Uzoma Emelife is the Managing Director of NNPC Properties Limited, NPL. In this interview, she discusses the prospects and opportunities of NPL in the real estate space, as well as the business model being activated. She insists that leveraging on the brand name and its size, NPL is set to create a paradigm realignment in property and asset/facility management.
AS far as Nigerians are concerned, NNPC is all about crude oil exploration and exportation. What is NNPC properties all about?
NNPC Properties Limited (NPL) is the real estate arm of NNPC Limited established to capitalize on the potential within the Nigerian and diasporan real estate markets, generating revenue as a non-core business. The company aims to become a leading player in the global real estate market by reliably providing customers with the highest level of real estate solutions and optimizing value for its stakeholders, thus, competing with real estate companies of other National Oil Companies (NAOCs) like Saudi Aramco and PETRONAS. By adopting a strategic commercial approach and forging strong partnerships with established real estate developers and reputable Facility Management (FM) Companies, NPL intends to leverage the brand equity and workforce of NNPC Ltd to maximize value from real estate development (residential) and Facility Management in Nigeria.
Looking at the Nigerian real estate sector, are there still enough market opportunities to be explored by your organisation?
Quite a lot. Let’s look at residential real estate. The Nigerian real estate market presents significant opportunities for NPL: The current national housing deficit is estimated at 28 million units, with a World Bank forecast of an additional 700,000 units needed every year for the next 20 years, highlighting the vast potential of the housing market. The market volume forecast for 2024 is expected to reach $1.93 trillion, representing a significant value for NPL to exploit in this segment. NPL has demonstrated its ability to facilitate housing product sales within NNPC Ltd, with N3.2 billion worth of sales facilitated in the last five years. This success highlights the significant potential for NPL to expand its market share and increase revenue by effectively positioning its products to appeal to the broader housing market.
In terms of size, it is expected that asset and property management would weigh heavily in the business space of NPL. What is the current asset size?
We have a huge real estate stock (356 properties) within NNPC Ltd with a potential for income from lease, tenant management, and maintenance across Strategic Business Units (SBUs). There is also the growing urban population resulting in a rise in the number of both commercial and residential properties presenting opportunities for property management allowing them to provide services such as leasing, tenant management, and maintenance to a wider range of clients. We also have the potential to harness the average rental rates of 230,000/sqm for commercial spaces (offices, retail, hospitality, etc.).
The strategy is for NPL to extend its property management services beyond rental space management and collections to overseeing and maintaining properties on behalf of SBUs/BUs. The company currently manages a total of 40 rental spaces across 11 locations within NNPC Ltd. A revenue potential of N0.5 billion can be realized from property management/lease administration within NNPC. To further capitalize on the real estate market, NNPC Properties Limited (NPL) has developed commercialization strategies for select properties, which are estimated to generate over N1.4 billion in revenue for the company. This initiative would involve identifying underutilized or nonperforming assets within NPL’s/NNPC Ltd.’s portfolio and devising strategies to maximize the value of these assets through various means such as lease, sale, or joint venture arrangements. The company intends to form strategic partnerships with real estate developers, investors, and other key stakeholders to expand its network and increase the scale of its operations in property/asset management.
How does NPL handle facility management?
The facility management market in Nigeria presents significant growth opportunities for NPL. The current market value is estimated at $8.45 billion, with a projected Compound Annual Growth Rate (CAGR) of 5.4% from 2024-2027, indicating a significant potential for growth. NNPC Properties Limited (NPL) intends to take advantage of its relationship with NNPC Ltd, which owns 17 office locations across Nigeria with a market value exceeding N7 billion, to provide Facility Management services across the business. This offers NPL a unique entry point into the facility management market, enabling the company to leverage NNPC’s extensive real estate assets rapidly gaining significant presence in the market.
Our aim is to capitalize on its relations with NNPC Ltd to deploy facility management (FM) services across NNPC locations nationwide. The FM market is estimated to be worth over N7 billion. The proposed strategy is for NPL to enter a joint venture (JV) or Special Purpose Vehicle (SPV) partnership with reputable FM companies to deliver this service within the next 5 years. NNPC Ltd will significantly benefit from cost savings across its 17 office locations through the proposed optimization of FM services by NPL. An estimated N5 billion in cost savings can be achieved via project planning improvement and execution efficiency, allowing NPL to generate a revenue of about N3bn annually. The proposed strategy is expected to position NNPC Properties Limited (NPL) as a significant player in the FM space, enhancing the company’s presence in the market, and paving the way for future growth and expansion.
What type of business model are you adopting?
The business model is designed for full operation across the real estate value chain providing and sustaining value to shareholders in real estate development, asset/property management, and facility management; through a partnership model that requires minimal investment capital with partners providing equity in the form of technical know-how and counterpart funding.
The real estate development strategy focuses on the acquisition and development of a varied mix of property types to create a balanced portfolio anticipated to generate sustainable returns in the short to medium-term through capital appreciation and sale of development units. This strategy, upon implementation, could unlock over N50 billion in value from proposed investments in the Lagos and Abuja real estate space over the next five years. NNPC Properties has initiated the implementation of its strategy by conducting an internal housing market survey in March 2024, where a significant 88% of the respondents expressed a desire to participate in real estate development projects led by NPL. This level of interest from within NNPC Ltd alone suggests that the NPL brand is trusted and accepted. This is an encouraging indicator for the success of the proposed strategy.
While the outlined strategies present a compelling opportunity for NPL to capitalize on the real estate market, it is critical to note that several factors are vital in ensuring the successful implementation of the plan. The company will require support in areas such as funding, inter-departmental collaboration, human capital development, and change management to effectively achieve its objectives and realize the full potential of the proposed strategy.
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