are beginning to come there. Investors here are looking at an investment that will take five to six years to mature.
At this point, we should be looking at how to propel movement into the city because it is just coming into the market. People are always looking for established areas to locate their businesses. The promoters of the city should be looking at larger developers who will come and develop large number of units.
I believe that this will hasten the development of the city. There should be a kind of partnership between large scale developers with the developers of Eko Atlantic. For me, it is incredible that the city is coming here and now, and that shows how far we have come in real estate development. But there should be a way to attract larger scale developers and propel more movement into the city.
The issue of low cost housing has continued to agitate the minds of those who follow trends in this market. Demand here is huge, yet most developers avoid that segment of the market. Do you have any plan of going into low cost housing, considering the economy of scale you have talked about?
Yes, we built 1004 flats and I can tell you there are economies of scale in managing the estate. We are really planning to go into large scale development. We have the experience and the track record. We have already applied for land from the Lagos State government to do an estate along the Lekki-Epe Expressway. We are also pursuing land in Abuja to do an estate of the same magnitude.
We have realized that when you develop something of this magnitude, the community takes off quicker; there is economy of scale; there are reasonably discounted costs than in normal investment.
We at 1004 will be doing some schemes for lower and middle income earners. We are already working on it and we hope to get the land from Lagos State government, we will take off and definitely, most of what we will be doing will be from 1000 units and more.
It may not be necessarily low income because the Federal Mortgage Bank has increased the NHF loan from N5 million to N15 million which means a house buyer can now afford a house of that amount plus his own personal savings, bringing us to houses for N20 million to N25 million per unit. So, we are looking at developing houses within that price range.
The Nigerian real estate market is about Lagos, Abuja and Port Harcourt. If you were to advise a potential investor, what would you tell him about these three investment destinations?
Lagos continues to be a really structured commercial real estate market. Here, there are commercial activities which deepens the market. I believe that it is high time we recognized the Governor’s consent as a mere commercial venture. It involves paying the government’s money. This is because if a land transaction is illegal, the governor’s consent does not legalise it because the transaction could be revoked if proven to be illegal.
I don’t believe in the whole argument of scrapping the consent through the whole process of amending the constitution. Governor’s consent should be made something like paying for vehicle licence such that once you pay, you go drive your car.
Unlike Lagos, Abuja is still a new market that started in 1979. Cities are organic and so, take time to develop. The city centre in Abuja has developed while the satellite towns are not. The structure of the market there is controlled by government unlike Lagos which is private sector driven. The nature of the market is such that prices are way beyond the reach of majority of the people there. Returns on investment in the city is however good if you got your land early and it has appreciated.
Port Harcourt is basically an oil economy and the militancy in the region has affected its property market. Just like what is happening in the north, values have been distorted and even when normalcy returns, it will take a while for the market to settle.
