To many Nigerians, the outgoing year 2020 comes off easily as one eaten by the locusts. At individual and corporate levels, it has been a challenging year that has left several businesses and homes grasping for survival. But some businesses saw the challenges of the year as a steep learning curve, especially those in real estate business. Purple Capital Partners is one of such businesses. In this interview, LAIDE AGBOOLA, Co-founder and CEO, Purple Group, speaks on this year of pandemic and #EndSARS, its impact on business and investment and how Purple has been able to remain focused and strong on target. He also speaks on other real estate issues. CHUKA UROKO reports.
It has been a very challenging 2020 for everybody, individuals and institutions alike. Businesses have had their projections reset and, in some cases, dropped entirely. How has the year been for Purple?
2020 has been a challenging year for businesses everywhere and Purple wasn’t left out. The unique challenges faced in 2020, arising from the global pandemic and lockdowns to the unrest, specifically affected Nigeria, leaving several businesses grasping for survival.
This year has been a steep learning curve for many businesses as it has shown the survival instincts of businesses in the face of unexpected economic disruptions. For Purple, the aforementioned challenges have led to a continuous reconfiguration of our capital structure, quick response to market changes and customer/partner changes to the market.
Therefore, we have been able to test our products in the worst of market conditions both in 2016 and now in 2020. We continue to work towards maintaining our confidence amongst our domestic and international alliances. The questions have remained the same: How do we assure our investors their returns are achievable?
And, how do we deliver on the proposed assets amidst lockdowns and a contracting economy? Fortunately, our mixed use development products have been designed specifically for this market based on deep research analysis and as a response to the market both in 2016 and now validated as the appropriate product for our Nigerian market even in 2020.
Of the various segments of the property market, retail seems the worst hit by the market challenges. How have these challenges affected occupancy rate at PurpleMaryland?
At Purple, our relationship with our tenants/partners and the growth of their businesses remain paramount. This has made those partners remain with us despite the several economic issues. We have continuously prioritised brand awareness; our product and partner products awareness and marketing with an unusually lower priced rental regime derived from our lower priced building strategy supported by smaller fit-for-purpose spatial planning.
Read also: Purple introduces e-commerce site, new lifestyle brands
This has been our strategy in maintaining our 97 percent occupancy level. However, this has not been without some sort of grant period in 2020. It has been an unusual year and has required us to deliver unusual responses tailor-made across our partners to arrive at sustainable businesses within our built environment going forward. This also speaks to the resilience of the businesses within our centre. However, this year has also reinforced our belief in our mixed use retail strategy, focusing on essential services and domestic retailers, who are flexible and have shown adaptability to the peculiarities of the Nigerian market.
As a response to the 2020 challenges, many investors are rethinking and refocusing. What is the new direction for you?
Purple has been known as an investment or real estate firm depending on who you ask. However, we have taken all those competencies and asked ourselves some questions to determine the core outcome / impact of all these business activities and how do all the business decisions and strategies translate to real world value.
To this end, we decided that improving the end user’s lifestyle and experience by delivering world standard real estate assets that continue to be viable and impactful remains essential. Hence our enhanced focus on the lifestyle development of our consumers by accelerating our natural evolution from pure brick and mortar centres to include our online market place.
The online market, purple.shop, includes all our in-store retailers and a well curated selection of new vendors, who we have vetted and trust to deliver high quality products and services to our customers. In addition, as an improvement to customers’ lifestyles, we have also launched new products like Nano Apartments that tackle some of the long held issues in the residential, short and long stay space. We have commenced construction of these apartments in Lekki Phase 1 and would be delivering more to our mainland customer-base starting in 2021.
With the heavy impact of Covid-19 and #EndSARS protests on the sector, what do you see as the future of real estate in Nigeria?
We’ve seen numerous shifts in the past few years, from the rise of shared spaces and services bringing about co-working and co-living to this year, which has also shown us the value of mixed use assets, but there is also a need for privacy and self-sustainability. We believe there is gradual shift towards smaller, mixed used facilities that give customers some sort of balanced, but affordable and flexible lifestyle.
This is the immediate future of real estate and it is what our Purple Nano product line brings to complement our Purple Lekki and eventually would complement our Purple Maryland (formerly Maryland Mall) product offerings. The drive is to be able to deliver on work, shop, eat, play, drink and live concept across our product offerings and back it up with a strong online marketplace, purple.shop.
Besides all that have been said, what do you consider major challenges for real estate developers?
For us as a lifestyle and real estate development business, the ability to deliver products to our customers and partners at sustainably attractive prices makes our major priority. Prior to a lower rate interest rate regime currently being experienced, attractive naira-based financing for real estate lifestyle, especially around hospitality, has not been entirely forthcoming.
We also need supportive policies and economic laws to ensure we are all driving towards resolving shelter deficits in every form whether it be residential or hospitality. There is obviously an infrastructural gap that can only be driven by investors. This is even more apparent now than ever with the collapse of the oil price coupled with the pandemic.
We can feel the need for domestic players and institutions to back leading domestic players that have boots on the ground and neck deep in the development cycle of Nigeria. We are not a portfolio international company or investor. We are Nigerians and we are on ground.
Our focus is to develop Nigeria, but Nigeria must provide an investment climate that is evidently supportive of growth so that domestic players and institutions do not shy away from investing locally, especially at a time like this. We are all we have.
Our target is to continuously work on delivering value assets to our customers and partners at attractive prices irrespective of the exchange rate movements experienced. These movements form a threat to our margins created from lower interest rate regimes as our ultimate plan is not to continuously pass on this exchange rate changes in our lifestyle developments to our consumers.
Apart from development challenges, there are operational challenges from power cost, good access roads and other infrastructural deficits, meaning that developers have to bear these costs. We are very mindful about pricing and continuous increase in prices in a down market. Our ability to sell or lease products at attractive prices can only be sustained where we do not have variables moving constantly.
With the current economic recession as well as reduced spending power, real estate tends to be seen as luxury rather than an investment. We bank on the fact that the pandemic has shown the real importance of work, shop, eat, play, drink, and live in a singular location. However, this must be at the right price point.
Material sourcing and a weak domestic manufacturing industry continues to be a stretch on right product pricing for the domestic market, as appropriate items continually have to be sourced offshore. This, coupled with the downward direction of the Naira, continues to increase the cost of developments, limiting developers in terms of finishing and finance to innovate further. Notwithstanding, we continue to innovate and form alliances with our network of contractors, building partnerships that align our interest of delivering value to our consumers based on attractive pricing.
In terms of development and operations, we have found a way to work with the best of the domestic space we operate in whilst delivering at international standard levels fit-for-purpose assets. We need to ensure we are not losing our best hands at all levels of the real estate value chain to the Diaspora. Taking on international expertise at greater cost is at the detriment of the Nigerian real estate development industry and can only lead to stagnation if the best minds and artisans are brought in and never home grown.
The residential segment of the real estate, arguably, has had its hay days. What, in your view, is the next big thing in the residential market?
We keep saying to whoever cares to listen that we are a real estate and lifestyle development business. Even our residential developments are a function of co-habitation principle towards real estate asset classes, in the first instance, not to talk of the multi-use as apartment hotels, short and long stay as well as co-living.
The concepts discussed here are alien and somewhat new to the market, but the market must adapt. We conducted that research as far back as 2018 and began our quest for delivery ever since then. We are here now. The quest to create unique, but attractively priced, living solutions for the mid-market, a discerning investor’s haven.
You recently implemented a brand restructuring and offered new products. What values will restructuring and new product offering add to Purple as a group?
The Purple values have always been perseverance, audacity, collaboration and transparency. Although these principles have guided us thus far, we have only just better defined them such that our end users feel the Purple way. We want to ensure our investors also remain very much at the centre of all we do as a business. With our new products, we are only ensuring that we offer our investors a diversified portfolio that enhances better returns.
For example, our Nanos will feature top tier hotel management services. Merging this hotel management approach with a residential style building has created a unique well catered experience for occupiers as well as a viable professionally managed asset for investors who are able to receive an assured tenancy return for these Nanos at PurpleLekki, only where they choose to. Like I mentioned, the success of PurpleNano at PurpleLekki is pushing for the need to deliver competitively priced PurpleNano to our mainland audience.
