One of Nigeria’s foremost players in the real estate sector, Mr. Edwin Akinlade, has done a survey of the industry and surmised that affordable housing is the future of the industry. He also spoke about the effects of the COVID-19 pandemic and his running battle with Asset Management Corporation of Nigeria, AMCON, which has reportedly refused to obey court orders in favour of Suru Group. However, despite the ugly experience, Akinlade, who described himself as David in a titanic battle with AMCON, ‘the Goliath’, remains undaunted but feels bad that nobody obeys court order in Nigeria. He spoke with Anthony Iwuoma
How has COVID-19 pandemic affected the real estate industry, and your company in particular?
COVID-19 has rewritten the way businesses are done all over the world. It has also reordered the order of our lifestyles. For us, we pruned down what we are supposed to be doing. In real estate, we own a lot of development in Lagos in particular. Over the years, we have developed; we have sold a lot of property.
Few months ago we decided to go into what we call affordable housing. Because we discovered that luxury and middle income taste is very low at the moment. There is no money; one has to face reality of the new normal. But the area of affordable housing is still bundling around.
So, what we discovered is that nothing is happening in the luxury market. The number of sales is far in-between. In the middle income, things are happening there but you have to encourage the buyer to join you. However, in the affordable housing area, we discovered that inasmuch as there is no cash, people can still gather together the deposit you are asking for.
Where do you see the real estate market heading, given the effect of COVID 19?
Like I said, COVID-19 has changed everything. Most of our meetings are now done on zoom. So, we must consider all that in the type of business we do in terms of mask, social distancing, sanitise your hands; all of those have impact on real estate development and our job. For us, looking into next year we believe the market will rebound subject to COVID numbers. The luxury market will take a while to spring back to life.
What we are selling in the luxury end now is land. People are now more interested in land rather than the homes on it. One of the things we have done and continue to do is buying big land, particularly in Ikeja GRA, and cut it into smaller pieces and sell by plots. We are doing that and will continue to do so out of what I call our land bank in Ikeja GRA.
Apart from COVID, what other challenges is the real estate sector confronted by?
Going forward also, if you look at interest rates, inflation, forex, what we are seeing is not encouraging and that will impact on the economy and particularly on our industry. Thanks to the Central Bank of Nigeria, CBN, that recently reduced interest rate by 1%; they can do better. All the intervention funds CBN is doing is at 9%.
How can you do those rates at just under 12%? There is disparity. I believe that for Nigeria to move expectedly, let’s collapse all these rates at 9% and that will encourage people like us to go to Nigerian banks and borrow money. If I’m doing a development like this and Nigerian bank is charging me 20-30 percent, that loan is already nonperforming even before I draw it.
So, if I make any amount and pay the bank 30%, what is left? And you also have to pay government taxation. Our hotels in Lagos, we pay Value Aded Tax, VAT; we pay consumption tax; we pay environmental tax; we pay land use charge; all sorts; the council will arrive for alcohol tax, all sorts, which is not sustainable. It’s a killer. That is one of the drawbacks that we are facing; government policies; excess taxation or multiple taxation. Government is not creating enabling environment for us to do business to employ more people.
Unfortunately, inflation will keep going high. Everything is going up because of cost of petrol, electricity, forex. I don’t need to tell you about forex. The last time I checked, it was over N460 to a dollar. We know what forex used to be a year ago or in 2005. This unfortunately is where we find ourselves. These things are anti-real estate and anti-hotel businesses. The future is very low; so we have to keep on reinventing ourselves.
Competition is fierce in hotels and like I always say to people, one of the areas we play very high is Ikeja GRA. Some ten years ago, there were only three hotels but now up to 35. So, if cost is going that high and we cannot pass the cost to our customers, what will happen is that some of these hotels will collapse. If people like us position ourselves very well, we can be picking them up for cheap.
The other area is to develop good quality shops; we are looking for good locations to do it. Commercial, office buildings are dead because people are moving home. We only work Monday, Wednesday and Friday in my office. That’s the trend now. If someone asks me to come and rent bigger office, I’d ask him to come and rent from me.
COVID has shown me that I can run all of my businesses from my bed, with laptop on my laps. I’ll be calling my staff from home to go to where they need to get to from home; they don’t need to come here. You will now see nobody taking office building; the worst hit is the luxury type. Most of the people that usually rent those properties come from come from South Africa but South African economy is in depression; nothing is taking place. It is important to understand these things to be able to decide the business you need to involve in.
What exactly is Suru Group doing now?
I have already told you some of the things we are doing. We are doing our best. For instance, we have about 32 flats in Ketu and bungalows at Mile 12. We tell our buyers to invest 15 percent and we will cover the rest while the buyer spreads his balance across 24 months.
This is how we have been able to adjust to the effect of the COVID-19. We are also building hospitality structures within Lagos, at a very considerably affordable cost. We are bringing standard facility to Ketu, for instance, at a relatively cheap price, yet classy for the price. We are also doing quality housing and hospitality business in Ogolonto in Ikorodu. We have been able to invest more on the low income and middle income earners more than ever before because of the effect of the COVID-19.
It seems that the Suru Group has really surmounted the COVID-19 pandemic?
We have prepared ourselves sufficiently to surmount the odds of COVID. We have also identified that affordable housing is the future and moved in there. The volume is there, especially in Lagos and that is what we are resolved to drastically do.
In terms of hotel, we will be focusing on what I term budget hotel. I’m not interested in luxury hotel. My interest is in budget hotel, maximum of 100 rooms, with one air conditioner per room; no more central air conditioners, which means that if you have 100-room hotel, if only one room is taken, you’ll be incurring expenditure for all of 100 rooms.
But with one air conditioner to a room, the electricity people only bill you for that one room. I am confident that the future is very good so long as we focus on these two areas. Certainly, private realtors could have done more, but we need the immediate intervention of the government to support us. I should commend this administration for initiating the intervention fund of N200 billion for real estate companies, at the single digit interest rate of 9%. This will go a long way to boost the real estate sector.
If we can access the CBN real estate funding; if we can tap into it, and it has up to ten years’ tenor; it will allow us build enough low cost housing estates that will be affordable for most low income earners. So, we’ll play big time in that area.
What is this unending battle Suru Group has with the Asset Management Corporation of Nigeria, AMCON, about?
I believe you’ve all been following our story. It is one of those stories you can call the David and Goliath story. I am David; AMCON is the Goliath. The bible calls him the strength of the Philistines and he kept on tormenting David. So, AMCON keeps on tormenting me in one way or another. But at the end, David overcame Goliath. So, I’m very confident that in no distant future, so long as we don’t die, victory is ours.
What really is the problem; what happened?
The background of our fight with AMCON dates back to 2010, when we were banking with Ecobank, formally Oceanic Bank, when then central bank governor, Lamido Sanusi took over the banks. Our funding of N13 billion by the bank was cancelled after we had already drawn N10 billion, which was used to buy property in Ikeja GRA, Bestwestern Hotel on Allen Avenue, Ikeja; another hotel in Opebi and various others.
Business was going on; the loan was performing, being serviced. Suddenly a letter was brought to our office sometime in early 2011 that our erforming loan had been sold to AMCON, against the terms setting up the corporation. We had no issues servicing our loan. AMCON bought our performing loan. By law, AMCON was not supposed to buy a servicing loan. However, Ecobank tampered with our N10 billion loan and sold it to AMCON for N8.3 billion at a discount, without notifying us.
So, we sued Ecobank for N39 billion for mismanaging our facility and canceling our undrawn facility, which we planned to use to complete our second hotel and our real estate in Ikeja GRA; that case remains in the Federal High Court till today. AMCON came to join and frustrate that case by filing a counter claim, saying we owed them N26 billion. The case was dismissed. They went to another court, urging it to declare that they bought the loan correctly and also lost.
So, why did you not sue AMCON instead?
We never took AMCON to court. This is because we believe we have no business with AMCON but the bank that sold our active loan to the agency. Over the years, AMCON has taken series of actions against us.They had filed three different suits against us, but we won all of them.
They ran to court, asking the Inspector General of Police to help them recover their property without even mentioning our name, the real owners. On the day AMCON came and closed our hotel on Allen, we had almost 200 staff kicked out; we had in the hotel about 150 guests teargassed out; I have all the videos, Mopol with illegality; a government agency, using illegality to gain access to people’s property. This led to the loss of jobs of so many. All the money we owe the affected staff has not been paid because all the documentations are still in that hotel. The office we left is still there from September, 2017; over three years.
We had a valuation just before AMCON struck. The hotel was valued at N6 billion. AMCON did a valuation few months ago, and it has depreciated to N1 billion according to them. All the furniture is damaged. The roof is leaking. If you pass there you see some windows open, curtain coming outside. If we recover the hotel tomorrow, all the furniture will have to be changed. We have to now refurbish the whole place.
Reroof and start all over again. Our government does not care because if it does, that illegality should never have happened. But thank God, we went to appeal court and again won. The Court of Appeal overturned it, ordering them to go back to lower court and put our name in the suit. However, AMCON was not satisfied; so they went to Supreme Court where the case is currently pending. We have published a caveat emptor in The Punch.
Why is that?
The reason is that some weeks ago, AMCON wrote to us that they had sold our property in Ikeja GRA. Which property? They took us to court and we won. They appealed to the Supreme Court but the case is yet to be decided. We are in possession of the property, which they purportedly sold.
As we speak, all the cases we had and won, were filed by AMCON and Suru Group won all the three different suits. We wonder under what power AMCON sold our property. AMCON has no power to sell a property that has been sealed by the court.
The caveat emptor is necessary, therefore, to alert the public, and the prospective buyer or the so-called buyer that the property is under legal battle, which is currently in favour of Suru Group. They should beware when dealing with AMCON over our properties; the person would have bought nothing and nobody should waste his hard earned money.
AMCON had launched an onslaught to recover the N5.4 trillion bad debts it bought from commercial banks, and has gone on seizing spree in the last three years, taking over valuable assets, belonging to prominent Nigerians and companies with no regard for rule of law.
It is unfortunate that nobody obeys court orders in Nigeria. However, I commend the judiciary for proving over and over that it remains the hope of the common man against oppressors.
What is the immediate fallout of all this on the industry, especially with regard to investors, particularly foreigners?
Most FDI investors can’t play in real estate market, given the wahala that surrounds us – government policies, multiple taxation, high interest rates, high inflation, high forex rates – and even area boys are not helpful.
What I found baffling is your passion for real estate, despite the challenges, especially your battle with AMCON. What is the reason?
The reason is that real estate is a calling for me. I am called to serve in real estate just as pastors are called to serve on the altar. Because of the call upon me, it is imposible for any power to frustrate me out of this business. I believe that God who called me is able to see me through all the challenges, including AMCON’s.