UPDC REIT Initial Public Offer - Equity Note from BGL


Tuesday, 19 February 2013 / BGL 

The colossal housing deficit in Nigeria has been said to require the entire federal budget compounded for over 10 years to bridge. Estimated at between 12 million and 16 million housing units, applying a mid-level unit price of N10 million would cost this country between N50 trillion and N60 trillion. To meet the housing needs of Nigerians, therefore, the real estate sector is witnessing huge levels of investment.

The possible commercial properties rents rate in Nigeria has been estimated to be in the region above US$1,000 per square metre per annum for smaller spaces. At this rate, headline rents in Lagos- Nigeria’s commercial capital, is perhaps among the highest in the World. This presents great opportunities for savvy investors to seek significant returns from real estate investment.

It is in this regard that the UACN Property Development Company Plc (UPDC) Real Estate Investment Trust scheme (REITs) initial public offer of 3,000,000,000 units of N10 each at par, currently open to investors, may be timely in a subsector that may be overtly shallow and yet potentially profitable.  The fund is structured in such a way that UPDC will own about 40% (N12 billion) of the fund while the remaining 60% (N18 billion) will be held by the investing public and will go towards the purchase of real estate assets from UPDC.  The fund aims to achieve a long-term capital growth of its assets by investing at least 75% of the proceeds of the offer directly in quality real estate in strategic locations across Nigeria. A maximum of 25% will be invested in other real estate related assets with only about 10% in liquid assets such as fixed income securities.

Rather than the over-concentration of investments in that traditional equities and fixed income instruments, a balanced portfolio including an aggressive exposure to the real estate sector would present a better picture for investors, including institutional investors like banks, insurance and asset management companies....

While the UPDC REITs is expected to be tax-exempt, due to the absence of specific legislation which grants the special status on REITs, it may be subject to taxation at the trust level. However, when this income is distributed to investors, it becomes franked investments which would not be subject to further tax....

Download the BGL EQUITY NOTE on UPDC REIT’s Initial Public Offer

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4.    UPDC to raise a N30bn IPO offering in Own REIT - Proshare

5.    UPDC REIT - Prospectus February 2013


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