By Adedapo Adesanya
The management of UACN Property Development (UPDC) Plc has announced plans by the company to reduce its current debt obligation of about N20.8 billion to about N4.8 billion.
Addressing some analysts and members of the media, including Business Post at the Exchange on Tuesday in Lagos, the CEO of UPDC, Mr Folasope Aiyesimoju, stated that this was one of the main reasons for the firm’s N16 billion rights issue, which is to be used to refinance its short-term debt and reduce finance costs.
He said the optimal performance of its recapitalisation through this right issue will see the debt cut to N4.8 billion by repaying the bridge loan facility owed its former parent company, UAC of Nigeria Plc.
At the company’s Facts Behind the Issue presentation yesterday, Mr Aiyesimoju disclosed the company’s broader strategy to create long term shareholder value through the recapitalisation effort.
UPDC, in the second quarter of 2019, had obtained a one-year N16 billion bridge loan for debt obligations and to reduce high debt service cost. The facility was used to pay the company’s maturing short term obligations of N6.5 billion in Commercial Papers, N7.4 billion Commercial Paper-related support facility, and N2.1 billion in intra-group working capital facilities.
In 2019, UAC of Nigeria Plc offloaded its entire stock in its real estate subsidiary, UPDC, following years of loss–making despite efforts to turn it around. Results of the company for the half year ended June 2019 showed that the former parent company recorded a N1.2 billion loss while in 2018, it recorded a N15 billion loss due to UPDC.
The company now plans to raise fresh funds via a rights issue of 15,961,574,145 ordinary shares of 50 kobo each at N1.00 per share on the basis of 43 new ordinary shares for every 7 ordinary shares held as at the close of business on Monday, September 30, 2019 through its issuing house, Stanbic IBTC Capital.
Set to reposition the real estate company, Mr Aiyesimoju, who was appointed in August 2019 after the board was reconstituted, is seeking to strengthen and improve its capital structure by focusing on affordable housing to cater for young middle management professionals.
The company also said that it will be looking at expanding its hotel service in Lagos to offer a more with the current housing demands of its target clientele.
He explained that with the teeming youth population in Nigeria, the company deemed it necessary to address the gap in residential units for young professionals one unit at a time.
“Recognising a shift in the demographics in Nigeria with a rising youth population, and limited home ownership opportunities for young middle management professionals in close proximity to the central business areas of Lagos, we tested the market with our first residences development in Festac, Lagos.
“The residences offered 196 units of 1- and 2-bedroom apartment at a price of N22 million to N30 million per unit,” he said.
According to the UPDC CEO, this is the fastest selling development of the company, adding that in years to come, it will replicate this in other parts of Lagos.
“Our aim is to expand this concept for middle income housing for young professionals further into areas such as Surulere, Yaba, and Ibeju-Lekki over the next three years,” he added.
“Located opposite our mixed-use Festival Complex in Festac, this development is scheduled to commence in the third quarter of 2020. The project will be funded with a mix of developer equity and off-plan sales,” he added.
To improve its hotel performance, Mr Aiyesimoju said, “Our plan is to convert one of the three hotel wings into serviced residential apartments for sale, similar to our successful residences development.”
