H2: 2017 Report

Market TrendsIn Premium

JAMES

developmentsCUBITTREAL ESTATE

2017 IN BRIEFExchange Rate Trend in 2017

Whistleblowing & the Crusade against Corruption

2018 OUTLOOKGeneral Economic Trend

Sectors to Watch

Innovative Product to Watch

Real Estate Development

Forthcoming Events

www.jamescubittdevelopments.com

H2: 2017 Report

CONTENT01

02

INTRODUCTION

ECONOMIC OVERVIEW: 2017

Crude oil prices

Ination rate

Real estate investment trusts (REITs) in Nigeria

Exchange rate trend in 2017

Debt prole in 2017

Whistleblowing and the crusade against corruption

03REAL ESTATE SECTOR PERFORMANCE IN 2017

Commercial Ofce spaces

Prime land

The Wesley

Comparison of global property prices

Innovative product to watch: Buy-Own-Build (BOB)

 

 

04ECONOMIC OUTLOOK: 2018

General economic trend

Key sectors to look out for

The Rubicon

Real estate development in 2018

12

8

2

1

H2: 2017 Report1

In this report, we look at the challenges faced

by the Nigerian economy in 2017 especially

as it affects the real estate sector. We also

consider projections for the economy in 2018.

Ination remained fairly steady during the

year, gradually tapering off at 15.91% in Q4.

The high exchange rate of the Naira to the

Dollar meant that prices generally remained

high. This was particularly so for the real estate

sector which remained sluggish on account

of increased costs and minimal investment.

This was indicated by the prices of built

property which largely remained constant or

even declined in some locations.

The whistleblowing policy of the Federal

Government was put to the test as a drama

ensued over the payment of a whistle-blower

for one of the seized highbrow properties in

Ikoyi.

In all, as the nation emerged from recession in the last months of the year, Nigeria appears poised to

grow stronger in spite of its challenges. It is hoped that inow of private investment capital in 2018 will

be instrumental in restoring life to the economy and the real estate sector in particular.

INTRODUCTION

H2: 2017 Report2

The Nigerian economy was in a struggle for recovery in 2017, and the real estate sector was not

exempted. In September 2017, the economy was reported to be gradually emerging out of recession.

However, real estate was still listed as one of the top 5 declining sectors with a growth rate of -3.53% in

Q3.

Crude oil prices

In the rst quarter of the year, oil price maintained an

average of $46 per barrel. This appreciated slightly to $48

in Q2. Late in Q3, however, it peaked to a high of

$58/barrel, further increasing to $64 by November 2017.

Crude oil prices (dpb)

70

60

50

40

30

20

10

0Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017

Source: MCO Real Estate Report, Y Charts

ECONOMIC OVERVIEW

Q1 2016

Q2 2016

Q22016

Q42016

Q12017

Q22017

Q32017

Q42017

Oil price (dpb) 37 47 45 52 46 48 58 64

H2: 2017 Report3

Inflation Rate

The ination rate is a key determinant of purchasing power in an economy. At the end of 2016, the

ination rate was at a high of 18.55%. This steadily declined throughout 2017, indicating better

economic performance, to 15.91% at the end of the year.

Source: National Bureau of Statistics

Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017

Ination rate

0

2

4

6

8

10

12

14

16

18

20

Inflation rate

Q1 2016

Q2 2016

Q22016

Q42016

Q12017

Q22017

Q32017

Q42017

Ination Rate 12.77 16.48 17.85 18.55 17.26 16.1 15.98 15.91

H2: 2017 Report4

Real Estate Investment Trusts (REITs) are

corporations or trusts that use the pooled

capital of many investors to purchase and

manage income property and/or mortgage

loans. REITs are traded on The Nigerian Stock

Exchange just like stocks. Investors gain

exposure to both the value of the real estate

owned by the trust and regular rental income

generated from the properties. The fund

manager selects the investment properties

and i s respons ib le for maintenance,

administration, rentals, and improvements.

Most property trust managers include

properties across a diversity of geographic

regions, lease lengths, and tenant types.

REITs typically account for

2.5% – 5% of the entire stock exchange

Real Estate Investment Trusts (REITs) in Nigeria

According to the CEO of Nigerian Stock

Exchange, Oscar Onyema, Nigeria's REIT sector

stands at N40bn ($131m at the ofcial rate) in

May 2017 through three REITs which account for

less than 0.5% of the entire stock exchange. This

shows that the REITs sub-sector in Nigeria is still

evolving and is at infancy. Comparing these

gures against developed countries with more

advanced capital markets, REITs typically

account for 2.5% – 5% of the entire stock

exchange.

REITs

H2: 2017 Report5

Exchange Rate Trend in 2017The exchange rate of the Naira was in decline at the beginning of the year. Furthermore, the disparity

between the ofcial rate provided by the Central Bank of Nigeria and the parallel exchange rate

continued to grow wide. For example, the ofcial exchange rate for the US Dollar at the beginning of

February was N305 and the parallel rate was over N500. Disparity and uctuation with this rate affected

planning, control and forecasting for businesses.

The ofcial exchange rate for the US Dollar at the beginning

of February was N305 and the parallel rate was over N500

Foreign transactions were difcult for rms to consummate as a result of scarcity and the tedious

process of purchasing foreign currencies. Real estate transactions revolve around leasing, renting,

buying or selling of properties which are directly linked to monetary valuations, and these were

signicantly affected during the period.

The rate remained relatively stable over the second half of the year at an average of N360 to a Dollar.

While the exchange rate has remained high but relatively stable, the disparity between the ofcial and

parallel rate is still obvious.

H2: 2017 Report6

Debts are necessary for the development of the economy

Debt Profile in 2017

The continuous rise in the debt prole of Nigeria is an indication that a part of the future revenue of the

country is being consumed and the left over will be used to service the debt. All things being equal,

Nigeria's debt prole will continue to rise as the government in power covers the shortfall in revenue

induced by borrowings of previous governments.

The resultant effect for the budget of the nation is

that borrowings were made to nance the

decits. Debts are necessary for the development

of the economy because of the multiplier

effect/advantage inherent in it. According to the

National Bureau of Statistics, Nigeria's total

domestic and foreign debt stocks as at June 30,

2017 stood at about $15.1 billion and N14.1 trillion

respectively. Further break down of these gures

shows that federal debt accounted for 74% of the

nation's total foreign debt while all states and the

Federal Capital Territory (FCT) accounted for the

remaining 26%.

The proposed 2018 budget is in decit and a large

chunk goes into debt servicing.

Less than 31% of the budget is allocated for capital

expenditure which will be nanced by borrowing

in 2018. There have been concerns from

economic experts that borrowing to nance

recurrent expenditure has been proven not to

bring any social and economic impact on the

citizenry.

7 H2: 2017 Report

Whistleblowing andThe Crusade against Corruption

The ght against corruption is targeted at people who

have looted the treasury of the nation. The preferred

haven for the looters is prime real estate in highbrow

locations like Ikoyi and Victoria Island on account of

the appreciating investment value of such assets.

Such properties are conscated from suspected

looters and are sold to recover the stolen funds. The

asset is sold at a relatively cheap price (forced sale

value) compared to the asset's original value.

According to the policy, the whistle-blower is to be

rewarded with anywhere between 2.5 – 5.0% of the

recovered amount. This is designed to encourage the

public to provide the government with credible

information that would directly help in apprehending

such persons.

Developments surrounding the compensation of the

whistle-blower for one of the conscated properties in

Ikoyi has raised questions about the veracity of the

compensation package of the policy. Although the

whistle-blower was eventually paid, the preceding

drama cast some doubt on the integrity of the policy.

In spite of this, real estate practitioners struggle with

the negative impact that the policy is having on the

sale of real estate assets as investors are now very

cautious to acquire such properties.

The whistle-blower is to be rewarded with anywhere between

2.5 – 5.0% of the recovered amount

Ease of Doing Business

As the year came to a close, Nigeria was ranked as

145 out of a total of 190 economies on the ease of

doing business index by the World Bank, an

improvement over its former position of 169.

8 H2: 2017 Report

REAL ESTATE The real estate sector has had a challenging year. This has been large ly occas ioned by the following factors:

Poor state of the economy: Developers have been

reluctant to start projects and investors have also not

been enthusiastic about investing in the sector.

Project nancing has been difcult. High interest rates

have resulted in higher costs of building materials,

which has in turn led to increased development costs.

The Nigerian society has been slow to explore

alternative construction methods and materials, e.g.

wood, plastic, etc.

1

2

3

SECTOR PERFORMANCE IN 2017

“Real estate developers have been slow to explore

alternative construction methods and materials. We are still dependent

on concrete bricks.”

Adetokunbo AdefuyeActing General Manager, Projects

James Cubitt Resources

9 H2: 2017 Report

The rental prices of prime ofce spaces declined as the year wore on. This was occasioned by worsened

economic conditions in an over-supplied market. For instance, the average rent for Grade A ofce

spaces in Lekki fell from N48,000/sqm to N38,000/sqm annually. Rental prices in key locations like Ikoyi

and Victoria Island generally averaged N20,600 and N13,000 respectively per square metre.

No new Grade A ofce spaces were delivered in the year under review. However, there are

expectations that over the next 6-12 months, not less than 50,000sqm of space will be added to the real

estate landscape. Among these include the much awaited Cornerstone Tower, which is set to be

introduced into the market over the next six months. It is billed to make available 12,000 square metres of

lettable space on 12 oors. Also in view is the Greystone Tower, an 18-oor mixed use development on

Victoria Island, which is billed to be ready in June 2018.

COMMERCIAL OFFICE SPACE

Rental prices in key locations like Ikoyi and Victoria Island generally

averaged N20,600 and N13,000 respectively per square metre.

10 H2: 2017 Report

Land prices remained relatively high during

the year with slight variations within the

quarters. For instance, in Ikoyi, prime land

moved f rom around N435,000 at the

beginning of the year to N376,000 per square

meter in the third quarter of the year. As the

year wound to a close, it generally averaged

N369,000 per square meter. In Victoria Island,

the price averaged N380,000 per square

meter, with Lekki and Oniru coming up behind

at N195,000 and N168,000 per square meter

respectively. Land in Eko Atlantic City still

remains the most expensive at N524,000 per

square meter.

Location Average price/sqm (N)

Eko Atlantic City 524,000

Banana Island 385,000

Victoria Island 380,000

Ikoyi 369,000

Lekki Phase 1 195,000

Oniru 168,000

Source: MCORE

In Ikoyi, prime land moved from around N435,000 at the

beginning of the year to N376,000 per square meter in the third quarter of the year

PRIME LAND

11 H2: 2017 Report

H2: 2017 Report

A unique blend of comfort, artistic beauty and elegance, The Wesley offers the perfect

ambience for you to unwind and put aside the stress of the day. Suitable as a corporate

guesthouse and accommodation for C-suite executives that value the pleasure and comfort

of modern living.

WESLEYTHE

Contact0708 5946 1290907 0401 905 clientrelations@jamescubittdevelopments.comwww.jamescubittdevelopments.com

PROPERTY DETAILS FACILITIES UNIQUE ATTRACTIONS

24 - hour concierge services

Central kitchen and chef

On-site rst aid services and ambulance

Creche

Car wash & valet

Zen garden

Housekeeping and laundry

22 three-bedroom apartments

2 three-bedroom apartments Art Gallery

SPA

Wellness Centre & Gym

Coffee Bar & Lounge

12 H2: 2017 Report

What does property prices look like across the globe? Here's a pictorial comparison of real estate prices

in Lagos compared with 5 key global cities.

Source: Knight Frank

COMPARISON OF GLOBAL PROPERTY PRICES

City Size (sqm) Cost ($) Cost/sqm ($)

Lagos 120 477,780 3,981

Dubai 457.2 680,000 1,487

Cape Town 213.36 200,000 938

Hong Kong 213.36 1.900,000 8,920

London 213.36 1,300,000 6,103

New York 457.2 2,700,000 5,908

13 H2: 2017 Report

Economic Outlook:

2018

Following the early presentation of the annual budget

to the National Assembly, there is an indication that the

annual budget will be passed early compared to

previous years. This is a clear signal of an early kick off

point for 2018 as most business activities tail the path of

the scal policies of the government.

Exchange rate, which is a key variable determining the

health of an economy, has quite being stable. There

are indications that the rate and stability in the forex

mechanism will be maintained. If this is realized, it will

improve the performance of the economy. Planning,

forecasting, adequate projection and control

measures can be better put in place by business

organisations.

The ination rate declined from April 2017 and gradually

moved in that direction for the rest of the year. If that

trend continues in 2018, it would have a multiplier effect

across all sectors of the economy.

GENERAL ECONOMIC TREND

2013

2014

2015

2016

2017

2018 ?

“There is light at the end ofthe tunnel for the real estate

sector, As the recession came to an end in 2017 and

the economy gradually picks up, we can expect

modest but cautious growth

in 2018”Oludotun Carew

Director, Renaissance UK

14 H2: 2017 Report

SECTORS TO WATCH

Decline in oil prices brings to the fore a crucial

need for economic diversication. And the

agricultural sector has been identied as an

important sector to provide that needed

alternative focus. In view of this, the push for a

strong agriculture-led economy has been at

the forefront of government policy.

AGRICULTURE CONSTRUCTION/ REAL ESTATE

Notable projects are still on-going, ranging from

commercial, mixed use development, to

hospitality and retail projects. New ones are also

expected to be in t roduced soon. The

government, at all levels, continues to advocate

introducing mortgage schemes to provide

houses for its citizens.

As ination steadily reduces and forex

becomes more stable and relatively available,

manufacturers have what it takes to continue

production and make more returns on their

investment.

OFFICE SPACE

MANUFACTURING OIL / GAS

Oil price is gradually gaining momentum in the

world market, meaning that activities in the oil

and gas sector will pick up. Also, the restiveness in

the Niger Delta has been put on hold since the

government has actively engaged in dialogue

with the host community. In view of this, oil

production has been gradually increasing, which

is good news for investors.

As the economy gradually recovers, certain sectors of the economy remain signicant and critical in

the quest for growth. These are highlighted below:

15 H2: 2017 Report

RUBICONTHEThe smart location for the

innovative Nigerian business, The

Rubicon is a world-class

commercial facility in the heart of

Lagos. Combining state-of-the art

building technology with a feel for

the uniqueness that is Lagos, The

Rubicon captures the essence of

the city's elite nerve centre.

Features

Property Details 15 oors (11 commercial, 3 parking,

1 mixed)

A penthouse apartment

11 oors of lettable soace (3rd - 13th oor)

Parking space on 3 oors for 170 cars

Banking hall - ground oor

3 scenic lifts

Water treatment plant

16 H2: 2017 Report

Buy-Own-Build (BOB) is a nancial product developed by James Cubitt Developments to ease the

path to property ownership without signicantly impacting a subscriber's lifestyle. BOB offers a exible

payment that allows prospective clients grow their property portfolio and take advantage of exciting

real estate offers in highbrow areas.

The BOB product is especially suited to investors who desire a exible approach to asset acquisition in

premium locations. It offers a unique opportunity to acquire premium property while it steadily

appreciates in value. In addition, this is also nancially convenient as there is no interest payment.

INNOVATIVE PRODUCT TO WATCH

“From failing rent prices andunlled properties in 2017, we can expect

better spending by both individuals and the government in 2018,

which should translate into growth

for the real estate sector”

Gboyega AdegbolaGeneral Manager, Business Services,

James Cubitt Resources

17 H2: 2017 Report

REAL ESTATE DEVELOPMENT IN 2018

As the economy moves out of recession, it is expected that:

Better cash ow would result in the introduction of more real estate projects. This should also translate

into further traction for projects that have been stalled on account of limited funds.

Increased market stability should translate into better management of real estate projects and

developments.

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18 H2: 2017 Report

FORTHCOMING EVENTS

©2018 James Cubitt Developments Limited

JAMES

developmentsCUBITT

This report was prepared by James Cubitt Developments Limited ©2018.

Whilst every effort has been made to ensure that the data contained in it is correct, no

responsibility can be taken for omissions or erroneous data provided by a third party or due to

information being unavailable or inaccessible during the research period. The estimates and

conclusions contained in this report have been carefully prepared in the light of our experience

in the property market and information that we were able to collect, but their accuracy is in no

way guaranteed.

For further information on this report, please contact:

0809 9902 207- 088th Floor, Union Marble House

1 Alfred Rewane Road, Falomo, IkoyiLagos, Nigeria.

clientrelations@jamesdevelopments.com

Marketing & ResearchTolulope OlorunderoTolulope.olorundero@jamescubittresources.com0808 0702 877

SalesOlatade DaranijoOlatade.Daranijo@jamescubittdevelopments.com0708 5946 129, 0907 0401 905