UPDC to raise a N30bn IPO offering in Own REIT

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Wednesday, February 06, 2013 / BusinessDay
In what appears as a response to growing investment sentiments in the Nigeria Stock Exchange and call for a rebound in the Initial Public Offering (IPO) market, UACN Property Development Company (UPDC) plc is set to raise N30billion through an IPO of three billion units of N10 each, in the UPDC Real Estate Investment Trust (REIT).
The IPO which opens on February 19, 2013 and closes on March 28, 2013 has the authorisation of the Securities and Exchange Commission (SEC) and the approval of the Nigerian Stock Exchange (NSE) for the listing of the Units of the REIT.
Real Estate Investment Trust is close-ended and its units will be listed on the floor of the Nigerian Stock Exchange. Once the offer is concluded, units of the REIT can only be bought or sold through a licensed Stockbroker on the floor of the Exchange. Consequently, the price will be market driven and not based on the Net Asset Value (NAV) of the REIT.
The units qualify as securities in which Pension Fund Assets (PFAs) can be invested under the Pension Reform Act 2004, and in which Trustees may invest under the Trustees Investment Act Cap T22 LFN 2004.
Global Credit Rating Company (GCR) –rating agency to the offer, assigned a BBB(f) rating to the offer. In the event of oversubscription, 15 percent of the offer size will be absorbed, subject to the SEC’s approval and registration of additional units.
FSDH Asset Management Limited is the fund manager to the offer; Stanbic IBTC is the lead issuing house/receiving bank; while BGL plc is the co-issuing house to the offer.
Larry Ephraim Ettah, chairman UPDC said “the offer will help us to execute our lines of significant projects. This will allow us have the financial fire power to execute the projects. As a subsidiary of UAC, UPDC is a company with a long history of pedigree. What we are saying is that we will deliver high returns to investors.”
Hakeem Bamidele Ogunniran, managing director UPDC said: “When you are looking at REIT, you first look at the sponsors before the offer assets. The asset of the REIT are already there and they are fully tenanted and no vacancy.”
Hamda Abimbola Ambah, director, asset management, FSDH Asset Management said: “This is something unique currently happening at the market because it allows people to have exposure to real estate investments without having to look for millions of naira. The prospectus is professionally put together. Of course you don’t expect less from UPDC.”
UPDC intends to hold 40 percent of the REIT, while 60 percent will be held by the investing public. The cash being raised from the offer will be applied towards the purchase of real estate assets from UPDC. UPDC will receive as purchase consideration, a combination of units of the REIT valued at N12billion and cash payment. Consequently, UPDC will not make any cash subscription in respect of its 40 percent stake. A minimum of 90 percent of the income earned will be distributed to unit holders at the end of every financial year. There is no option of reinvesting such income.
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