Taking a significant step to bridging Nigeria’s housing deficit
The real estate sector in Nigeria has continued to contribute significantly to the nation’s GDP, accounting for, at least, 7.07 percent of GDP as at Q4, 2018. This contribution which could be more, if the sector’s full potential is exploited, is made possible by the activities of estate developers.
At the forefront of these activities is Mixta Real Estate Plc (‘Mixta Nigeria’), the leading developer in affordable housing and urban infrastructure in Nigeria.
Following the footsteps of its parent company – Mixta Africa, South Africa’s success in the delivery of over 6,100 affordable housing units across countries in sub-Saharan Africa and North Africa— Mixta Nigeria is determined to consistently maintain its position at the forefront, providing Nigerians with affordable housing.
Realising the constraint which funding could pose on its way to achieving its ambition, Mixta Nigeria approached the Nigerian capital market in 2017 by establishing a Bond programme under which certain bonds of a nominal aggregate amount not exceeding N30billion (the ‘Programme Bonds’) may be issued by way of an offer for subscription or private placement.
In the same year, Mixta issued a portion of the Programme Bonds (‘Series I Issue’), raising N4.5billion via an offer for subscription by way of a book building process at a fixed rate of 17 percent due 2021. The bonds in the Series I Issue were secured by a guarantee from GuarantCo Limited, a development finance institution operating from the UK which facilitates infrastructure development in low income countries through the provision of credit guarantees.
Kola Ashiru-Balogun, Mixta Nigeria’s managing director, explained that GuarantCo guaranteed the principal and one coupon payment relating to the bonds, adding that the bonds issued under the Series I Issue are listed on the Nigerian Stock Exchange and the FMDQ OTC Securities Exchange.
“The Series I Issue has been successful in the secondary market. The high demand for it demonstrates the capital market’s growing confidence in the real estate sector”, Ashiru-Balogun noted.
Following its successes in 2017 and its entrance into a new market, Edo State government, early in 2018, saw the need to increase the momentum in delivery of quality affordable housing units and necessitated another approach to the Nigerian capital market.
The managing director disclosed that, in 2018, Mixta Nigeria issued a further portion of the Programme Bonds (‘Series II Issue’) also via an offer for subscription by way of a book building process in two tranches. In the first tranche, Tranche A, the company raised N2.9 billion at a fixed rate of 16.50 percent due in 2023. The principal and one coupon payment was guaranteed by GuarantCo.
In Tranche B, he said, “Mixta Nigeria raised N2.3billion at 17.75 percent due 2023 and secured by a third-party legal mortgage. The Series II Issue, being more successful than the Series I Issue, is a clear vote of confidence by investors in Mixta Nigeria’s strategy to focus on affordable housing, and an indication of significant future growth in the real estate sector”.
GuarantCo’s assistance in Series I and Series II Tranche A bonds was key to securing reasonable coupon rates for the bonds.
Expectation is that this significant step will enable Mixta Nigeria to do more developments that will deliver more affordable housing, leading to a significant reduction in Nigeria’s widening housing gap.
Ashiru-Balogun has assured that notwithstanding the what has been achieved, Mixta is not resting on its oars in its bid to bridge Nigeria’s housing deficit. “This is a goal which requires the collaborative efforts of developers and the governments, at all levels, through innovative technical solutions and effective long term financing mechanisms”, he said.