AKINTOLA OLADEJO’s advice to real estate developers

• What The CEO Prestigious Home Said

Mr. Akintola Oladejo plays big in real estate. He is the CEO of Prestigious Homes Limited, a reputed property development firm which has completed over 300 residential and commercial housing units. Mr. Oladejo is a custodian who understands how joint ventures work. He has overseen the signing of many Joint Ventures over the years and many reputable companies consult him to help them strike deals with their partners. He owns a resume which speaks high of his personality. He is an alumnus of Harvard University Graduate School of Design; Advance Management Development Programme; and Federal University of Technology, Minna. He had garnered diverse experience working for reputable international companies such as ExxonMobil, Schlumberger and Guaranty Trust Bank. He heads a number of business companies as the Chairman. These companies are Perez Medcare Hospital, Integrated Subsea Services Limited, Prestigious Construction Limited, and Integrated Subsea Services Limited.

Few days ago, he was invited as a Lead Facilitator at the 2023 Mandatory Continuing Professional Development (MCPD), a seminar held by the Lagos branch of the National Institution of Estate Surveyors and Valuers in Ikeja, Lagos State. There he delivered a lecture titled: “Opportunities and Challenges in Joint Venture and Development Leases. At the Seminar, City People team lead by its GM, Wahab Bashir and reporters, Jamiu Abubakar and Promise Babatunde had a chat with him. There he spoke at length explaining the significance of collaborating through joint venture and what developers to know before signing a joint venture agreement. Below are excerpts:

As the lead facilitator at today’s MCPD event, can you do a summary of the lecture you just delivered?

Today was a talk about property joint ventures agreement, opportunities and threats. Like you know, Joint ventures is one of the tools that property developers use in property development. It is one of the transactional tools to engage either land owners or other partners as the case may be. Today I was to facilitate or lead a discussion that talked about all of the areas, all of the things that are to be considered, all of the things that constitute these joint ventures transactions as we have it in real life as a little property development.

Now you just made mention of some of the challenges. I want you to quickly dwell on a bit of them.

First of all, I’ll talk about the opportunities because I like to see things from a positive perspective. So, I did say opportunities exist, you know, and the significance in the real estate space as regards joint ventures. So, what that does is, if as a developer, the traditional way is that I go to buy land at a certain cost, then I go to look for money for development, then build, then go to the market and start selling. What if there’s somebody that’s willing to give me their land and I don’t have to pay for it upfront, and I can then use the money I have, okay, that would have been used to buy the land to go into development straight away rather than buy the land and then go look for the money to develop. So what that does is, if it was going to take me one year to look for money to fulfill the first option which was buying land then now look for another one year to start building. Then you finish building within another two or three years, and the project timeline is about four years. I can cut that by half by starting to build today, you know. But then I must also be willing to share my profits because the profit is going to be less than if I had gone to buy land, you know, so it is a way to make transactions come alive faster. To spread the risk, I’m not going into a risk sharing arrangement with another person rather than go it alone. So most of the time you collaborate in business, you achieve faster results and better results. Then also that I’m going to because I now have a partner that is sharing risks with me, the bank is also going to look into what I’m doing. So it’s not just me making the decision which could have been prone to even more failures, but I now have checks and balances in place. So it leads to the overall success of the project and it’s a win -win. And it’s not me doing one, I can then do two, I can do three, I can do more, you know. So that is the whole essence. Now we talked about, are there threats? Yes, for everything that there is an advantage, there’s a disadvantage. But these are things that can be managed. For instance, we talked about the increased cost of construction. Even signing an agreement today, 2023 December. And let’s say cement is 5,000 naira per bag. And this just happened in June. Cement becomes 10,000 naira per bag. And we have done our agreement based on today’s reality. And we have factored maybe like 10% inflation. But the ratio has now become like 100%. Price has doubled, which is unforeseen. How do we manage this kind of stuff? At the beginning of any project at Abinitio, can we envisage everything that can go wrong as humans? The answer is no. Right? But we can have a way of managing these things by the kind of Joint Venture Agreement that we enter into.  we can put it in such a way that there are allowances for this kind of inflation. There are opportunities to come and sit and renegotiate if it goes beyond the certain mark. Once people see that you have genuine intention, it’s a win -win you’re looking for. People are open to conversation; they’re open to discussion. So that was the sense of what we’re talking about.

When you look at the Nigerian environment today, the overview of JV schemes, you discover that the success rates are very low. What could be responsible for this?

One of the things that I also talked about is how people lack financial discipline. You see some developers go into a joint venture agreement. Even that project is already sold but they’ve committed the money to something else. There’s no financial discipline. Well, you’re unable to understand that. You’ve not earned a profit except to do the work. When your house is delivered, the project is done. It doesn’t belong to you. You know, so that is one. Okay, the other thing is, are you over -trading? I tell people, if you don’t over -trade, do it within your capacity. If your capacity right now is to build two houses, why are you signing 10 JVs?  Greed is also a factor. So, don’t over -trade. Do within your capacity. Grow organically. Handle from one, then become two. Two becomes four. Four becomes eight. So those are some of the reasons you have a lot of abandoned projects. Also, people don’t get their preference right. Sometimes they don’t enter the right JV agreement. Well, because it’s just one project by force. The land owners now say, oh, this is what I want. You know, it’s not a win -win agreement. You just put your head. The man says my land is in Banana Island and you’re doing 10 houses. I’ll collect 7, you take 3. And when you sell the whole, you cannot even build the whole project. And the man will sign. Before entering the  understanding the market is very important. Understanding all of the dynamics around the development will help you to sign a proper JV agreement. So, you’re either doing it right or not doing it at all. It’s very key.

During your presentation, you said it is easier to develop real estate in Nigeria compared to other parts of the world. I want you to dwell a little bit more.

My point is when you have an environment that is not as regulated, this is a developing country and I would agree that we are not as regulated as it is in another mature economy. There is often an opportunity, what people call; the place is broken. The place presents a business opportunity. My point was if you are doing off -plan, what can we do here? When you are doing off-plan, we just pay that to the developer. In other countries, you can’t, they won’t let you pay developers. You pay into an escrow account managed by the government. What if the developer runs away with people’s money? So, my point was if people trust you here and they want to commit their life savings, their sweat to you, the least you can do is respect their investment and build for them.

And once you do, you see that you’ve seen it, you’ve done it, they keep coming back to you. So that was my point. That’s why I say it’s easier, you know, because people are just giving money based on trust.

What do you suggest should be done as punishment to developers who collect money and default in delivering a base of trust ?

They should be jailed.  Our judiciary system needs to be tested. The truth of the matter is in any agreement you go, make sure you have a signed agreement. Don’t do oral agreement but make sure you have a signed agreement and insist on performance. so people need to insist on performance on the agreement that is signed. One or two people have been used as scapegoats. It’s when people know that there is no consequence for their actions that they misbehave. Once you know there are consequences and you are held responsible then there’s going to be changes in the sector. However, there are developers that do the right thing. They continue to perform. Like our company Prestigious Homes Limited is one of those examples. We do not owe anybody any house that they deposited money and has not been given.

What are the new projects at hand in your company?

Right now, we are doing a very lovely development called Lekki Foreshore in Lekki Phase 1, at the end of freedom way. We have about 108 housing units. So our aim is to develop communities that work. When people are buying our development, they are buying value, they are buying peace of mind. In America, after 50, 60 years, people can still sell houses. their houses are still solid and intact. We are not building for 5 years or 10 years, we are building houses that are sustainable. So people should expect from our stable what we will do, which is quality, which is value. They will always get value beyond whatever money they are giving to us. That’s our vision.

Looking at the insurgence of landgrabbers, how have you been coping with their nefarious activities?

We’ve got a challenge, especially in Lagos, you know, like I said, what we’ll try to do is just understand your Market, where you operate, have policy and ground rules. You do not engage in development on any property without proper title. We do not go into either JVs or buy lands in the period where they say the title is in lieu or is in view or it is under processing. No, the title must be verifiable. Once your title is ready, you can call us but I’m not interested in whether we’re still under processing or the survey has been paved. No, no, no! You don’t want problems which can be all exhausting. You don’t even have time for that kind of stuff. So, do your business right  Like I said at the meeting, if you do things right, even in this country you can make your business successful. So genuine title, title that’s already ready is what I do.