“We built our initial portfolio in Nigeria focusing on fit outs for global occupiers and several new shopping centres throughout the country. We then completed new commercial office buildings and a number of hotels,” says Profica CEO Tim White. “This work continues, but we’re also diversifying into other sectors and services, including, logistics and the healthcare sector, where Profica has global expertise. We believe in seeing the opportunity through the crisis.”
Profica, and indeed the West African property industry as a whole, suffered a harsh blow when Regional Director for West Africa Malcolm Matanda succumbed to a heart attack in 2020. After close on 10 years with Profica, White says Matanda left a powerful legacy which forms the base for Profica’s continued expansion.
“Malcolm was a firm believer in Profica’s philosophy of focusing on local solutions for the local setting, and building strong relationships,” says White. “When we first started in the Nigerian market, professional project management was still a new concept in the West African country. Many South African companies had already attempted to make their mark in the country, and many failed. Profica, however, knew to proceed with much more cultural sensitivity to the multiple cultures in Nigeria, and to focus on growing an indigenous Nigerian team. We have built a truly Nigerian business and we are forever grateful for the contribution Malcolm made.”
Chris Titmas, Profica group director, has been based in West Africa with Profica for over seven years. Originally living in Lagos, Chris moved to Accra for a number of years and has since returned to Lagos to oversee the team’s project management delivery for a number of large capital projects that are currently at design or construction stage.
With a heightened focus on risk management in the current environment, Titmas says the first person investors now appoint is an experienced project manager, rather than the architect or QS. “In Nigeria, people are coming to us, before we find them.”
Before the recession, Profica’s client base was 55% international, 45% local. “Now, our client base is majority Nigerian companies and we have a larger overall share of the market. Even while the boom was happening, we made a deliberate decision to spread our portfolio across both international and local clients,” says Titmas.
While the pandemic has taken a toll, White says there is still a lot of positivity in Nigeria. “Before the pandemic, the country had recovered from the recession and was on a more stable and realistic footing, without the inflated pre-recession gloss. When Nigeria was the sugar-coated ‘next big thing’, foreign companies invested and had their fingers burnt in some cases. In the quick cooldown that came with the recession, foreign investment into property development largely disappeared overnight, and only more established foreign investors and indigenous companies remained.”
We’re not out of the woods yet however, says White, as Nigeria has the same political administration and problems with access to forex continue. “Everyone has to operate in naira, so investors cannot command dollar rentals. When your revenue stream is the turbulent naira, but your costs are largely in dollars due to large import costs, investment in Nigeria becomes more challenging. However, as the economy improves, more opportunities in real estate, both for occupier and capital markets, will emerge.”
When it comes to Nigeria, in fact West Africa as a whole, Titmas says there has been an evolution in the approach to projects. “It’s finally become more about serving what indigenous markets really need, rather than basing projects on international assumptions of what the market needs. This drives the types of projects we see.”
He cites the retail sector, where there has historically been an investment drive around formalising Nigerian retail to a Westernised shopping mall model. 70% of Profica’s projects in Nigeria were shopping malls between 2010 and 2014. However, in the Nigerian environment, informal markets still dominate, says Titmas.
It can be more challenging to create malls, and costs must be carefully managed, explains Titmas. “There is often a need to create utilities and factoring in sewage, power and boreholes add to built costs. 60% of built cost is driven by the need to import many items, for example all the airconditioning units required for indoor malls. As this drives costs up throughout the chain, informal markets are often cheaper for the consumer. Careful investment and management is needed to make the malls a success.”
Titmas says there is an ongoing major focus in the healthcare sector. “The pandemic has highlighted an increasing need for hospitals that can offer world-class medical care across the continent. We’re seeing a much higher proportion of private international investment in this area. Also, as many Nigerians usually leave the country for any elective surgeries, the plan with the new specialist facilities is to keep them at home for these procedures.”
When it comes to the commercial office building sector, foreign investors have focused on creating products for multinational corporations, but often these are not the businesses that are expanding locally. “Nigeria was under military rule as recently as 19 years ago, with businesses operating largely out of converted houses. Now, this type of accommodation doesn’t fit their organisational growth or image and there is a real shortage of bespoke, formalised commercial office buildings for indigenous businesses. We’re finding that our Nigerian clients are investing in building their own large corporate head offices to international A grade standards, for example Profica clients MaryStem Securities, WalterSmith Petroleum and Stanbic Nigeria.”
The hospitality sector was healthy prior to the pandemic, with local landowners acquiring licences to build and run hotels carrying international brands. Titmas is hopeful it will recover. “We are involved in several hotel projects, including the Four Seasons, Novotel for the Accor Group and. We’ve focused on being able to localise effectively, creating synergies between local teams of designers and international brand requirements.” The Protea (Marriott) hotel in Alausa, Lagos is part of Profica’s hospitality portfolio in the country.
LESSONS LEARNED IN NIGERIA
A decade of experience has resulted in a depth of institutional knowledge and relationships that add great value to projects. Titmas highlights several lessons learned over the years:
- Form a local business and grow from the soil of that environment. Locals must have a stake in your success as part of the family. Focus on investing in indigenous staff.
- Don’t impose Westernised ideas. Transplants get rejected if they’re not a match.
- In this region relationships can be as important as technical know-how, stronger than contract terms, and the key to managing risk. It’s high risk and high reward, and you must be savvy enough to see where the risks lie. You definitely need to have Plan A, B and C!
- In terms of investors, you are often dealing with family offices or very high net worth individuals – and it’s essential to have relationships at the top of the tree. We’ve made sure we were dealing with the top players of the sector in terms of partnerships with the right consultants and clients. Our local relationships and insights are core to the value we offer to clients. Strong relationships breed trust
Profica continues to see Nigeria as a key growth opportunity in the West African region, says Titmas. “In an environment ready for greenfield development, Profica’s deal and project origination capabilities can add great value. We’re able to advise clients on how best to unlock the potential of land and progress this through to development management. Profica has a solid foothold and nearly a decade of local experience in West Africa. We’re here to stay and do good business.”