Why investors close eyes on REITs despite prospects, low hanging fruits

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Real Estate Investment Trusts (REITs) ought to provide investors with opportunity to diversify their portfolio in funds of various property types, thereby reducing investment risks and volatility, but  unfortunately in Nigeria, investors shy away from this promising but underperforming asset class.

Many investors see REITs as danger-zone considering the low performance of the Nigerian Stock Exchange, which has made the asset class less exciting to investors.

This confirms the position of Najeeb Adeyemi, Head of Valuation at Lagos-based real estate consulting firm, Mustapha Ewenla & Partners, that investors shy away from REITs market because of its relatively low market value, small fragmentation and unattractive earnings figures.

“REITs companies in Nigeria have not been doing well looking at their market value and financial performance. They are struggling for survival. You can’t expect investors to put their funds in an asset class they are uncertain about” said Adeyemi.

REITs were  introduced into Nigerian market 12 years ago, making it one of the oldest in Africa, but yet to gain traction in the country. It is still growing slowly despite a significant increase in the global market capitalization which an Ernest & Young report puts at approximately US$1.7 trillion, up from US$734 billion in 2010.

There have, however, been attempts to grow this market as reflected in the modest ₦2 billion Skye Shelter Fund floated in 2007. Others are Union Homes and Sun Trust which followed with ₦12 billion and ₦20 billion offerings respectively. UAC Property Development Company’s (UPDC’s) 2013 offering of ₦30 billion which declined to market capitalisation of ₦26.7 billion in May 2017 is the largest and most successful offering so far.

Nigeria’s REITs market continues to lag peers unlike South Africa that has about 50 listed REITs, even as they are one of the top performing … Read More...