Purple Real Estate Income Plc (PREIP) has announced an Initial Public Offering of 2,000,000,000 ordinary shares of 50 kobo each at N5 per share.
The offer, which is expected to raise N10 billion, opened today (Monday 21st November 2022 ) and will close on Friday 23rd December 2022 according to the offer documents obtained by Nairametrics.
Purple Real Estate Income is a tech-enabled real estate business. commenced operations in 2014 and is responsible for the development of Purple Maryland (Previously Maryland Mall) amongst other real estate developments.
Expansion: The Chief Executive Officer, Mr Laide Agboola, stated in the document that the company is expanding its real estate footprint delivering similar investment-grade assets including Purple Lekki, an all-inclusive mixed-use centre building on the learnings from its flagship asset. He said:
- “PREIP is on a path to becoming the first approved REICO in Nigeria beginning with an Initial Public offer of 2 Billion Ordinary Shares at N5 per share. The REICO Platform will allow the company consistently raise capital for the development and acquisition of assets.
- “Purple operates an ecosystem of interconnected real estate-based products offline and in the cloud. Post the IPO, the company will take advantage of the REICO structure to expand its real estate stock, by investing in both yielding and development assets, in a ratio of 75%:25% respectively.
- “This will allow Purple to offer its investors blended yields which are more attractive than the typical REIT approach of taking over completed assets which have less capital appreciation potential.
- “The platform will be further amplified with no more than 35% debt to Gross Asset Value to achieve a 10-year average Return on Equity of 18% per annum excluding capital appreciation of the equity shareholdings.”
To list on NGX: Agboola noted that the listing of the shares will be on the NGX, while an oversubscription limit of 15% will be absorbed.
The issuing houses include Kairos Capital, Emerging Africa, PAC Capital, Lead Capital and Mainstreet Capital.
- Agboola, while commenting on the company’s half-year results said: “Building on the momentum we achieved in 2021, we made significant progress during the first half of 2022 and reached several milestones as we expanded our client reach and developed more properties. This was accomplished despite a background of considerable geopolitical instability made worse by the conflict in Ukraine. This war has had a big influence on consumer spending, supply chains, overall inflation, exchange rate, and energy prices.
- We remain committed to providing solutions that cater to the needs of our environment and young and vibrant population. The aim is to diversify our revenue streams through our real estate and lifestyle development businesses. Our focus is on strengthening growth through technology and partnerships, as well as improving our capital base. We look forward to progressing further during the year.”
Financial highlights: Gross earnings of ₦4.7 billion, up by 157.5% (H1 2021: ₦1.8 billion). A key driver of gross earnings growth was income earned from trading properties under development (70.5% of gross earnings) which grew year-on-year by 391.0% to ₦3.3 billion (H1 2021: ₦676.1 million).
Other drivers of gross earnings include Rental income (5.8% of gross earnings) of ₦273.8 million (H1 2021: 288.9 million), down marginally by 5.2% as a result of concessions given to tenants to help alleviate the adverse economic conditions in the country.
Revenue from services to tenants (7.2% of gross earnings) grew significantly by 87.2% to ₦337.1 million from ₦180.1 million in H1 2021 driven by the rise in diesel and electricity rates in 2022.
Total other income (16.6% of gross earnings) grew by 14.0% to ₦779.8 from ₦684.1 million recorded in H1 2021 on higher impairment write-backs of ₦273.8 million (H1 2021: ₦147.2 million)
Net revenue grew by 57.1% to ₦984.6 million in H1 2022 (H1 2021: ₦626.8 million), primarily on account of higher revenue recorded on trading properties under development. The cost of sales also increased significantly over the period specifically, the cost of sales from trading properties under development rose by 638.6% to ₦2.7 billion (H1 2021: ₦372.9 million) because of the recognition of the direct cost associated with the sales of the trading property in addition to the rise in the cost of materials and exchange rate. Overall, this resulted in a net revenue margin of 20.9% in H1 2022 relative to the 34.3% recorded in H1 2021.
The relevance of the Nigerian capital market to provide funding for business is being tested. Trust that if this IPO succeeds then we might have a plethora of public offerings in 2023. Many business promoters are sitting on the fence because of investors unwillingness, market downturn and economic headwings. The buzz around this transaction is building up. Perhaps what can count against the success is the planned listing on an inefficient and non-surpotive NGX. Perhaps, the promoters should have considered FMDQ. Be that as it may, NGX management wake up and support this transaction considering the value it brings and it would bring to the stock market.rsnehilr, watch the cost of the campaigns