Fresh prospects may be on the card for real estate investors seeking property ownership without the attendant expenses or difficulties of being a landlord if statements made recently by one of Nigeria’s leading property development company – Top Services Limited (TSL) are anything to go by.
The company with the specialty in providing “neighborhood” malls has announced, it will float a N20 billion Real Estate Investment Trust (REIT) in the capital market.
REITs are corporations or trusts that use the funds of many investors to purchase and manage income property and/or mortgage loans. It is traded on the Nigerian Stock Exchange (NSE) just like shares.
REITs offer tax advantages to investors and provide a liquid way to invest in real estate, which is an otherwise illiquid market. Another benefit of REITs is that they allow investors to share in non-residential properties like hotels, shopping complexes, malls, and industrial properties.
Also, REITs require no minimum investment and do not necessarily increase and decrease in value along with the broader market. However, they pay dividends no matter how the shares perform.
In Nigeria, REITs are highly successful and provides less risky investment option in real estate to both small and big investors, regular and dependable income to the unit holders and attraction of massive Foreign Direct Investment (FDI) in the real estate sector. It enjoys pockets of tax exemptions that attract investors and fund managers such as exemptions of investors from withholding taxes (WHT) as well as Value Added Tax (VAT) and Capital Gains Tax (CGT) on sales of these units or securities.
Currently, there are four listed property companies on the NSE with a combined market capitalization of over N45 billion. These include Skye Shelter Fund PLC, Union Homes Real Estate Investment Trust, UPDC and UACN Property Development Company.
Experts say, of the property companies listed, UACN Property Development Company and the UPDC REIT have the most diversified investment portfolio which include hospitality, office, residential, retail and hospitality assets. Skye Shelter Fund PLC and Union Homes Real Estate Investment Trust are predominantly focused on residential property assets.
But with the proposed entrance of the TSL, the equation may likely change. The close-ended TSL REIT offer, consisting of 20 million units for subscription at N1, 000 per unit started on February 1, 2017, with First Ally Capital as its lead issuing house and First Ally Asset Management as its fund manager.
Under the scheme, TSL committed itself to building and delivering “neighborhood” malls that are affordable yet of high quality to attract anchor tenants. To date, TSL has developed four malls; Adeniran Ogunsanya Mall, Surulere, Apapa Mall, Apapa, Cocoa Mall, Dugbe, Ibadan, Oyo State and Akure Mall, Akure, Ondo State, all of which are currently operational and have occupancy rates of over 80 percent.
Chairman of Top Services Limited, Chief Tokunbo Omisore, said initial investments by the REIT would focus on the retail-related real estate including the highlighted four malls owned by TSL. Promising stable and regular income distribution to investors in the REIT, Chief Omisore disclosed that the malls could boast of diverse corporate tenant profile with staggered rental renewal periods, which prevents mass vacancy at any one period.
He listed the strengths of the TSL REIT to include predictable cash flow, multiple anchor tenants at each location with long-term leases, rental payments agreements that are indexed to the naira/dollar rate, zero leverage of assets at inception, while Investors will not take on development, construction or financing risk. In addition, the malls have high average occupancy rate as all the malls are at or above 80per cent occupancy levels.
For Mr. Winston Osuchukwu, Managing Director of First Ally Asset Management, Fund Manager for the TSL REIT, “investing in the TSL REIT allows for diversification of investment portfolio thereby reducing portfolio risks.”
He assured investors that professionals with great care, top skill, prudence, and diligence would manage the REIT. “For instance, the Investment Committee consists of professionals with diverse skills and in-depth knowledge in real estate investment and operations. In addition, the REIT is transparently structured and backed by reputable organizations including ARM Trustees Limited, Stanbic IBTC Bank Plc, and Leadway Assurance Plc,”
Source: The Guardian