Lekki gardens’ reputation rose very quickly, so did its buildings. In its first year of full operation, (2012-2013), it delivered 200 houses; and from May 2013 to June 2014, it delivered up to 2000 houses. The CEO Richard Nyong says the target is to deliver 20,000 homes and to serve 100,000 people in the next 18 to 36 months.
Until recently, Lekki gardens had only been under public glare for the right reasons – to offer mouth-watering discounts and unbelievably low prices. Like its CEO, Lekki Gardens, or LG for short, is (or was) a very private organization. But we were able to get hold of an earlier interview granted by Nyong and we gleaned some interesting insights into how the firm operated.
Selling The Nigerian Dream
Instrumental to its rapid rise was the way LG priced its products.
The company was able to score points by offering prices that were lower than competitors.
One factor made LG a success. It gave customers the opportunity to own homes in expensive locations without them having to stomp up huge sums of money for the land upon which the house was situated. Homebuyers also did not have to deal with difficult issues related to buying land in Nigeria – slow government documentation, harassment and shakedowns by the local communities – omo-oniles, and the likes.
Buying a decent house in Ikoyi or Lekki without needing to pay for Ikoyi or Lekki land is a good deal any day.
Customers were also drawn in by the potential capital gains of having a Lekki home. By owning a home in these parts, there was the opportunity to resell the houses at a higher price in future. Prices would always rise since there was always a deficit in the market.
The Business plan
LG’s business plan was to sell houses “off-plan”, that is paying for the home, before it is built. When the housing development is (fully?) paid for, then the building can start.
LG tried not to rely on external financing. It didn’t make use of bank loans. It did not also have any shareholders to distribute its profit with. Hence, it had only the customers and their pockets to take care off.
The plan was simple – buyers pay for the houses off-plan. The houses are sold at low prices, so that the entire housing development project can be financed as quickly as possible. As a result LG makes small margins.
In the referenced interview, Nyong said:
“What we do is that if we have not sold it, we won’t build it. People who want to build in one year, have their plan and so do people who want to build in three or five years. We always work towards aligning our corporate goals to the customer’s income”.
Ultra cost cutting
In order to maintain profitability in spite of the low prices, there was only one way to go. LG had to make sure its costs stayed low. Really low.
In the interview, he was asked:
“You play in the luxury end of the market yet your prices are way below what other players offer. If you look at Ikoyi, for instance, your houses are much lower than the price of land there. How do you arrive at your prices?
And he responded:
“For us, if there is cause for us to make N30 million and I can make 10 percent profit which is N3 million, I think that will be ok for us. If the cost of a property is say N35 million and I find a way to bring down the cost to N30 million and my profit there is N3 million, I think a wise customer would patronize me…”
“…Our starting point is not how much are we going to make, but how do we get our product to the people that matter. So, at the end of the day we are looking for every creative way to save the customers money…”
“We try to find a way to save money, reduce the use of concrete, maximize the use of land, reduce our desire for profit…”
But little was it known that this ‘innocent and noble’ desire to minimize cost for the buyer by “reducing the use of concrete, and maximizing the use of land” would lead to 35 people losing their lives.
“Maximizing the use of land” sounds like the company was trying to be efficient with resources, but it became criminal when safety regulations were violated.
It was this quest to maximize the use of land space that led to it adding an extra floor beyond the number of approved floors.
According to the Lagos State Building Control Agency, the collapsed building was already served a contravention notice and sealed for exceeding the approved number of floors, but the order was defied.
Although this collapse happened to an unfinished project, one can’t help but notice the same themes looking back to his previous works.
Sadly, for some already existing clients, including those who have inspected certain LG homes, there is a silent conviction that an incident involving LG could not be so far away. It was just a long time coming.
Residents in its existing Lekki Gardens estate have complained bitterly about its atrocious state of facilities, and the complete lack of maintenance. Some have complained about cracks on the wall, some others have complained about disjointed pipes.
What this event will lead to in the coming days is not certain. But integrity checks have been demanded on other buildings built by Messrs Lekki Worldwide Estate Limited, the promoters of LG.
Substantive conclusions can only be reached after investigations have been concluded. However, for home buyers who have deposited funds to Lekki Gardens the longer this case lingers the more excruciating it is for them. With emotions riding high against the company and vultures circling in, things may turn from bad to worse. Some are wondering what could happen if the brain behind the company is made to remain behind bars much longer. Will the company’s reputation ever recover? Will banks continue fund mortgages for new buyers? Will existing loans be in jeopardy?What about the value of the houses? Will it be negatively impacted?
These questions all point to one dreaded scenario. Events like this are typically the beginning of the end of something. Home owners will hope that the end is in their favour.