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Real Estate Investment In Sub-Saharan Africa - The Role Of The Capital Market

REITs
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Tuesday, May 23, 2017, 6:38 PM /NSE

Real Estate Investment Trust (REIT) Conference. Welcome Address by Mr. Oscar N. Onyema, OON, Chief Executive Officer, The Nigerian Stock Exchange

Good morning distinguished ladies and gentlemen


On behalf of the Council and Management of The Nigerian Stock Exchange (NSE), it gives me great pleasure to welcome you to the inaugural Real Estate Investment Trust in Sub – Saharan African conference with the theme: REAL ESTATE INVESTMENT IN SUB – SAHARAN AFRICA – THE ROLE OF THE CAPITAL MARKET hosted by the Nigerian Stock Exchange.


We believe that your active participation is an indication of your interest and strong commitment towards the development and growth of REITs in Nigeria and Sub – Saharan Africa in general.


According to Ernest & Young report of 2016, global market capitalization of REITs now stands at approximately US$1.7t, up from US$734b in 2010.


The US REIT market has grown by almost 150%, while the market capitalization of non-US REITs has more than doubled.


The two fastest-growing markets in the last five years have been Australia and Japan, both of which have now overtaken France and the UK to be the second- and third-largest global REIT markets, respectively.


Globally, 16 jurisdictions have introduced REIT or REIT-like legislation since 2006, although not all have fully functioning active participants. According to SNL Financials, the total number of countries with REIT or REIT like regimes is now 36.


The African REITs market is presently valued at US$29b and is available in four (4) countries (Ghana, Nigeria, South Africa and Kenya).


There are only 32 REITs in Africa with South Africa being the largest REIT market having 27 REITs and Nigeria second with three REITs listed.


In 2015, an estimated $265m worth of transactions were concluded in Kenya, Nigeria and Ghana, a big improvement to the $65m seen in all three markets during 2012.


This indicates an increasing market as a larger number of investors are beginning to take increased interest and participation in the Real Estate Investment sector.


The African real estate markets are well positioned for a long-term growth phase given the significant supply deficit across the continent.


The current state of this asset class and the huge opportunities the sector holds are some of the key issues to be discussed during the conference.


The conference will highlight the investment opportunities and challenges across Sub Saharan Africa with emphasis on deal structuring and capital formation, valuation models, regulatory and tax issues, Transfer of title and the Land Use Act, Governance and robust risk management framework for REITs.


In Nigeria, the Real Estate Sector has recorded steady and consistent growth over the last decade. PwC in its report titled, ‘Real Estate: Building the Future of Africa,’ predicted that Nigeria’s real estate investment will rise by about 49 per cent, from $9.16 billion to $13.65 billion in 2016.


It attributes this to a growing middle class driving demand for residential property development, and indirectly, retail, industrial and commercial real estate development.


We believe that this growth can be accelerated by deploying capital market tools such as REITs, listing of real estate companies, and creation of real estate ETFs to unlock capital in the sector.


Since 2007, when the Securities and Exchange Commission (SEC) introduced the framework for the establishment of REITs, the Nigerian investing public has been given an opportunity to invest in a diversified portfolio of choice real estate assets.


Whilst the Nigerian market may not be as developed as other emerging markets such as Mexico, South Africa and Singapore, this asset class has definitely come to stay.


Today we have about N40b in REITs market cap listed on the NSE and a total of N96b in the Construction/ Real Estate sector of our equity market.


In spite of the challenging economic headwinds in Nigeria and other commodity based economics, the capital market (including the NSE) remains one of the main vehicles to promote sustainable economic development and wealth creation.


This conference is in line with the Exchange’s strategic initiative to promote and create the enabling environment for sustainable development of Real Estate Investment Trusts (REITs) in Nigeria and sub-Saharan Africa.


To create a more transparent, liquid and accessible market structure in line with global best practices for REITs, we recently notified the capital market ecosystem and other stakeholders of the proposed changes in our market regarding the reporting and valuation of Real Estate Investment Trusts (REITs); and other collective investment schemes listed on The NSE.


The proposed changes, which will be implemented over the next three (3) quarters of 2017 are aimed at promoting transparency, disclosure, visibility and liquidity of listed REITs and Closed End Funds in our market.


The changes will also make it easier for existing and potential investors to access information required to make investment decisions thereby contributing to the growth of these products in our market.


REITs and Closed End Funds listed on The Exchange will be reclassified from the Main Board to a separate board specially created for REITs and Closed End Funds under the Equities Market.


Through our growth agenda, the NSE will continue to engage other regulators, market operators, investors and other stakeholders towards delivering a culture of service excellence, intimate knowledge of clients, innovative products and world class market infrastructure.


Ladies and gentlemen, we have business executives, industry experts in the African Real Estate ecosystem; capital market operators and participants; as well as thought leaders gathered here today.


Through the course of today’s conference, our guest speakers and distinguished panelists will discuss and provide expert opinion on the development of REITs; current trends and experiences, challenges and global best practices.


They will provide insights into investment opportunities in Nigeria and Sub Saharan Africa.


Let me conclude by expressing our gratitude to our Titanium Sponsors – FSDH Asset Management and Stanbic IBTC Bank for their unwavering support and commitment towards the success of this conference.


I will also like to appreciate our other sponsors- PWC, Rand Merchant Bank, UPDC Plc, Mixta Nigeria, Udo Udoma & Bello Osagie Solicitors for their support.


I would like to recognize the presence of representatives from– DG of The Securities and Exchange Commission (SEC); The Honourable Commissioner for Works & Housing; CEO of Asset Management Corporation of Nigeria (AMCON); Acting DG of National Pension Commission (PENCOM); CEO of Nigerian Mortgage Refinancing Company (NMRC); Executive Chairman of the Federal Inland Revenue Service (FIRS) and the Executive (Managing Director) of Equity Capital Markets International, Standard Bank, UK.


Lastly I wish to thank the Head of Domestic Primary Market, Tony Ibeziako, and his team members (Gbenga, Ozofu, Morayo and Omo), our Corporate Communications team, Market Operators, Retail and Institutional Investors, Professional Bodies here present, and members of the Media, for your contributions in making today a success.


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