In this Interview with Kayode Tokede, the Group Managing Director, Haldane McCall Plc, Dr Edward Akinlade reveals the company's plan to partner with the federal government to address housing deficit, reviewed his company's activity after and the outlook for real estate and hospitality sectors in Nigeria
Congratulations on the listing of Haldane McCall on the main board of NGX on November 20, this year. In the first week of listing, the company's share price appreciated significantly, demonstrating investor confidence. How would you respond to this?
Well, we were excited that the market is responding, though the stock price has slowed down a little bit. Obviously, those in the capital market can see value in our company. But they are looking for more information, and the information that is coming is our year end result and accounts. We are releasing it by February 2025. But we are going to be keeping the market informed about our activities. We shall continue to update the market about our activities before the year end account is released to the investing public.
How does the company plan to comply with NGX's listing requirements and corporate governance standards?
It's a huge task, but I'm sure we are up to that task. We have a Compliance Officer. His job is to make sure that we are complying with every regulatory requirement. With regards to the Exchange, we have received a number of letters from them already, and we have complied fully. NGX has responded that we have now made the list of companies that complied with full listing standard. Another feather in our cap is that our company has also achieved compliance with the Free Float requirements for listed companies on NGX.
The company was listed by introduction. Any plan to raise capital and if yes, by what financial instrument and how will the proceeds be utilised?
We have a huge plan next year. One is the plan to raise a N250 billion bond, in tranches of N25 billion. We have started work on that and will be coming to the market next year. The purpose of it is to fund affordable housing. We have started negotiation with a number of our partners that will be off takers for that. A good example is the Labour Congress, TUC, and also Lagos state government. We are in negotiation with them at the moment. Whatever we build, they will buy, give it to their members. This is the purpose of that bond. We want to do what has never been done before in the affordable housing market. Remember, for example, if you look at Lagos, I think the latest statistics show that the Lagos State government has been able to build about 13,000 new homes since 1999.
Can you imagine the huge task ahead of us when the Lateef Jakande report then says the deficit is 16 million. What we are trying to do is to start and deliver about 1200 units in the next five years and that is within our current funding. But with the bond, we will be able to do substantially more than that. For example, we are raising N250 billion, if we divide that by 20, it's going to cost us N20 million each -that is about 12,500 units. So you can see the staggering numbers of what we need to do, and we believe it's going to be profitable. Those who subscribe to the bond will basically enjoy the return on investment.
What are the key drivers that set the company apart from its peers?
I think it's the passion. I mean, we've been around for a long time. We are not the new kid on the block. I grew up in the real estate sector in the United Kingdom. I came into Nigeria and I started real estate here in 2006, registered Haldane McCall 2012 and then integrated the two businesses of Suru home and Suru Express into it. The experience is there. I am a chartered accountant in England and also in Nigeria. And also we have a chairman who is a Senior Advocate of Nigeria (SAN) that has passion for real estate. We are trying to open doors where a lot of people believe that there is no money on the Exchange to fund real estate. We will work to reverse that trend. This is why we are visiting the capital market to raise bond. And also, one of the things we will also do at the tail end of next year is that we'll do rights issues, basically to bring equity. As we are floating debt, we'll do the same for equity. But don't forget, the fundamental thing about it is that we need to do a credit rating. Hopefully, we shall commence the process by January 2025. We have the structure that can support good rating.
What is the Company's current portfolio of properties, and what are its plans for expansion?
Don't forget, we are trading with investors' money. We have to be careful. The market that we know is solid in terms of land registration, particularly in Nigeria. We all know the returns on investment in Lagos and in Abuja. Some people say yes, River and others say Oyo State has good returns on land assets. But we know land in Lagos is very lucrative, and that is where our focus is for now. Meanwhile, our portfolio is mainly real estate and hotels. As you know, we have three hotels: one in Surulere, one in Ikorodu and then one in Ikeja. On real estate, we have diverse assets. At the moment, we have assets in Lagos. Republic of Benin, and London. So those are the ranges of where we are. We will soon, be moving into Abuja, an opportunity has presented itself. We believe that we will be very liquid next year in terms of expanding our land bank. We believe in the land bank business, which is buying distressed assets, add value and sell it quickly. It's very profitable.
How does the Company manage its hospitality operations, and what are its strategies for improving occupancy rates and revenue?
The effect of the present macroeconomy challenges is huge. Everybody in Nigeria cannot be self-denial If you also add the foreign exchange issue to it, our customer is aware. The uncertain operating environment obviously impacts our room rates. But we do not compromise quality. We have faced challenges in our cost of operation, which is brought by unstable foreign exchange, and double-digit inflation, and it is obviously impacting energy costs. For instance, our energy cost has grown by 400per cent and it's only the one in Ikorodu that is still in the normal band area. We are looking at bringing our cost down. But also, don't forget that one big challenge that hit us aside energy cost, is our staff cost. Their cost of transportation from home to office has increased significantly. So, prices of everything has gone up astronomically. Our shareholders are not going to pay for the operating expenses of the company. We have to deliver value. One of the things that we are not doing at the moment is that we're not borrowing any money from the Nigerian bank. We want to expand our hotel. We are planning to have four more hotels in Lagos, and two in Abuja in the next two years. We also want to play big in the affordable homes market in Nigeria. Basically, what no man can do, we want to do it and tell people to come and join us because Nigerians need affordable housing. In fact, somebody is saying that the latest deficit is 25 million. It has moved from 16 million and now 25 million. Of course, population has grown. So we want to enter that affordable housing.
You have always said that Haldane McCall wants to partner with the federal government to address housing deficit in Nigeria. In what form will this partnership be ?
Yes. We want to partner with the federal government. The federal government does not need to pay us for anything. We will deliver it to them, but they must give us guarantee before we start. So in the affordable housing, we will play big in that market going forward. We have the land banking business. Land banking is buying distressed property, hold it and sell it. Our other business is construction. We as a company, don't do the construction ourselves. What we do is to acquire more land and once we finish that, we will start another 100 in the same area. We have all those plans on some of our land. We have a huge land in Opebi. We want to build 88 apartments, skyscraper, 12 story building. It will probably be the tallest building in that axis going forward. We are doing all the planning together at the moment. That's a N16 billion project. That is also what we will do next year, and then hopefully the bond will bring in how we're going to fund them. And then if the interest rate comes down, we may look at maybe a federal mortgage bank to give us construction funding. Hopefully, my discussion with family home in Abuja will also be successful. We shall gather all that money and expand our operation.
How are you managing the current hike in prices of building materials?
It is not easy but what we do is to sign what is called a "fixed price contract" with our subcontractor. So we lock them down and give them money. If we're doing any project, we give them 25 per cent upfront. We give them another 25 per cent so we expect them to go and use that 25 to lock down materials. Future money will then be used for labour. Hike in building materials has to do with Naira at the foreign exchange market. If foreign exchange comes down, the prices of building materials will also come down. But I am one of those people who have advocated the reduction of cement prices. There is only one argument they give which is energy costs. The government can go in and do something about energy for cement manufacturing companies. The government can also do price control of cement. We manufacture cement in Nigeria
Can you provide an overview of the company's corporate governance structure, including its board composition and executive management team?
We have a Board of Directors that is the head of what is running our operation, headed by George Oguntade, a Senior Advocate of Nigeria (SAN). And in that Board structure, at the moment, we have about 10 Non-executive Directors and Three Executive Directors and a Group Managing Director (GMD). Our Board comprises of professionals from diverse background. As part of meeting the requirement of SEC and Nigerian Exchange Limited, we have three separate sub-committees of which one deals with risk management., another deals with audits, and the third obviously deals with compliance. We have also adopted the corporate governance code for Nigeria and the one for Canada and the US. These are what drive our operation, in terms of our day to day activities. We have a well -experienced Compliance Officer, who make sure that we are follow the rules. Listing on a stock exchange is to dance naked. This is an element of transparency.
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On the day of listing, you announced that 30 % of the Company's profit shall be declared as dividend. When do you intend to start this dividend policy?
Hopefully, once we release our accounts in February 2025, we'll make a proposal to the Board of Directors for an interim dividend. It is a policy that has been approved by our Board. Hopefully, after the publication of our results in February next year, we should be able to start paying interim dividends, from March. Our registrar Registrar will swing into action. We'll then pay final dividends once we do the Annual General Meeting (AGM.).
How does the Company plan to engage with its shareholders and the wider investment community?
Well, don't forget, we have an open-door policy. and our websites are up and running. People reach us through email. In fact, recently, we had a company in South Africa that they want to invest in our shares. We have to quickly send them to one of our stockbrokers that they should interact with so that we have interaction going forward.
What is your outlook for the real estate and hospitality sectors in Nigeria, and how do you see these sectors evolving in the next 2-3 years?
These two sectors are performing well in the economy if not for the Naira. Remember this time last year, what the foreign exchange market was, until the CBN liberalised it, and we are now about N1500, to one Dollar. This is what is driving house prices in Lagos and even rents. In the last one year, I will say in some area, it has gone up by 100% to 200% in terms of prices. If customers believe that there's no confidence in the market house prices will come down. The interest rates they're charging on mortgage in Nigeria is prohibitive. Most thing we do in Nigeria is with cash. In the UK, you cannot buy 1-million-pound house in cash. You have to take a mortgage. In order to sell most of our property in Nigeria, we do developers finance where we will say, bring 20 per cent we'll give you one year to pay the balance. So it is we the developers that are financing purchasers in Nigeria. But given the housing deficit of 25 million, the pressure on homes in Lagos, Abuja, Port Harcourt, will not stop. Our company is well-positioned to capitalize on this.
