Investment in REIT to increase Real Estate income and Supply

Nigeria’s housing challenges will be partly addressed with increased investment in Real Estate Investment Trust, REIT, as it is currently enabling the construction of properties for different classes of individuals and corporate organisation in different parts of the country, said Mrs. Olumayowa Ogunwemimo, Managing Director, FSDH Asset Management Limited.

FSDH Asset is the fund manager of UACN Property Development Company’s (UPDC) REIT.

According to Ogunwemimo, given the huge capital that is required for direct real estate investment, most investors are unable to achieve a real estate portfolio that is diversified across real estate types, such commercial real estate, residential real estate among others and geographical location.

She said, “REITs provide investors with an opportunity to invest in a diversified real estate portfolio.   Investment in a diversified REIT, such as the UPDC REIT, provides such opportunities, as the REIT is not only diversified across real estate types but it also ensure that its investments are not concentrated in one part of Nigeria as the properties are located in different parts of Lagos, Abuja and Aba.”

She explained that a Real Estate Investment Trust pools funds together from many investors in order to purchase real estate assets and/or real estate related instruments, which have the ability to generate income. “There are three types of REITs – Equity REIT, Mortgage REIT and Hybrid REIT.

An Equity REIT invests only in income generating real estate properties, while a Mortgage REIT invests only in mortgages, that is, loans that have been granted for the acquisition/construction of buildings). A Hybrid REIT invests in a combination of both income generating properties and mortgages,” she added.

She, however, stated that despite the fact that REITS are not common in Nigeria, investors are gradually becoming aware of the benefits of investing in a REIT and have taken advantage of the opportunities provided by the UPDC REIT.

According to her, the benefits of investing in a REIT include the fact that they provide stable and regular income to investors, especially as REITs typically pay out 90 per cent of the total income realised on an annual basis. “In order to ensure that the UPDC REIT provides investors with regular income, the Trustees and the Investment Committee have approved the payment of an interim distribution to its unit holders to be paid on December 4, 2014. The distribution represents 90 per cent of the realised income earned for the period ended June 30, 2014,” she said.

She further stated that REITs allow investors to be beneficial owners of real estate assets, without having to make huge capital investments, as is typical of direct investment in real estate.

“With as little as N100,000, investors in the UPDC REIT became part owners of such prime properties held  in the REIT as the Victoria Mall Plaza 1 & 2 situated on Aboyade Cole in Victoria Island, the prestigious Abebe Court on Bourdillon Road in Ikoyi and the centrally located UAC Complex in the Central Business District of Abuja,” she added.

Source: Michael Eboh (Vanguard)

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