Eko atlantic nigeria hudson yards twin development

Eko Atlantic Nigeria’s Mega Project Student Ameni Kabboudi Professor Brian Schwagerl

NYU

I.

What is going on in Sub Saharan Africa: between infrastructure and development

If you ask anyone about their knowledge on Africa, it would be very limited if not non-existent.

It is important to tell that Africa has been the breadbasket for western and eastern hemisphere of the world with commodity and mining, where natural resources such as oil, crude and diamond has been the major industries. But what most people lack in acknowledging is how diverse and different the countries in Africa are. Under this paper, I will discuss the impact of the real estate industry as well the big development project in Nigeria.

What most people are unaware of is how big Africa, with over 50 countries with each has its own language and system. The map bellows how big it is related to other countries.

Fig. 1: Africa Size What people do not realize as well is that Africa is going under a forecast for economic boom which will result into the great expansion of construction which will draw investors’ attention.

Urbanization is taking off and numbers indicate a virgin land that is ready to be developed.

Unexpectedly the development on both the real estate market and infrastructure is attracting the appetite of small developers and local and lenders.

Fig. 2: Construction in Africa in 2014 International investors are not focused on Africa and even if a few attention is made, it is mainly towards South Africa but not the rest of Africa. Even big companies such as Blackstone, Goldman Sachs and Morgan Stanley are lately considering Africa. The traditional problems will be estimated to be a lack of transparency in jurisdictions as well as the lack of a good infrastructure. However, this is not entirely true. Bad rules have tied down the development of Lagos which is the base of Eko Atlantic Project along with 1000 other African cities since their independence from colonialism. These include corruption, mismanagement, political interference, unresponsiveness, overbearing religiosity, nepotism, human rights abuses and incompetent presence of the state.

I will mention a few big construction project that are estimating to be changing the overall view of Africa as well as facilitate the logistics. To list few; Zambia Railway upgrade since the railway become dilapidated. Being the first produced of cooper in Africa, the country is working on its whole railway system for the next 3 years which is a clear that the government is forecasting a solid future as well knowing that the core to development start with the logistics.

Not far away from central part of Africa, we go east to see a promising project in Tanzania mainly in Dar Essalam called Oyster Bay. It is a $270 Million investment that aim for revitalizing the marina by providing two luxury hotels and one of the biggest malls in Africa as well as a conference center and hospital.

But the main need to build all these projects is the demographic change in the countries, according to Peter Niehaus, director of leading international legal company: ‘Demographics on the African continent is a major driver for the real estate industry predominantly as a result of close to half of the total population on the continent being younger than the age of 30. That in turn means that there is an ever growing need for the development of public service infrastructure, housing, industrial, formal agricultural, telecommunications and retail facilities to meet the demand of the population�. According to the World Bank, Africa’s median age was

19.7 years in 2012 as compared with a global median of 29.7 years. Africa’s median age is expected to increase to 25.4 years by 2050, and Africa will remain the continent with the youngest population.

This can create a big opportunities for developers to rush into building and meeting the over demand and the non-existent supply. Nigeria alone which is our main focus in this paper is estimated to accommodate one billion people which might replicate the Chinese Example on economic and demographic stand point.

In addition to the demographic implement, Nigeria is a prominent market which has one of the largest GDP growth per year and which economy is the leader in Africa. Nigeria is attractive because it is the biggest consumer market in the west part of Africa. Its Gross National GDP accounts for $5121 Million Dollars. Compared to South Africa, Nigeria still struggles to implement successful projects as it is not stable enough and does not have the efficient infrastructure despite the promising market that is expected to be booming in the next years.

To narrow down our main focus on the western part of Africa, government owns about 45% of the projected development while the biggest portion of funding comes from Europe and the U.S with a 21% of the total funding. The growth of funding increased from $50 million last year to $75 million. The investment in Real Estate accounts for 8% this year which doubled from last year. However, as traditional as the market is, mining, energy power and gas and oil account together for 56% of the most invested in industries. This is quite expected as Africa has been always seen the hub for natural resources. Real Estate Market constitute about 11% of the entire economy of the country of Nigeria which is slightly higher than many other Sub-Saharan African Countries. Figure below shows that Lagos and Abuja in Top 3 in Africa for Rental asking price.

Fig 3: Top Rental Markets prices in Africa – Nigeria comes Second-

Due to the demographic needs, Nigeria alone is experiencing a shortfall of 17 million housing units which can be a great opportunity for developers. It is expected that 13 out of 20 fastest growing economy in the next 5 years will be in Africa. “Large volumes of good quality commercial and residential property are needed to support the continuing African growth Retail space / malls are at the bottleneck of Africa and the concept of mall is still relatively new.

With an expected increase in the purchase power in Africa, retail space will be sought after.

Commercial space is also another sector that is in need. With expansion of economy, multinational companies are expected to grow tremendously. Thus, the quality of offices on a European or American standard need to be addressed. Eko Atlantic Project is an example of what can be a solution for this Real Estate inefficiency in Nigeria. Thus, a detailed research will entail the project in this paper.

II.

Eko Atlantic 1) Construction/Predevelopment process

In order to come up with more accurate information, I have reached out to Yuki Omenai who is in charge of sales and marketing division and who is responsible for selling Africa’s biggest land reclamation in the history of Africa to developers who want to build high and medium rise resiential and commercial buildings.

I have emailed him different questions and he provided me with as many answers as possible which I think are critical in understanding Eko Atlantic Project in a deeper level.

A. Why This development: Environmental Necessity The vision behind this huge development is to create a 21st century city in West Africa that can accommodate business needs for the next few hundred years. According to David Frame ‘Managing director of Eko Atlantic’ ‘Eko Atlantic is not an old model, this is a 21st century model that will reach international standards. ’ This would mean that Eko Atlantic city would operate under high standards of transparency and good governance. Its security would be handled by independent policing standards. This could extend to other aspects of its civil and criminal justice systems. Its sanitary, health, energy supplies, environment and other regulatory rules should be pegged with comparable standards in London, New York, Paris, Dubai and the population of Lagos is growing rapidly and the city is built for centuries on old colonial infrastructure not designed to accommodate such density, Eko Atlantic is the solution. Lagos is growing 10X times faster than New York. The urban planners have no more control as the population of the city of Lagos which reaches 15 million, exceeding Beijing population.

However, the main reason behind this development is not an urban need, but rather an environmental necessity.

Fig 4: Victoria Coastline with Land Reclamation Before and After In fact, the original coast line is in danger. 1.5 miles in deep has been lost due to erosion over the past 100 years. That’s why reclaiming all that land and rebuilding a stop wall under Lagos government to prevent threat of erosion to island of Victoria growth in 2005 was a necessity that led to the idea of creating a new city which it was under threat of being devastated completely.

The coastline of Victoria was eroding at a rate of 32 Feet per year and by 2005, the whole district was put in danger of being totally lost to the ocean. The state government needed to build a sea, wall as a solution for the erosion. However, the coast would have been crippling for them. EKO Atlantic developers were actually approached to find a solution and that was to build the sea wall off the coast and to sand fill behind it. In order to recover the cost, the new land created would be owned by the company and the developers have the right to sell of the land to recuperate the costs. The project is operated privately by Chagouri Group (the developer), one of the most famous billionaire family in Nigeria, while Construction companies are purely Chinese. In fact not too far from Eko Atlantic, China Railway Construction Corp has recently signed a deal worth nearly $12 billion with Nigeria Government to build a railway along the West African nation's coast. This is another indication of the powerful existence of Chinese in the market that led them to be pioneer not only in minding but also building the infrastructure of the countries.

B. Regulation and Land Use The Eko Atlantic Project is a public and private partnership. But the financing is 100% generated from the private sector. In the meantime the government provide a fast tracking processing of documentation and provide legal and policy assistance. Given the fact that the rate of erosion of Victoria Island, action had to be taken quickly. There was no time to waste and all parties knew immediately a quick intervention is needed. The developer spent 18 months on scale model tests

to refine the shape of the sea wall. Given the partnership with government, permits were not needed.

However, one of the biggest issues when it comes to land in Nigeria is that, securing clean land title and a large plot of land is very hard. Many plots are owned by families and they are usually small. Each member of the family needs to agree on the change of the ownership. Thus, it is difficult to ‘collect adjacent lands’ to develop an entire vacant site where a development can occur. Besides, the government in Nigeria owns about 40% of the real estate.

C. Zoning Issues There was no issues with creating an artificial land. However, developers were presented with several different zoning options for the city. The final choice was for the mixed-use zoning policy applied to all districts. The reason behind it is to create a modern city that can compete with international cities while avoiding the massive rush hours from residential to commercial zones and vice versa. There was actually a suggestion of implementing multiple occupancy into each development to ensure the 24 hour activity in each building which provide the liveliness to the district. Eko Atlantic has a concession from government both to develop and operate the land. They have their own gas supply and water system and their own sewage treatment.

D. Police Power In order to establish a well-maintained city that can serve the west African countries as well as bring thrive to the economy of Nigeria, where elite class increased by 300% from last year.

The government has a duty to organize its resources and mobilize its resources to improve this city. But destroying people’s home without due process is not the way to go about it. That is counterproductive. We have seen in class the video accompanied by the presentation, a community like Makoko, living on floating homes and boats are been evicted with a notice of 72 Hours only from the police. Slums close by Eko Atlantic might not be desirable according to the government but this is also unfair since eviction is made for people who have not only no place to go but have been there for ages. Compensation is not even in the equation. The issue as you can see in Nigeria, as well as the other parts of Africa, there is no security or preservation of anything related to the community and this is another factor that most investors fear; lack of protection or finding a goof exit plan when it comes to deal with a corrupted country.

Fig 5: Parts of Makoko After Eviction E. Environmental Issues Developers and engineers conducted an environmental impact assessment for the project but given that this was the first type of project with land issue. It was quite impossible to expect what the actual environmental impact can be. Therefore, there was an urge to monitor the impact by testing every 6 months while work is being done. To this date, 8 surveys were conducted and so far the seawall has created a new ecosystem of mollusks and shell fish which was not planned.

This wall was made of 8 million tons of rock. However, recently this summer, The Legal Defense and Assistance Project has approached a federal court in Lagos asking for an end to the ongoing Eko Atlantic City project. They claim that the project is illegal and did not perform any environmental assessment as required by law. According to LEDAP ‘The dredging of the ocean and construction of buildings on the reclaimed land under the Eko Atlantic City will not only flood the coastal areas in coming years, but will destroy aquatic life in the entire Nigerian territorial waters of the ocean including fishes and animals, thereby negatively affecting the rich ecosystem of the ocean, the Lagoon and adjourning rivers, swamps and wetland of the country’.

2) Development The size of the reclaimed land is 3.86 square miles. Eko Atlantic is incorporating residential, commercial, retail, leisure and hospitals, schools as well as places of worship (see figure 5 below). The master plan will include a variety of facilities all tailored into building a very modern city on an international level. The company is actually responsible for the development of the lands and infrastructure, no outside contractor is used. The only contractor brought in is the dredging company which is royal haskoning as the developers did not have the expertise neither the equipment to carry out that kind of work. Consultants are mostly relied on such as Dar Al Handasah for the road network design and traffic management system as they are selected on reputation and experience on working on projects of this scale.

Fig 6: Master Plan of Eko Atlantic The project stretches over 4 miles long and 1 mile width on the land with a total of 6177,63 Acres exploited which is big compared to our New York, biggest real estate development in the north America Hudson Yard with only 26 to 28 Acres 17 Million Sq. The project aims for providing housing for more than to ¼ million people, office for 400,000 employers. First development, is a commercial building headquarter of gas and oil companies which is made of 15 floors. The main road in central district will be called Eko Boulevard and will be as wide as 5th avenue in New York.

A. Target Market This project is targeting middle class and elite. Affordable units are also included for young professional. However, according to Ibiene Oceolo ‘Chief responsibility officer’ of Eko Atlantic ‘by providing super luxury units, we are setting a lifestyle which people in Nigeria keep asking for and when expats want to go home, they keep asking but to where and what – most people want to settle back home but there is a gap to what they are used to abroad and what is presently in offer in Lagos.

The marketing strategy of the project is done solely in Nigeria as there is enough capital to lease and resale the properties without any issue. However, developers are targeting a few multinational companies which are projected to act as anchor tenants and can bring in other companies into Eko Atlantic.

B. Green The main power plant is integrated in the sewage plant and waste disposal plant so that all solid waste generated within the city can be used to power the entire city. The fuel used normally to power the city will be LPG (Liquefied Petroleum Gas) which is quietly abundant in Nigeria.

Sustainability is not sure to be taken or even understood correctly by the Nigerian standards.

However, since the project is about modernity and creating community space as well as

competing against current cities. What developers and urban planners say that the city is holding the green concept based on renewable energy and technology as well a great transport system while respecting the needs of both the rich and poor.

C. Employment Impact Currently, 2,000 people are employed in construction sites. As more development came up, an anticipation of 10,000 people will be employed in constructing the city within its different sectors. A projection is estimated to create enough commercial space to accommodate 150,000 daily commuters who will come into the city to work each day. However, many of the residents of Lagos fear that these numbers are exaggerated and many even doubt the credibility of bringing job opportunities to the city as this is oriented to serve the elite class not the general welfare of job seekers.

D. Retail / Hotels expected Tenants According to the consultant I have asked, discussions are already underway with several large retailers to start pre-leasing the mall units. However, a release of information is preserved. With Regards to hotels, there are several hotels going to be in Eko Atlantic with over 12 scheduled to be constructed to date. The number might increase as well. There are actually, a number of developers making off plan sales and a few accepting pre-lease for the commercial spaces being developed.

E. What is unique about the project The level of service provided is a pioneer in Africa. There is no luxury buildings neither highend service provided within the development in West Africa. In addition, the area is a free economic zone which makes it very enticing for companies to be based in Lagos due to the reduced taxes. According to developers, there is no competitor for Eko Atlantic. No one is building anything of this scale within Africa. Given the location of this project, being in the most populous city in Africa where space is at premium and Nigeria is being one of the fastest growing economies in the world, it is not possible to compete with the project. This is also the first land reclamation project in Sub-Saharan Africa. However, I do believe this project is ambitious but there are still many problems related to it.

Fig 7: Downtown Eko Atlantic Expected Plan

F. Critics / Community Opposition There has been opposition from some people who feel that the project is only serving the wealthy as the cost of land is extremely high given the size of plots. Eko Atlantic strategy is only looking for those who can afford to buy and develop which is translated into affording minimum of 1015 million dollars in capital. These individuals then create units which can be purchased by the middle class and therefore facilitate the transferability of the units to most people. Besides, most of the rural fishing communities who depend on the ocean and surrounding waters for livelihood will be utterly displaced and impoverished. Thus, many believe this as ambitious as it is, might not add any value to the overall community and does not serve the public.

G. Workers Strikes Workers of Hitech, Seach Energy and ITB currently working on the Eko Atlantic city project took to the street on Wednesday 15th July, 2015 protesting the working conditions and drastic short-change in the salaries. It seems that one of the workers who claim that as against the promise of $100 per day promised by the management they have been receiving only $4.5. The question here again is whether the promise of bringing jobs including 30,000 jobs in construction is true or not or wither the law of employment is guaranteed. One of the worker says that since we have no union, we are protesting against our freedom and right. One of the worker says that they even work at night, there is no safety and condition is bad, there are white people working here too, we need equal rights, whatever they get, we need to get the same, we go to their country or even in our country, they treat us like slaves, that is not proper! Another worker was seen holding a sign that says “2 years working but broke, poverty is no good�

Whether the main reason is purely financial or not for construction workers to protest, this remains another risk why foreign investors are not interested in turning their head towards Africa even though it promises a lot of return and opportunities.

3) Stakeholders and Financing Financing to complete the project has already been secured through loans from local and international banks as well as a large contribution from the shareholders of the company. The biggest investors are largely domestic as the marketing strategy has not been done there. There are a few multinational uptake as well. The biggest issue with the lack of international involvement, as there is a fear from the lack of operational transaction within Nigeria which lead into an insecurity and uncertainty to invest money into this project. Sales values in 2009 were $ 10.76 Sq. Ft and now that are valued at $150 Sq. Ft. According to Olumide Onitiri-Coker, head consultant at Boss & Knight, a UK Firm, the project is prominent and is very positive about it however there is this term in Nigeria called 'Go Slow' which for him embodies the pace of the construction. Another clear sign is the entry price is too high.1 bedroom Apartment start from $300k which is very steep for the Nigerian market which has a 591$ as individual GDP when really the diaspora should be key target market.

III.

The future of Nigeria

A project as ambitious as the one provided by Nigeria, is definitely a big asset not only to the country but the western part of Africa. As numbers and statistics shows, there is huge opportunities to be taken into consideration if one wants to immerse into the Nigerian market in any sector since there is inequality between demand and supply in the next few years. But transparency in regulation and government’s corruption has been always a big issue beside the bad infrastructure of the country. Lagos is the largest city in Africa but it is not the most developed. According to JLL reports about the transparency of the real estate market in subSaharan Africa, Nigeria is ranked 8th which still makes it evident that the slow regulation process as well as the lack of clarity remains one of the few obstacles.

Fig 8: Real Estate Transparency in Sub Saharan Africa

Also according to sub-Saharan capital report “there is only two international hotels in Downtown Lagos which are the sheraton and intercontinental which emphasize on the current market

condition and the unattarctiveness from foreign investors and companies although reports indicate that things will be changing.

IV.

My final and Overall Opinion about Eko Atlantic Project

I cannot disagree that this project seems revolutionary compared on what is going on down in Africa. However, this project already started few years ago and it is expected to be completed in 15 Years. Yet, only the main road and one skyscraper on the oil/energy piece of the master plan is built. This raises concern on the effectiveness as well as the completion process of the construction. This might be a prominent project but the big issue here is not only about the uniqueness of the project but this seems like a drop of water in the ocean. I personally doubt if it will be ever completed despite the big funding. I also doubt if this would be completed in time.

In addition, assuming the project is done, the connectivity between African countries either via ports or flights to other continents are not only complicated but expensive too. Also, building financial hub on the west side of Africa is a vision but to realize it will need a lot of time and other factors. It is possible, it is not impossible but it will need a lot of time to be accomplished.

Dubai is an example that had to create the supply from scratch, thus demand followed, but it took years to build a brand and place itself on the world map.

Nigeria is not an exception, the project is feasible but a question of good government as well as a strong appetite for risk and patience will testify the success or failure of the project. Because there are so many planned mega projects in Africa that were stopped or remained on paper without execution due to government disagreement or some legislative issues. One of them is ‘Mediterranean Gate’ which was supposed to take place on a lake in Tunis but failed to be even started due to disagreement between both government and the foreign developers for money issues.

This goes without saying, that all indications support the project but the overall economy will also play a big factor in the future of Nigeria and Africa overall.

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NCK-days 2012 : Crossing Borders in Coastal Research : Jubilee Conference Proceedings (2012) Deloitte Industries." Choice Reviews Online 50.02 (2012) District, View Of The Business. EKO ATLANTIC Eko Atlantic The Dream of a New Model City Struggling with Transparency, Good Governance and Negative Environmental Impacts." Eko Atlantic The Dream of a New Model City Struggling with Transparency, Good Governance and Negative Environmental Impacts.

Honourable Commissioner, Lagos State Ministry Of. RESILIENT CITIES 2011 "Interviews." Africa GRI 2015 Knight Fr. Sub-Sahara Capital African Real Estate Update July 2015 Our View Lagos of the Future: Megacity's Ambitious Plans - CNN.com." CNN. Cable News Network Real Estate - Building the Future of Africa." PwC Real Estate." Compleat Lawyer 12.2 (1995)