Stanbic IBTC, others seek structured, liquid REIT market to attract foreign investors

Stanbic IBTC, a  member of Standard Bank Group, in partnership with other institutions, gathered finance and real estate experts at a roundtable discussion in Lagos recently, canvassing a structured, efficient and liquid  Real Estate Investment Trust (REIT) market capable of attracting a new class of local and foreign investors in Nigerian real estate market.

Nigeria’s large population, high rate of urbanization and high level infrastructure and housing deficit estimated at 17 million units have created a strong demand for real estate assets, making the country an attractive prospect for investible funds in real estate.

Organisers of the roundtable with the theme, ‘Creating Investment Grade Real Estate Assets in Nigeria’, also included Actis, Persianas Group and Resilient Africa and was targeted at key industry stakeholders and regulators.

Participants were also drawn 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).

The discussion which centre on a wide range of topics including asset valuation, land acquisition and zoning considerations, REIT structures and characteristics, REIT regime in Nigeria, etc was facilitated by  the Yewande Sadiku the Stanbic IBTC Capital Limited CEO; Adeniyi Adeleye, Head, Real Estate Finance, Stanbic IBTC (West Africa); Funke Okubadejo, Director, Real Estate, Actis; Nnema Byrd,  Asset Manager, Stanlib Africa Direct Property Development Fund,  and Andrew Brooking, Director, Java Capital.

Sadiku explained that the need to develop an efficient, viable and sustainable REIT market necessitated the introduction of the yearly forum, assuring that her company would continue to engage stakeholders at different levels to develop a viable REIT market.

In his keynote presentation, Adeleye, highlighted the apparent illiquidity of the existing REITs, noting that predictable and sustainable rental cashflow was one of the most important elements of the trust which was 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,” he said.

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

Also identified was the requirement for intervention inland transfers and urban planning processes to create an improved enabling environment, which will continue to support the creation of new real estate assets, as well as institute an efficient and speedy judicial process.

CHUKA UROKO