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Apartment Hotel in Lagos, Nigeria


This project is a good opportunity for institutional investors to participate in the fast growing hospitality market in Nigeria.

The Proposed Transaction

  • Re-development of LASACO House, a 17 floor commercial office block situated in the center of the financial district of Lagos, into a 4-star 84 room business hotel.
  • A Special Project Vehicle shall be incorporated which will be jointly owned by the initiators and new investors in the project.
  • The initiating company Transatlantic Brunel Invesco Limited (TBI) already has an “agreement in principle” with LASACO Assurance Plc i.e. the owners of LASACO House on getting a renewable 25 years lease for the building.
  • Deal size: $17.8m, thereof $3.1m equity financing and $14.6m debt financing.
  • Exit scenarios: Trade Sale, or Buy-Out of the Investor’s shares by the initiator.

Go to the short video.

Reasons to Invest into the Nigerian Hospitality Market

There are many reasons to invest into the hospitality industry in Nigeria, Africa's most populous nation, with Lagos being the largest city in Africa.

  • Nigeria is one of the most dynamic countries in the world:
    • According to Goldman Sachs, Nigeria will be one of the world’s largest economies by 2030.
    • The World Bank has identified Nigeria as one of the 11 countries that will be global economic generators of growth over the next 2 decades.
    • Citibank estimates that Nigeria will be the fastest growing economy in the world until 2050, with average growth rates of more than 8% over the next 4 decades.
  • Nigeria is better than its reputation. High ranking officials in government and regulatory bodies are successfully implementing anti-corruption policies.
  • After several general elections that have been free and fair, the democratic system is well established in Nigeria.
  • On the other hand, political uncertainty is still a risk factor. However, the militant islamistic sect of Boko Haram which has entered the headlines in the news quite often is only active in the North East region of the country, and clashes between Muslims and Christians are restricted to specific areas in the geographic center of Nigeria. In the Southern part of Nigeria the negative effects are negligible.

The CBD of Lagos Island
  • Travel and tourism is still an underdeveloped but rapidly growing sector of the Nigerian economy. With the Nigerian economy growing at about 7% annually for the past decade, the potential for growth in the hospitality business is huge and still remains largely untapped. It will continue to be attractive to new investors and hotel operating companies for many years to come.
  • According to W Hospitality Group Data, there are over 40,000 hotel rooms being planned or under construction, that is in the pipeline, for between year 2013 and year 2017, for the African continent. The top city for the planned construction is Lagos which has 4080 rooms in development. Recent developments in the Lagos hospitality industry for 2013 include the recent opening of the 358-room Intercontinental Hotel in Victoria Island, Lagos, as well as the recent announcement by Transnational Corporation of Nigeria to develop a Transcorp Hilton, at Ikoyi, Lagos.
  • The complete absence of any good quality hotel in the Lagos CBD represents an excellent value proposition for Lasaco Hotel.
  • The prime location of LASACO House is a competitive advantage to other 4* and 5* hotels in Lagos. The intended room rates will be very competitive compared to other hotels.

The Location

Lagos, the commercial capital of Nigeria is also the hub of West African commerce and the financial and manufacturing center of Nigeria.

The population of Lagos will exceed 25 million people by 2015, and it is by far the largest city in Africa. Lagos accounts for about 12% of the GDP of the Nigerian economy. The economy of Lagos will be the 13th biggest economy in Africa by 2014, equivalent to the size of the entire economy of Ghana and it is estimated that over 70% of the companies driving the Nigerian economy’s success are based in Lagos where the bulk of their customers also reside.

The city can be conveniently divided into the residential, commercial, and mixed-use districts. The premier commercial district is the Lagos Central Business District (Lagos CBD) and it is virtually synonymous with the geographic area called Lagos Island.

LASACO House is situated in the heart of the financial cluster of the Lagos CBD, and a brisk walk reveals that the headquarters of some of the most significant players in the financial sector of Nigeria’s economy are nearby, e.g. First City Monument Bank, Union Bank, First Bank, Wema Bank, Mainstreet Bank, the United Bank for Africa (UBA), the Bank of Industry, the Nigerian Stock Exchange Building and the newly completed Lagos Office of the Central Bank of Nigeria. Other significant neighbors are the Shell Petroleum Development Company, United African Company, and the Nigerian Port Authority.

The Developer

  • The project development will be done by Transatlantic Brunel Invesco Limited.
  • The CEO of this company is Dolapo Ajayi, a high-end real estate developer from Lagos and very much an insider in this business landscape.

In this short video, Dolapo Ajayi presents the Lasaco Hotel project and comments on other opportunities in the property development sector in Lagos. The video clip is extracted from the documentary film DramaConsult by Dorothee Wenner that will be shown in Germany's broadcast channel Arte on February 21st, 2014, and subsequently on ZDF

DramaConsult is currently screening in German cinemas and available online.

DramaConsult Teaser English from realeyztv on Vimeo.

 

Financial Estimates

  • The execution of the project will cost Naira 3.355 billion (US$20.710 million). Equity capital will amount to N1.0 billion (US$6.173 million) while debt capital will be N2.355 billion (US$14.537 million).
  • Investments from the initiators amount to N0.5 billion (US$3.1 million).
  • This proposal assumes that the SPV will borrow in US dollars from the international money markets with a moratorium period of 24 months. The loan shall be paid off in four years beginning from the first year of operation.
  • The construction phase is estimated to last for two years.
  • The operational phase starts in the third year after financing (= Year I in the graph left).
  • The hotel is estimated to start generating a positive cash flow and profit from the first year of operations.

Detailed information are availble on request.