In this interview, the Group Managing Director and Chief Executive Officer of Haldane McCall PLC, a frontline Chartered Accountant and real estate mogul, Dr Edward Akinlade, explains the motives for the Company’s desire to join the league of quoted companies on Nigerian Exchange Limited (NGX), speaks of the prospects in the real estate and hospitality sectors and what government can do to bring more Nigerians to the fold of home owners.
Late last year, you were quoted in some national dailies that Haldane McCall PLC has applied for listing by Introduction on the Nigerian Exchange Limited (NGX), this year. Can you give an update
Yes. We have gone far in our fillings at the Securities and Exchange Commission (SEC) and NGX . Barring unforeseen circumstances, we are hopeful that our application shall receive regulatory approval. Our approach is completely different. Our company is a major brand in real estate and , hospitality sectors. We want visibility to expand our shareholder base and drive inflow through an array of opportunities for capital raising in the market in the future. As of now , we are going for listing by Introduction. Then, we can sell our ideas, for example, to make affordable homes available for Nigerians. We also need visibility to sell our story, come up with capital raising options by equities or fixed income securities.
What are the motivating factors for the proposed listing ?
There are many opportunities enjoyed by listed companies in the areas of capital raising Investors have more confidence in quoted companies because the companies must comply with many rules, especially the Post Listing Requirements. Listing will in the nearest future enable Haldane McCall to do huge affordable homes in Lagos and Abuja particularly. These are the two markets that we want to look into and don’t forget that there are so many abandoned building projects in these two locations while so many people are suffering for homes to live in, that is what we are going to use the money for.
Why do you think that it is profitable for any investor to buy the shares of your company when you eventually list?
Our company is a rising brand. The future is based on what I would call a 10-year plan. Our master plan which spans 10 years, developed by Deloitte, speaks about being sustainable and profitable. We believe there will be capital growth in our shares. Another area we are looking at is making sure we pay dividends to our shareholders regularly. I investigated and found out that some of the real estate companies on the exchange had not paid a dividend for many years and I said it should not be so.
Do you still maintain your earlier pronouncement that 30 per cent of the company’s profit shall be declared as dividend ?
Yes. It is our policy on dividends. We shall pay out a minimum of 30 per cent of our net profit to shareholders. We will plough back 70 per cent. We will not ignore our shareholders. Our business plan is robust. Already, many investors are waiting for us to list on the exchange. They are excited to come and partner with us because they saw we have a story and vision. We have a formidable board that won’t be part of anything that is not robust enough.
Is there a relationship between your background and your decision to promote a business both in the real estate and hospitality sectors as a company?
It’s just a link to my background. Let’s compare real estate in the UK with Nigeria, where do we have more opportunities for investors to make money? They are two different markets. Profitability is different too. For instance, about 90 per cent of the housing business in the UK is driven by mortgages while it is only about 2 per cent in Nigeria. But obviously, real estate is much more profitable in Nigeria. Prices are diverse in Nigeria, while it is driven by what I will call perfect information in the UK. When I say perfect information, you can look at any part of the UK and they will tell you the prevailing price of property. You can’t go beyond that price. But here in Nigeria, you can dictate the price when you bring something good to the market.While growing up in London and towards the end of my stay in 2006 in the UK, as a qualified accountant, I was also working for a housing association. So, when I came to Nigeria in 2006, it was just an extension. We started with homes and later added the hospitality (hotel) business into it. But don’t forget that the limiting factor in Nigeria now is the cost of construction. Even the depreciation of the Nara against the Dollar is a big problem, and that is where we have a conflicting market. As for me, I’m doing what I was doing in the UK the Nigerian method, because if you want to do business here in Nigeria the way it is done in the UK, it can’t work.
Can you identify some of the major constraints to doing the real estate business in Nigeria?
Bureaucracy is a major constraint . There are plenty of constraints. First, when I got here from the UK, the first issue was getting government approval to build. In the UK, the last time I was there, to get approval was 14 weeks once you put in your application, and you start building. In Nigeria, it could take up to two years before you get the approval to build. That is a major constraint for us in this industry. In the olden days, all you had to do was to put in your application, make the necessary payments and start building even after the approval came out, nowadays, if you do that, especially in Lagos, the government will come to demolish the building. Another challenge is that of multiple taxations, you have the Omo-oniles to contend with and getting quality staff to execute the project is another problem. At times, to do some of the finishing works, we go to places like Port Novo in Benin Republic to get people to work for us because here in Nigeria, the contractor keeps telling you that the prices of materials have gone up and they will stop working until you find more money for them, which is a reflection of inflation in Nigeria. But don’t also forget we have the problem of the government providing us the enabling environment to do business if the government is not supporting us, we can’t be successful. The government has no business in real estate or even in any other business. They should provide us with opportunities, when opportunities are on the ground, we can do well. I mean, for example, remember the Jakande 2006/2007 report that said we had over 16 million housing deficit in Nigeria, what has happened over the years? Nothing. The deficit in the housing sector is as much as 25 million now. Take for example, Lagos with a population of about 20 million people, how many houses have we been able to provide? Since 1999, I don’t think Lagos has built 10,000 homes, and look at the number of people coming into the State daily.
How would you advise the government to create enabling environment in the real estate sector ?
What we proposed was that the government give developers like us land, free land, and we will build with our money, and then we will give part of the homes to the government for the land given to us. It’s a proposal but you know that our government has been busy harvesting oil and gas money and sharing FAAC allocation, and they are not showing interest in our proposal. Instead, they look for money and start building by themselves, they don’t have any business in building houses, it amounts to a waste of space. Imagine they have 100 people in every state in Nigeria and give everybody 2 acres of land, which the government has, see how number we could build in one year. The developers are not going to carry your land away, they will give you some units which the government can then rent out or use it to support civil servants, and the developer will sell the remaining. Those are some of our proposals which cost the government zero but they are not interested. If you look at Fashola’s tenure as minister of housing, how many units did he build? He spent almost four years thinking of what kind of houses to be built and in another four years, I won’t say that Fashola had up to 5,000 homes across Nigeria. Assuming that he had adopted that system from day one in office he would achieved more. If I were a developer in Borno state, would I not know the kind of homes to be built for the people in my environment? Can somebody go to Maiduguri to build a 30-storey building? Of course, it won’t work.
What policy did Margaret Thatcher implement to enhance availability of property in the UK during her tenure as the Prime Minister ?
When I was growing up in the UK, Mrs Margaret Thatcher became the Prime Minister. She used homes to transfer wealth to the common man. What they did when they found out that almost 70 per cent of the people are renting, they sold those homes to these people at a discount and from day one, the discount was put in the pocket of the buyers. They could take a loan from it, and the government took all that sales money and started building more, creating jobs, so the UK economy boomed. It appears that it is not their priority. Go and look at the federal budget for this year and see that the amount budgeted for housing is peanut. it is not the priority because the people in government are enjoying themselves with revenue from other sources.
You are saying that apart from oil which has been the mainstay of the Nigerian economy, the built industry is a major source of revenue for the government?
Yes it is. I also admit that agriculture, is another major avenue to create jobs in Nigeria. As for the real estate, when you want to build just one bungalow, you may employ about 10 people to build but behind those 10 are suppliers of different materials that will be used to build. In all, you can employ as much as 100 people to build that house. Now, you want to build one million houses, see the number of people that you are going to provide jobs for. Real estate is a very serious revenue earner but misguided priority is the reason why the government is not doing much in that direction. Seriously, it is a very good source of revenue. If the federal government wakes up tomorrow and says, every year, we will be building one million new homes through this method I mentioned, imagine how much could be generated. Imagine how much that will add to our Gross Domestic Product (GDP).
You have always emphasized partnership of the government and developers to tap the opportunities in this sector. Can you explain more ?
My position has always been a scenario whereby developers are given free land and we don’t need to spend money to buy and all we will do is to spend our money to build. It’s equivalent to the joint venture approach we practise in Lagos now.Someone brings the land, and you build and share the proceeds, that is exactly what i am suggesting to the government. Also, when you consider the cost of construction, government can help us. The UK did something in the past which I love. If you are a real estate company, you could buy cement or other building materials at a subsidized rate. These are some of the things we should be thinking of rather than neglecting the sector. We need to make things cheaper than what we are seeing in Lagos at the moment. Someone just rented a 2 bedroom in Okota for N1.2m, a one-room self-contained going for N750,000 or N800,000, it should not be so, but it is about the law of supply and demand. Demand for homes is high and the builders are also spending much to build and they need to recover their investment. The government can intervene in all stages of construction to make life easier for both the builders and rent-seekers.
If Mortgage contributes only 2 per cent to housing in Nigeria, how can this financial option be made available to Nigerians to become home owners ?
In the other climes , government has a deliberate policy to enable a common man own a home. A common man here can’t afford N20m to N25m to own a modest home. Governments in other climes provide that money for about 25 years as a loan. There are mortgage companies and banks in Nigeria but the problem is that when they allocate a certain amount for a mortgage in a particular year, once that money is finished, nothing happens again. And it should not be so. What countries abroad do is mortgage refinancing. In Nigeria, we have a mortgage reinsurance company but the problem is that the money is not being used for what it was planned for, that is what I discovered and also their capital is not big enough. Also, interest rates on Nigerian mortgages are perhaps the highest in the world. I mean, how can I get a mortgage and the rate is 20 per cent? It means if I needed to borrow N10m, I would have to pay N2m every year as interest and don’t forget that the Principal is still there. Therefore, the government should come up to say, for instance, let us expand mortgage in Nigeria and that interest should not be more than 5 per cent. By this, when builders get loans to build homes and sell them to the people, the government will buy them up and release more money to them to build more homes. That way mortgages will boom in the country. These are some of the things we could have done during the good years of President Obasanjo when money was everywhere but we missed it.
Can you share your thoughts on Haldane McCall’s Corporate Social Responsibility (CSR) ?
We hold Corporate Social Responsibility very dearly. As a good corporate citizen,
we are obliged to give back to the society. We do this in different forms. The biggest of all is our monthly Agege feeding where we feed thousands of masses on monthly basis. The progreamme is gradually going beyond Nigeria to other countries. If we can feed individuals, we can feed a nation
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