Affordable Mass Housing Innovative Building Technology The Solution to Nigeria's Mass Housing Needs

Transcription

1 INVESTMENT TEASER Affordable Mass Housing Innovative Building Technology The Solution to Nigeria's Mass Housing Needs CIRCA $ 190 million PROJECT FINANCE September P a g e

2 PROJECT BACKGROUND: For the faint-hearted, available statistics on Nigeria s housing deficit paint a grim picture; while for the incurable optimist, it presents limitless opportunities. Available data (for 2014) from the World Bank and the National Bureau of Statistics agree that Nigeria has an estimated housing deficit of over 17 million units. With a population of almost 180 million, according to data from the United Nations, an annual population growth rate of 2.8 per cent (2015) and an annual urban population growth rate of 4.7 per cent, "we need to stop talking and start building" with over 100 million Nigerians considered to live in substandard housing The bane of housing delivery in the country is multifarious, ranging from difficult access to land, insecurity of title, absence of building finance, and non-availability of building materials, coupled with the rate of growth of the market for housing. Others includes the speed of delivery of housing, affordability, designs and typologies, standards and workmanship, and building technology, among others. Putting all of these together gives a clear indication of the immense business opportunities for the private sector. Government s role in housing provision should be generally as enabler through progressive policies that will meet the overall objective of standard, environmentally friendliness and affordability PROJECT DESCRIPTION & SPONSOR: The promoters/ sponsors of this project-new Housing Project 37/15 Limited, a SPV made up of seasoned experts in Nigeria's building and construction industry, has identified this great business potential and they have obtained necessary government (both at Federal and State levels) support and backing in order to midwife this notable project. Lagos is the commercial nerve centre of Nigeria with an estimated population of over 20 million (raising daily) and a land size of 3,475 Km2 (the least among states in the country). This population to land ratio gives a population density of 5,179 people per square kilometre. By all standards the state is over populated. Hence, the fast rate of housing development in the neighbouring state of Ogun, were the pilot project will be located ( Mowe- Sagamu- Lagos/Ibadan express way) with approval from the Federal Government to build 15,000 affordable housing units on a 1,000 hectares of land. This would conprise10,200 units of 2 bedrooms and 4,800 units of 3 bedrooms in clusters. Structure: The aim of the promoter is to build an Eco friendly, Smart Satellite Town, to attract the following structures; facilities and amenities: 1. Independent power generation facility making use of gas turbine, which would be provided by independent contractors for direct sales to the town. Commercial Company has been signed with the Hilton Hotel Corporation. 2. Commercial centre, which would be led by notable shopping malls e.g Shoprite 3. A first class trauma centre and health facility, offering would class medical treatments and operations. 4. The ongoing Ibadan-Lagos railway would have a major terminal at the town. 5. All the housing units would be fitted with solar technology, making the environment eco-friendly.. 2 P a g e

3 INVESTMENT OPPORTUNITY: The Project Sponsor has secured a Corporate Guarantee from the Federal Government for the project, in respect of investors willing to fund the project. They have also secured Bank Guarantee from a foremost Nigerian Bank. The Sponsor s contribution is 10% of the project cost of $ 210 million. The investment would require circa $ 190 million for capital expenditure and working capital expenses. Financial experts have projected 31% Internal Rate of Returns (IRR). This IRR is by far on the conservative side as some prime properties within the environs have higher IRR. The promoters are already having high level discussions with potential off takers which includes the following: 1. Nestle- Its management and worker's cooperative. 2. Lafarge Cement- Its management and worker's cooperative 3. Olam Industry- Its management and worker's cooperative 4. BUA groups 5. Shoprite etc ($m) FINANCIAL SUMMARY: INVESTMENT Old tech cost New tech cost Old tech margin New tech margin $ $ $ $ 2 bedroom 185,975, ,883,750 (2,641,667) 62,449,583 3 bedroom 133,823,529 86,985,294 (16,176,471) 30,661,765 $/306 exchange rate The projected margin is based on the application of a modern technique of building, which guarantees cost reduction of at least 35%. While sales would be based on new Federal Government mortgage backed initiative of zero percent equity contribution for properties up to N5 million ($16,340) and 10% equity contribution for properties above N5 million (capped at N15 million). The units would sale: 3 N7.5 million ($22,875) 2 bedroom@ N5 million ($16,340) *Infrastructure contribution of N500,000 ($1,634) per unit with delivery within twelve calendar months The loan repayment of $ 190 million with its intended interest at maximum of 9% would be paid down in a year. Gross profit margins as well as EBITDA margins are projected at 43% to 20%. INVESTMENT HIGHLIGHTS: Strong Record The management team has deep industry knowledge, technical expertise and has successfully management other projects. Notable in Nigeria is the Central Bank of Nigeria corporate headquarters in Abuja 3 P a g e

4 INVESTMENT HIGHLIGHTS: Statistics of Building Cost According to benchmarking data from the Centre for Affordable Housing Finance in Africa (CAHF), construction costs are the largest component in the total cost of housing delivery across the SSA region, ranging between 41% and 72% among the above-mentioned markets. Based on this data, the estimated current construction costs per square metre: Nigeria (USD 696), Ghana (USD 627), Kenya (USD 569), Tanzania (USD 460), and South Africa (USD 425) 'Cast in situ' Housing Units-Construction Innovation for Cost reduction The introduction of an innovative alternative construction system that delivers concrete housing units that are cast in situ, using patented plastic/ aluminium-moulded formwork and a special mix of aerated concrete. Production of the formwork can incur a relatively high initial cost, however, due to its reusability, the modular formwork for one unit can be used to deliver up to 50 houses or more, potentially reducing construction cost and construction time in standardised large-scale projects. The system has the potential to reduce construction costs by 26% to 35%, depending on market conditions. Summary Developed in the mid 1970s, the technology of using aluminum forms has been used in the construction of thousands of residential units for both low- and high-rise buildings. It has proved successful in the construction of low-cost mass housing projects in various parts of the world. In Ghana for instance, a leading homes developer in collaboration with the country s Social Security and National Insurance Trust built 1,680 apartment units and sold almost all of them in less than two years In Kenya Arcoverde Kenya Ltd broke ground for construction of Iguta Paradise Homes, a 62 four-bedroom town-houses project along Kiambu Road that overlooks Runda. Five months later, much to the surprise of many, the first phase of the project comprising 32 houses is now complete and the houses are currently being painted in readiness for the market. 4 P a g e

5 .INVESTMENT HIGHLIGHTS: Sustainable Cash flow With a projected revenue of $ 300 million and Opex calculated at circa 20%, providing EBIT of 20% - 25%. Efficiency, Health and Safety Concerns The promoters and builders are noted for: 1. High level of efficiency, 2. Excellent health policies, and 3. International safety standards The above have made them a brand name in the construction industry Nigerian Bank Financial Support: The project had received Bank Guarantees (BG) from a AA- rated Nigerian financial institution (S & P long term rating) in respect of foreign investors debt finance of $190 million to finance mostly the capital needs which would cover building cost, import, logistics, training, installation, integration, and other miscellaneous expenses. Project Sponsor Equity Contribution The Project Sponsor has expended and will financially contribute up to a total amount equal of 10% of the Project cost. 5 P a g e

6 Disclaimer: has provided this information with illustrative purposes only and neither assumes responsibility nor guarantees its accuracy and integrity, nor undertakes any liability to complement the same with additional information that may be available. The information included in this document has been prepared with the exclusive purpose of assisting potential partners in their own evaluation of the project. This document is not intended to include all the information that a potential investor may require. It is understood that every individual recipient of this information will carry out his or her own independent research and will make his or her own economic financial analysis of the opportunity. The information herein shall not, under any circumstance, be substitute for the independent research and analysis performed by the respective recipient. All enquiries for further information relating to this Investment Teaser or to a possible transaction involving the Company should be directed to one of the following: Otunba Femmy Carrena Vice Chairman/ Chief Executive Officer New Housing Project 37/15 Limited Mobile arabella21st@yahoo.com Madu Oshinor AAT, Bsc, FCA Partner Mobile info@lewishampsng.co.uk 7b Asa Afariogun Street Ajao Estate, Isolo Lagos Tel: Website: 6 P a g e