Return rate on Abuja property is 15% – Urban Shelter MD
Urban Shelter has become a big name in the real sector. How did it begin? Our first project in FCT was the NITEL Head Office, Zone 6. We gave it out on rent and later bought it, then at the rate of N2,000 per square meter and paid N5.6 million in the first two years. […]
Urban Shelter has become a big name in the real sector. How did it begin?
Our first project in FCT was the NITEL Head Office, Zone 6. We gave it out on rent and later bought it, then at the rate of N2,000 per square meter and paid N5.6 million in the first two years. They later bought it for a market value of N40 million. That was in 1991/92 when cement was N50 per bag.
After that, we ploughed back the money in developing the diplomatic houses in Maitama, 6 bedroom houses with underground chalets and boys’ quarters. We also sold that to a shipping magnate for $400,000 which was equivalent to N40 million.
Then we started the Shelter Plaza now Shippers Plaza in 1992. At the time, we borrowed about N40 million from four banks. In 1993 when naira was devalued it affected price of building materials.
A tipper load of sand that we used to buy for N200, the price skyrocketed astronomically. The Shippers Plaza was supposed to be a 72-suite hotel but we had to change it to office complex when we did the cash flow.
We had Urban Shelter and Loans which came to our rescue with bridge financing. When we finished, we rented the plaza out but because we couldn’t service the loan and had to reschedule, we sold it for N850 million to one of our tenants, Shippers Council.
In 1990, we were building two-bedroom houses in Karmo; there was no infrastructure there so we had to build one-kilometer road and bring water. We sold it at that time for N500,000 each. I hear now they are selling for about N8-10 million. We also started development in Katampe Phase 1 then Phases 2 and 3 later.
Then we moved to Kado where we developed Lakeview Phase 1 and because of popular demand we had to do Phase 2. Then we started developing Amina Court in Dutse district of Apo with prices ranging from N32-105 million.
We then conceived the idea of the Drake and Evergreen Estates in Durumi, Abuja which is a partnership with Kano State government.
What informed the partnership with Kano government?
The Kano State Housing Corporation sold the land to the state’s Pension Fund but because they are not builders, they sought partnership with us. The Drake is out to be completed by the end of this year but the Evergreen will be completed about August or September 2014. We will also build 600 units for the Kano State government in Lokogoma which will take two years to complete.
What about low income housing?
We have the Brick City Kubwa for the low income with 1-3 bedroom houses ranging from N5-18 million. We have Phases 1 & 3 (Lot 1&2). We are presently talking with some government parastatals who want us to build specifically for their workers in Lugbe and Katampe where soon about 3,000 workers will own their houses.
Kano State owns the land. If your land is N200 million, we double it since we are not collecting naira today. By the time we finish, you find that the value has appreciated. If you want your money we sell it and give you.
We also are into commercial property development. We built Garki Model Market in partnership with Abuja Investments Ltd. which is about 2,600 stores of different sizes. In Minna, we’re in partnership with the state government building market stalls including the Bahago Plaza with over 100 shops and also Wushishi Estate in Minna.
We also provide site and services, that is provision of infrastructure in Suleja along Abuja-Kaduna road, we intend to put asphalt there costing about N4.5 million for a 900 m2 land.
In Kaduna too, we are planning in partnership with the state government, to provide 10-hectare site and services in their New Millennium City. In Lagos, we acquired some land where we intend to build residential houses.
How is the Abuja property market?
It is funny! At the time we came in, there were about 300 indigenous property developers but they have all fizzled out today, only Urban Shelter and Cachez are still remaining. What helped Abuja was the movement of the federal capital from Lagos which increased the demand for property astronomically and it is basically a question of demand and supply. This has helped the company tremendously. We have about 2,000 employees presently, apart from other artisans who are gaining from us.
Government conceived Abuja to be a civil service town not a commercial center that we see today. Everyone wants to own a house in Abuja because it is conducive and peaceful. Government should develop the satellite towns. But the problem with Abuja is the high rent. I don’t blame the investors because when you borrow money to build a house you will want returns.
What do you think of FG’s plan for Mortgage Refinance Company?
It’s a very good idea because it will help the industry and government as well. Government is supposed to be a social outfit for the citizenry. If such loans can come at one digit interest rate even, the taxi driver and the market woman can own their houses.
We have a deficit of about 16 million houses so if it is done well, it will definitely help the people. Developed countries subsidize houses so that their citizens can own houses.
What is Urban Shelter’s policy on sale not renting?
It is a board decision. I’ve been fighting for rent because a property shows you can service your loan anytime. Like I said, it’s a board’s decision but I can see there may be a change of heart because in Abuja, the rate of return is about 15 percent. In Dubai, the rate of return is 7 percent which makes me wonder why people are going to such places instead of places like Abuja.
Some people express concern that Abuja is becoming like Lagos?
It depends on the system; Lagos has changed because of the caliber of leadership there. Now, they have made it mandatory that you renovate your house every five years. Development Control should be doing checks to control deterioration.
What is the future of Urban Shelter?
The key words are trust and honesty. We’re planning that in five years, we’ll be on the Stock Exchange because what kills companies is if the owners are gone and they don’t have people to carry on, the business dies. The Stock Exchange helps you to follow the rules whether you are there or not. And on the Stock Exchange a director cannot just interfere like in a limited liability company where rules can be bent. So going to NSE will add value because you can raise more share capital.