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WlLh Lhe Lurozone flnally
pulllng ouL of recesslon
and sLrong bulllsh equlLy
markeL ln Lhe uS
(shuLdown aslde), cauLlous
opLlmlsm looms over
global markeLs.
637%5 8(%9'($:
1he year may have sLarLed
relaLlvely slowly, buL Lhe
markeL seems Lo be plcklng
up. 1he Lekkl-lkoyl llnk
brldge acLed as a caLalysL
for Lhe Lekkl properLy
markeL.
;<,,3(:
WlLh ma[or naLlonal
pro[ecLs ln Lhe plpellne,
real esLaLe ln Lagos has
never been more
appeallng. MarkeLs are
very opLlmlsLlc abouL Lhe
fuLure of Lekkl.
+,'+#,*- ).,/#* ,#+',*

Clobal MarkeL Cvervlew
Cver Lhe pasL 6 monLhs Lhe uS has caused mulLlple
rollercoasLer rldes Lo global markeLs.
1
The clout their economy has on the
world financial system is unparalleled
and if you really think about it rather
frightening. The fact that the currency
reserves of most countries are in
dollars generally doesnt help things
either, as many expect sanity from the
US for their own well being. However,
over the past 6 months, that is not
what they have been getting.
The FED Taper, a phrase that we all
surely must have come across
recently, involves the Federal Reserve
of America, slowing down the pace of
its US bond purchases. As a result
2
investors across the globe began
selling risk assets such as emerging
markets in favour of cash and US
securities. Emerging markets with
account deficits such as India and
Turkey were particularly vulnerable,
however owing to Nigerias current
account surplus, effects the taper
finance outflows would have had, were
cushioned, but only to an extent.
CBNC Africa similarly found that a
significant impact of the taper on
Nigerian financial markets was not
expected, as the main driver of local
exchange markets are local issues,
adding that foreign investors in local
3
equity markets were more medium-
long term. On the other hand, another
US debacle, the Government
Shutdown, ensued partly as a result of
a row between the US President and
Congress disagreement on debt
related issues and created a large
pocket of global uncertainty. The
Finance Minister of Nigeria explained
that the possibility of debt default by
the US posed dangers for Nigeria, as
costs of borrowing from the


"#$%&'()*%+',&'( -./0
-
1
the international market would rise
significantly. Bringing about similar
and quite sharp rises in cost of debt for
the investing public whilst closing the
door entirely for many. Furthermore,
as Nigerias reserves are in dollars,
and a devalued integrity-lacking dollar
could mean large amounts wiped off
the nations balance sheet.
On the European side however things
are generally improving. Investors
have been piling record amounts of
money into Europe and as the
continent pulls out of recession the
markets have concluded that the crisis
is over. According to the Financial
Times stronger exports and investor
demand have combined to push the
Eurozone up sharply. The region is
running a record current account
surplus; and this is expected to grow
as it continues to receive funds from
the rest of the world. However, some
feel that investors are overly optimistic,
possibly a flip side of their pessimism
over the dollar recently. Skeptics have
also noted that less financial pressure
on the European government has
already led them slow down the pace
on reform especially over banking
union on the worst hit European
countries. Hence they warn that things
may get worse.
When it comes to !"#$%"&, in some
sense markets are largely shielded
from global events. The country
provides a unique opportunity to
2
strongly outperform global
benchmarks but at the same time
poses some of the greatest risks
known to the investment market. The
economic picture has been relatively
mixed over the year but there is a
general sense that things appear to be
picking up.
Judging from the historic trends of the
poor implementation of multiple
infrastructural projects in Africas 2
nd

largest economy, its no surprise that
over the years many of the countrys
problems still remain. But considering
the introduction of new dynamics in
the power sector together with strong
infrastructural prospects, things are
starting to look up.
Ms. Okonjo-Iweala, the Finance
Minister explained through local press
that the World Bank and International
Finance Corporation agreed to
mobilize global funds for Nigerias
power infrastructure development.
These organisations intend for Nigeria
to be one of their focus countries in
sub-Saharan Africa for their
predominantly power based
infrastructure efforts. As a result they
are willing to invest hundreds of
millions of dollars. The Finance
Minister went on to explain that the
bank would also act as a catalyst for
further foreign direct investment,
providing an increased scope of
investment interest in the country.
3
Additionally, the recent privatization of
the infamous power sector has
sparked some positive and negative
controversy. Reuters reported earlier
last month that the initiative was the
best chance to unlock potential in
Africas most populous country, citing
that the power problems which have
gone on for decades have long put a
major brake on economic growth.
Estimates from the Federal
government state that power related
shortcomings cost up to 50%
economic growth yearly, a fair
estimation as these set backs push
business costs up 40%, sending away
large internationals and global
investors. It is clear that any form of
reform within this aging sector has the
ability to create enormous growth
within the distressed country.
Nevertheless, international and local
press were quick to express concern
that many of the power assets went to
local oligarchs raising fears of poor
management in the near future.
Adding that when consideration is
given to the poor state of existing
plants it will take a few years till results
are observed. Some estimates toped
$4b worth of repairs. President
Goodluck made similar remarks in that
change would not be overnight. One
thing is certain however, because of
the choice privatisation brings,
improvement is inevitable.

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3
finance will be more readily available,
which will help to service the countrys
large infrastructure deficit. It can also
be argued that for Lagos, core
development finance flows will be
directed towards the Lekki region as
projects such as Eko Atlantic are
2
infrastructure have taken center stage.
Flagship projects like Eko Atlantic,
Lekki Free Trade Zone, Lekki as a
region itself, and multiple regeneration
schemes in areas across the city along
with the redevelopment of the Lekki
Express way have brought some
strong prospects for the future of the
mega city.
The Financial Times also recently
pointed out that Pension funds, which
represent a large chunk of
infrastructure investors in developed
economies have not really caught the
bait in Nigeria, YET. In more
developed economies pensions funds
are key development financiers, with
up to 20% of their allocation focused
on infrastructure. They generally have
a participation rate of 46% according
to the Office of National Statistics in
the UK (2012). However, a poor
Nigerian participation rate of 3%,
growth of the pension pot from $2b to
$20b from 2004 to 2012 respectively
(26% Y.o.Y growth) strongly
demonstrates the potential for market
penetration. Signifying that the within
the next few years infrastructure
1
With regards to the future of Lagos,
Lekki is seemingly receiving a lot of
attention. The Lekki Peninsula, which
is approximately 70-80km long,
stretching from Victoria Island to the
west Refuge Island in the east
represents a blank canvas of endless
potential. Its no surprise then that
areas within the region have been
allocated for a Free Trade Zone, an
airport and a sea port surely with a lot
more to come in the next few years. At
the moment it currently holds several
estates, gated residential
developments, agricultural farmlands
and more recently a wave of luxury
residential developments.
Infrastructure projects like the
redevelopment of the Expressway and
the Lekki-Ikoyi link bridge have
certainly played an active role in
opening even more doors for this
promising area. Furthermore, the
approval of 2nd Niger Bridge is set to
connect Lagos to other parts of the
country and Lekki stands as the ideal
place to house wealthy relocators
amongst many others.
Furthermore, other aspects of
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1
Over the past decade, Luxury apartments within the trendy
areas of Lagos have become increasingly popular. Wealthy
locals and returnees, investors along with international
corporations regularly splurge out millions to acquire or
lease these properties. They represent a lifestyle Nigerians
are not particularly accustomed to but are obviously very
interested in. Analysts at Eko Atlantic explained that
amazing structures developed for the high end residential
real estate markets are springing up in various parts of the
city. Moreover, Businessday Investigations have revealed
that home buying has also seen recent growth, while the
other sub-sectors like short-stay apartments; leasing and
hotel accommodation have remained significantly upbeat.
Estimates report that up to 70% of recent development in
the Ikoyi region have fallen under the luxury apartment
category, a strong representation of the demand for this
style of living. However, regardless of the depth or strength
of demand for luxury, the idea of luxury within Lagos is still
questionable, especially on an international scale. CNBC
Africa explains that in terms of quality we are still lagging
behind globally. Notwithstanding, Fine and Country report
that appetite continues to grow, however clients are not
looking for what is considered to be luxury in global
standards. It can be strongly argued that the focus seems to
be on the irrelevant. Finishing is key in determining the
status of any property, and only a handful of developers and
investors seem to recognise that and ensure that they
2
capitalise on it.
A property covered in marble with a jacuzzi in the bathroom
may stand out to many as luxury but without the right
finishing and attention to detail it could end up looking like
trash. But as it was explained earlier many clients are not
looking for what is considered to as luxury in global
standards. Hence on Banana Island and Ikoyi properties are
flying off the shelves, many even before completion.
Consequently, vacancy rates within the area are
staggeringly low. Moreover, the bulk of the properties that
remain vacant are not always a representation of low
demand, but a result of stubbornness and inflexibility from
landlords, developers and investors refusing to accept
market rents. Many dont seem to understand that an
investment by definition involves time, and considering the
nature of real estate as an asset, a much longer time
horizon than most asset classes.
An opportunity for here would be to run a survey evaluating
the performance of property owners and their behavioural
patterns. See the example below.


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"#$%&'()*%+',&'( -./0

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If we assume a yearly target rate of return of 20% for each owner,
considering the behaviour of each owner who would perform better
after 5 years?
?ear 1 ?ear 2 ?ear 3 ?ear 4 ?ear 3

3 year
reLurn
A 0 0 20 20 20

12
8 0 0 13 13 13

9
C 0 0 0 0 0

0
' )*+ ),+ -.+ -.+ -.+

)/+
L 0 20 20 20 20

16
EXAMPLE SURVEY RESULT
Its simple. As long as the owner who accepted the lower rent
immediately can intelligently conduct a rent review after a year or
two, that owner will outperform others. Results from a survey of this
nature can be collated in report format to present to owners who are
refusing to market at reasonable prices and reassure them that they
can still perform well regardless.
A recent Survey from Fine and Country (figure 3) noted that growth is
coming from a combination of Owner Occupiers, the wealthy who are
rewarding themselves with property luxuries and others wanting to
move out of outdated suburbs (like VGC) to trendy regions like Ikoyi.
However, the investors still largely represent 50%-60% of demand,
as only a small percentage of the market can own multiple properties.
The survey largely ignores the strong impact the international firms
and their expats have on driving the luxury real estate market in
Nigeria. Looking forward, with slight improvements in GDP growth
expectations
from the International Monetary Fund (IMF)
coupled with falling unemployment in the United
States, United Kingdom and Germany (countries
with the largest amounts of expats in Nigeria) it can
be assumed that number of expats coming into
Nigeria over the next few years are set to grow.
Local agents have already observed a larger inflow
of expats into the country.
33
13
13
13
;%<(#' %? @',3AB
lnvesLors Cwner Cccuplers
llnanclal 8ewards Movers (eg. vCC)
Figure3 - Source: Fine and Country Survey
0%
2%
4%
6%
8%
10%
12%
2010 2011 2012 2013 2014 2015
Unemployment Rate
Germany United Kingdom United States
20
23
30
10
13
"CA'( D'E3+F%<(
A - Achleved ueslred 8enL aer 2 years
8 - Seuled for a lower prlce aer 2 years
C - kepL holdlng
u - Lowered rlce lmmedlaLely and
lncreased renL gradually over 2 years
L - Achleved ueslred 8enL Aer 1 ?ear
Source: International Monetary Fund
EXAMPLE SURVEY RESULT


"#$%&'()*%+',&'( -./0
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1
Lagos is recognised as one of the most expensive
cities in the world, as a result of the high costs of property.
However, this is mainly as a result of chronic levels of
undersupply, which then presents a strong opportunity.
The Lekki region in Lagos has seen outstanding growth in
the past decade. According to the Nigerian Institution of
Civil Engineers the axis is the fastest growing real estate
corridor in West Africa. Reporting strong growth in the
number of people residing and working along the corridor.
Top Real Estate firms in Lagos like Fine and Country and
Fieldco have recognised this growth and are repositioning
themselves. Fine and Country pointed out in an interview
with CNBC Africa that Lekki is in growth mode and
foresee the region to be the core growth area within the
years to come.
It is believed that in the future Lekki Peninsula will be the
next commercial capital of Lagos state and also a city with
the best social amenities and infrastructure. Much of the
reason for the robust expectations and forecasts for the
region more recently are due to infrastructural projects
such a the Lekki-Ikoyi link bridge and the redevelopment
of the Lekki-Epe Express way. Business day reported that
property analysts believe the axis could play a major role
as the new investment hub for real estate investors as
Lagos gradually evolves into a mega city.
The Lekki-Ikoyi link bridge, which was commissioned by
the Governor earlier this year, noted that it has had a
significant impact on travel time in a manner that is
enhancing business. The bridge has changed the
dynamics of the real estate market in Ikoyi and Lekki. As a
result ample properties that were previously vacant are
quickly filling up, causing small price increases within the
region.
Moreover, the Lagos State Government report that the
master plan for Lekki will provide a built area that can
accommodate a residential population of about 3.4m
people and non-residential population of about 1.9m
people. The government hopes that unique characteristics
of the Atlantic Coast, Lagos Lagoon and the inland natural
areas will be protected and enhance to give Lekki New
City the special natural ambience character. This is an
impressive improvement from previous development
schemes as sustainability is being considered. It is
important especially in Lagos to ensure that practices in
development are carried out sustainably considering the
current population and expectations for growth.
2

One question being asked is the extent at which Lekki
can hold Luxury properties now and in the future. There
certainly is a market, and it is growing. However, the
capacity can only hold a certain amount at the moment
as development in the region is still largely underway.
However, the future for Lekki is very promising and we
are strongly optimistic.

Eko Atlantic
Eko Atlantic, a multibillion-dollar investment provided
solely by private investors is a new city that has been
created in a bid to make it the financial centre of Nigeria
and possibly West Africa.

Like Lekki, this scheme is one that is getting a lot of
traction. Many are excited about the very well planned
scheme and believe that if completed and executed
properly will steal the shine from Ikoyi and V/I in the high
end residential and commercial real estate markets
respectively.
Local agents explain that the plans that have been set for
development are unlike anything that have ever been
seen before and they have enough power to throw Ikoyi
off its throne. For real estate investors with large asset
holdings in Ikoyi, the best advice for them is to begin to
diversify. As a shift in the dynamics high-end residential
market is imminent.


"#$%&'()*%+',&'( -./0


Fieldcos vision is to be the foremost property transactions company in Nigeria. We are passionate about providing a
first class property management service for our clients and improving the quality of accommodation provided.


Dolapo Omidire
r
Research Analyst
October-November 2013
d.omidire@gmail.com
http://uk.linkedin.com/in/domidire

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