Our client, a USA-based property development company, partnered with the Federal Housing Authority (FHA) to develop 257 medium income housing units on 20 hectares of land near Awka, capital of Anambra State, Nigeria for sale.
Under the agreement:
- FHA would provide the land while the company builds the homes and provides associated infrastructure.
- An escrow account would be opened into which sales proceeds would be paid
- Our client was required to invest at least 25% of project cost before it can draw from the escrow account towards project completion
- FHA would retain 40% of net proceeds.
They approached us to write a business plan and develop a sensitized financial model for the project. We were also to help with fund raising.
We began by visiting the project site to get a sense of the setting. We considered the distance to the site from Awka, Enugu, Onitsha and other centers of socio-economic activity in the region. We conducted a demand and price survey of different types of housing units in the immediate vicinity and in the region. We paid particular attention to homes similar to those proposed for delivery by the project, taking cognizance of location, size, internal features and infrastructure provided.
After the initial financial modeling and sensitization, we came to the conclusion that, to keep the project profitable while making it attractive we could not compete based on price. We therefore encouraged our client to add some relatively low-cost enhancements that would differentiate its offering from those commonly found in that area and, thus justify a premium price.
After exploring some options, we decided to partner with an internet service provider, cable television service agent and a solar energy solution provider to provide a value-added offering. That meant every home would be delivered fully fitted with networked internet access, networked cable television points and solar energy systems.
Because our client also had significant experience with facilities management, we encouraged them to set up a facilities management company to manage the estate. they also agreed to slightly modify their plan and make provision for a small shopping mall to serve residents of the estate and the surroundings. These new additions significantly boosted the ROI.
We then completed the Strategic Business Plan Package, comprising the full business plan, financial model and PowerPoint presentation of the executive summary. It showed that we needed to raise N1.3 billion to get to the 25% mark, after which we could draw from the escrow account to complete the project. We attached these documents to a well-written financing proposal and sent it to our contacts in some Nigerian banks.
Because our financing proposal was specifically packaged to meet the financing requirements of Nigerian banks, it was not long before we found some takers. In fact, we became a bride with several suitors, so we could negotiate terms from a position of strength.
We are glad to confirm that the financing deal has been signed. The project has commenced – they are developing the road network now. The marketing has commenced and it looks like the additional features are making the homes attractive enough to command a premium price.
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