Union Homes Real Estate Investment Trust (REITs) recorded a spike in occupancy rates for its choice properties across Nigeria. This was contained in the company’s periodic Key Performance Metrics for the period ended November 30, 2019.
The metrics indicate, 6 out of its 9 properties recorded 100% occupancy rates compared to October 2018 where none of its properties hit 100% occupancy rates.
- According to the data 63 out of the 94 units of apartments had an occupancy rate of about 100%.
- Seven out of its properties are located in Lagos (Ikoyi and Lekki) and two located in Abuja.
- As of March this year about 28 units of apartments had 100% occupancy rates suggesting the company has been able to rent out nearly all of its choice properties.
- Apart from its apartment in Jabi at 17% occupancy rate its other properties have at least 80% or more occupancy rates.
While the company has recorded a spike in occupancy rates, rental yields still remain abysmal for most of its properties.
- For example, its properties in VI and Ikoyi posted rental yields of between 4% and 4.89%. Only its 16-unit Locke apartment in Lekki posted a yield above 6.97%.
- Its Olive apartment in Jabi Abuja posted a yield of 1% and an occupancy rate of just 17%.
- Rental yields are very poor in Nigeria due to the rising cost of acquiring land Also the developmental fees and infrastructure cost is a major challenge for developers.
What this means: A higher occupancy rate ensures the business is at least letting out most of its properties. Following the 2016/17 recession, the real estate industry was badly hit as most luxury apartments faced difficulty looking for buyers or tenants.
- For most developers like Union Home REITs. They have had to crash down rents just to ensure that their apartments are not left empty. A higher vacancy rate is an expense to the REIT they can do without.
- Rental yields will likely remain low provided land and development cost continues to be exorbitant.
Experts say …
Meanwhile, industry experts believe that Union Homes REIT and other operators would perform better in 2020 if certain steps are taken.
One of such steps, as explained by Ranti Adedeji, Managing Partner, Adrant Properties, is to encourage institutional investors to take advantage of REIT.
He said, “The Pension fund administrators (PFAs) can take advantage of REIT and that the REIT’s excess capital will be invested in upgrading existing facilities, government securities, and real estate-related investments to enhance the yield of the fund, among other projected income streams.”
[READ ALSO: Why The NSE Wants More Transparent Funds And REITS]
Another stakeholder, Kayode Oni, explained that access to long term financing like that of the PFAs can help lower the cost of rent for tenants in the long run.
He said, “Investors will have an investment that will yield them good returns progressively over the years. So what’s going to be different here is that would be, if you look at most of the previous event, you raise the money and then you go to build and every time you go to do that, you realize that you have cost over loans, you are not able to finish the project and then you have to move back and raise other cash and all that, but in this case the asset is there.”
SpaceX says it’s pursuing necessary licenses to bring Starlink to Nigeria
Broadband penetration of 70% which covers 90% of the population is the FG’s target in its National Broadband Plan (NNBP), 2020-2025.
American private space exploration company founded by Elon Musk, SpaceX says it is working to pursue all necessary licenses needed to bring the Starlink Satellite internet services to Nigeria.
This was disclosed by Mr Ryan Goodnight, SpaceX’s Starlink Market Access Director for Africa in a meeting with NCC’s Executive Vice-Chairman (EVC), Prof. Umar Danbatta on Friday in Abuja.
What SpaceX is saying about Starlink in Nigeria
“SpaceX has been in discussion with NCC virtually over the past several months to begin the process of pursuing all necessary licences to bring Starlink, its satellite-based broadband services, to Nigeria.
Having made substantial progress in the discussion, the commission granted SpaceX’s request for a face-to-face discussion to gain better insights on the prospects,” they said.
The NCC stated that it has listened to SpaceX’s presentation and will review it vis-à-vis its regulatory direction of ensuring an effective and sustainable telecoms ecosystem where a licensee’s operational model does not dampen healthy competition among other licensees.
“As the regulator of a highly dynamic sector in Nigeria, the commission is conscious of the need to ensure that our regulatory actions are anchored on national interest,” they said.
NCC added that broadband penetration of 70% which covers 90% of the population is the FG’s target in its National Broadband Plan (NNBP), 2020-2025. This is also in line with its National Digital Economy Policy and Strategy (NDEPS), 2010-2030.
What you should know
Starlink is an internet service launched by SpaceX to improve internet coverage in rural and underserved areas globally. Starlink satellites are over 60 times closer to Earth than traditional satellites, resulting in lower latency and the ability to support services typically not possible with traditional satellite internet.
Nairametrics also reported this month that the Federal Government announced a deal with Microsoft through the Federal Ministry of Communications and Digital Economy for the development of high-speed internet infrastructure across the six regions in the country.
What FGN Free Meter Program means for the power sector
Without effective penalties for erring DisCos and consumers, progress may still remain very slow.
According to news reports, the Minister of Power, Mamman Saleh on Wednesday said the distribution of the four million free electricity prepaid meters pledged by the Central Bank of Nigeria would soon begin across the country.
According to him, the government is wrapping up the distribution of its initial one million meters, which he labelled phase zero, and would soon begin the distribution of the four million sponsored by CBN, which he tagged phase two. He also noted that the Federal Executive Council approved N3bn for the execution of six major electricity projects in the country to upgrade Nigeria’s electricity facilities and improve power supply across the country.
Ineffective metering remains a major drawback to the success of power sector reforms in Nigeria. While some consumers avoid paying for power consumed through meter bypass, some other consumers are made to pay for what they have not consumed through estimated billing by DisCos.
DisCos have been largely unsuccessful with metering their customers.
As far as inadequate metering is concerned, DisCos over time, have used this situation to their advantage via estimated billings. It appears that fully metering customers are currently being viewed as a disincentive, given that estimated bills can easily be manipulated.
According to a report by the Nigerian Electricity Regulatory Commission (NERC), only 4,234,759 (40.27%) of the total customer population of 10,516,090 were metered as of 30 June 2020. Clearly, this validates the widely held view that there are a wide number of customers on estimated billing which gives room for illegal connection to the networks and in turn corrupt practices. NERC further revealed that only three out of 11 Electricity Distribution Companies in the country had metered more than 50% of electricity customers under their coverage areas as of June 2020.
Effective metering in our view is one step ahead in solving the myriad of problems embattling the Nigerian power sector. Though supposed to be unpaid for, many customers in a bid to avoid the bureaucracy associated with getting meters have paid to get their own meters. We believe the provision of meters to all end-use customers will go a long way in ameliorating the liquidity squeeze in the power sector whilst also providing cashflow to the DisCos for investment in equipment needed to evacuate unused electricity to consumers nationwide.
We laud the FG’s efforts at distributing meters freely to end-users, but we note that without effective penalties for erring DisCos and consumers, progress may still remain very slow.
CSL Stockbrokers Limited, Lagos (CSLS) is a wholly owned subsidiary of FCMB Group Plc and is regulated by the Securities and Exchange Commission, Nigeria. CSLS is a member of the Nigerian Stock Exchange.
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