Top Services Limited (TSL) and First Ally, fund manager, have signed a N20 billion real estate investment trust (REIT), consisting of 20 million units which will be on offer for subscription at N1,000 per unit from February 1, 2017.
TSL, a property development company specializing in retail and hospitality real estate across Nigeria, has a 20-year track record in the hospitality and retail space and started out as a developer and contractor to UAC Plc in its Mr. Biggs restaurant locations throughout the country. In the last 11 years, the firm has been developing apartment hotels, including La Cour in Ikoyi, Lagos.
According to the Chairman of TSL, Tokunbo Omisore, an Architect, explained that the REIT became necessary because of the high interest rate on bank loan, which has been the major source of funding for retail development.
Omisore said the REIT was signed based on four retail malls TSL had sponsored- Adeniran Ogunsanya Mall, Surulere, Apapa Mall, Apapa, Cocoa Mall, Dugbe, Ibadan, Oyo State and Akure Mall, Akure, Ondo State.
He said 97 per cent of net income on the malls would be distributed to investors at the end of each year, in addition to capital distribution. “Retail business is an integral part of our growth. Even in the US, it is an important part of their economy and creates opportunities for business and employment.
“The gross lettable area in each of our malls is creating jobs directly and indirectly to over 1,200 people. Shoprite alone gives employment to over 340 people. The cinema creates a few jobs and our local retailers are trying to grow.”
Giving reason for going into REIT, Omisore said “Unlike our South African competitors, we have a wrong funding. “The South Africans come in with huge funding running into 40, 60, 80 million dollars. These funds are given to them at 4-5 percent interest rate for 10-15 years.
“Here, if we operate on dollar rate, it is 10-12 percent; if it is on naira rate, before now, it was 20-25 percent. Now, it is 29, 31 or 32 percent. How can we grow with this?”
Omisore advised the government to see mall development as an infrastructural development, stating that a shop that sits on 10, 000 to 12,000 square metres was an industry, considering that it has a bakery, an abattoir and a cinema and that all of these create opportunities for the future.
He said, “Government talks about creating employment, but how can this be made to happen? Even when they are to create employment, SMEs and entrepreneurs need a platform. Where is the platform? We talk about agriculture. Shoprite has about 28 per cent of agricultural products that are processed and packaged in Nigeria.
“Before Shoprite, all those involved in foods and beverage products died natural death, because they had nowhere to showcase their products. So, retail has provided opportunity for such people.
“There is opportunity not only in the processing, but also in the packaging. There is competition now in doing this such that if you go to the stores, you see locally packaged products you will think they are imported.”
He said, “What we need to do therefore is to make such facility affordable. We need to put in a structure that will accommodate even a graduate that has gone into SME.
“We see ourselves as spoilers in the market because we are the only malls that have Shoprite as anchor tenant and the rent goes as low as $150 per square metre as against the South African malls that go for between $700 and $900 per square metre.
“We built the malls to a budget and we know the challenges of the communities in which the malls are located. They don’t have money. We also know that the malls have one of the biggest problems and that is energy which is very unpredictable and takes about 60 percent of the service charge. These are extra costs to a local retailer who does not really understand the difference between service charge and rent.
“Now that government has decided to look inwards by encouraging local content. We are therefore also encouraged to go to government and present our case. By coming up with this REIT, we are diluting our holding in the company such that it is no longer a matter of one man business.”