Cost implications of uncertainties to economy, by Ukpong

Mr. Samuel Effiong Ukpong is the Managing Director of the popular1004 Estates Limited and a graduate of Estate Management from the University of Nigeria Nsukka. The estate manager has worked in different organization like United Bank for Africa, Federal Ministry of Works and Housing, Diya Fatimilehin & Co at management positions. He also worked with Zenith Properties Limited and The R.E.D Company Limited as Managing Director, before joining 1004 Estates in 2008 as Executive Director. He is currently a Director at the Bank of Industry Trust Company. In this interview with CHIJIOKE NELSON, he explained how the economy bears the brunt of security issues and the company contributions to growth and development. Excerpts.

How has the present security challenges in the country affected your business and the industry as a whole?

The present security challenges are affecting everyone in the country. We are at the best and worst of times. The economy was rebased as the largest in Africa, with much foreign investment and private equity funds very interested in the country’s huge market and until recently, oil had sustained quite a high price. The menace of terrorism, which has been going on for some time now is bringing to the fore that we cannot take our security for granted like we usually do with lax measures. We all need to give the moral and political support to the government to deal conclusively with the threat.  

  For businesses, we all have to invest in business continuity planning and also upgrade to better security equipment and personnel. The security protocols, which were flouted easily in the past, are now rigorously maintained. The security awareness of our residents and strict processing of our clients and visitors is highly imperative. We need to acquire, as necessary, the resources to detect human and vehicular activity and remote surveillance has to be adapted with regular collaboration with the police force.

  The Ebola crisis, which with concerted effort by the Lagos State and the Federal Government was a good case in point particularly for us at 1004 Estate, because we have a high travelling population of residents and also a large number of drivers and cooks and stewards who we also needed to process for temperature scans and providing sanitizers across the length and breath of the estate. These became quite an expense but mandatory because even a single case will impact the estate. So, there was no alternative. The facility management budgets for large estates and public buildings, malls, hotels have to take cognizance of the environment in which we are now operating in. Many of these places have already beefed up security. We also have to depend on the understanding and awareness or cooperation of the residents, clients and visitors to achieve greater public safety.

What would you say about your organisation’s contributions to the growth and development of the economy through your projects?

We have definitely added value to the Nigerian economy by ensuring that in all our new operations we create wealth for our clients and stakeholders. Invariably, we have ensured that we create avenues for employment. For instance, because we run between two to three shifts of personnel to keep our estate running 365 days of the year, including public holidays and weekends, we are like a large complex of hotels that never close and we have created value through employment of nearly 400 Nigerians of various technical and engineering cadres. Also, with our construction joint venture, we expect the employment number and direct sub-contractors to double.

  We are hopeful that 1004 Estates and its subsidiaries can continue to expand its contribution to the Nigerian economy. We also comply with all statutory regulations regarding pensions, group life insurance and health benefits for our workers and provide training as well. Some of our new ventures will also provide multiple outsourced supplier requirements in the construction field, which requires architects, engineers, consultants, masons, electricians, power and water engineers, safety opportunities. We need to erase the impression that Nigerians are not capable of managing and running our affairs like in other climes.

What in your view is the state of facility management and real estate industry in the country?

I believe that we need to approach the issue of facility maintenance or management from the proper perspective of realising that all human activities- economic, educational, residential, recreational and spiritual usually take place in a building and the quality and efficiency of our environment is directly related to performance, productivity and our social behaviour. It is also obvious that perfectly managed structures, systems, facilities and equipments coupled with the right societal attitude of compliance is what largely separates the first world economies from ours.

  In the industry, you will find roughly three levels of service delivery. First, you will see exceptionally managed and high end service providers who manage the diplomatic, petroleum, telecommunications and banking industry chiefs.

These are frequently remunerated in thousands of dollars yearly. The high emphasis at this level is recreating 24-hour first world conditions in Nigeria where this is generally absent or inconsistent. 

  The second layer will be the middle tier of the economy where a slightly lower level of 24-hour service is being provided with a lower cost structure. This has become more common with increase in the communal buildings, as housing estates become the vogue and shared service structures being logically adopted. Ironically, nearly the same service level of the 1st strata is expected despite the lower costs. 

  The third layer will be multiple or single residential buildings or office blocks with partial service- only during specific hours of the day. These are not usually 24-hour operations and costs vary with the scope of services provided.

  The informal rung where probably most buildings will fall into are the individual home and office owners who provide and manage own infrastructure and incidentally incurs higher costs than on the communal estates. The industry has different standards at these various levels, with a uniform standard yet to be adopted due to the disparity in services and costs. The lack of efficient public service infrastructure, which would have created some level playing field for operators to focus on other value added services, is at the centre of the disparity of service providers.

  But our company’s mission is to create places where our clients can live, work, play and innovate and that drives our passion to provide estates and buildings that relieve our clients of the usual Nigerian headaches of water, power, security and recreation while they focus on what is important to them, which is increasing their success in their endeavours.

What has been your experience managing a leading brand in real estate and facility management?

My experience since coming on board has been very interesting because our first priority was proving that the company and the estate could be well managed on the exit of UPDC and Union Homes and the empirical evidence available shows that the property values have significantly moved from average of N20 million-N25 million to N50 million-N65 million, an increase of 150 per cent returns on investment and the rents have also improved from N1.5 million-N2 million to N3 million-N5 million, which is over 100 per cent growth also. There are relatively only few flat vacancies and the properties for sale moves fast as the estate continues to be the destination of choice for company accommodation. The expatriate community has also grown from 10 per cent to 60 per cent. There has also been a churn in the first tenants, who moved in to more corporate organizations and that has also made us to invest in improving the aesthetics to keep the estate attractive.

What were your challenges on assumption of duties?

On taking over the estate, we were confronted with the fact that a lot of the requirements and processes for proper communal living on the scale of the estate were not in place in terms of tenants’ information, parking regulations, work permits and move in and move out permits, visitor protocols, security checks, liability for payments and collection of debts and accounting protocols, among other things. There were many misconceptions over the duties and expectations of the landlords, their tenants and 1004 Estates Limited, particularly in relation to the sublease document. A lot of our first occupants were not very familiar with service charge scope administration and there were lots of misunderstandings, which are hopefully becoming better understood as we go along.

What in your assessment is responsible for the poor or lack of maintenance culture in the country and how do you think this problem can be tackled?

The lack of or poor maintenance culture has several causes, but mainly attitude, because we frequently don’t recognize the need to maintain or stretch the lifetime of our properties in Nigeria. You will find 1000 year old castles in Europe still being maintained and overtime, modern amenities are upgraded and introduced without tampering much with the original building design. This needs a high degree of altruism, which is looking for the most good of the largest number of people at all times and dedicated passion to achieve this. Then we need to also acknowledge the knowledge and skill/experience gap, because facility management as a discipline is in its infancy here. Most importantly, the costs implications to maintain and operate large facilities like airports, hotels, hospitals and office buildings to the required health, safety and efficient standards after their completion are not correctly factored into the total cost from the conception of the project by the owners. Of course, the maintenance budget becomes wrongly viewed as a burden.

  This accounts for the failure and collapse of most of our public and private infrastructure like roads, trains and buildings. The cost of building new structures is also very prohibitive in Nigeria hence all efforts should always be put into maintenance to continue to deliver long term value benefits from the original investment cost. You will also find a poor payment culture in the country as militating against improved performance in the sector. You will find that people don’t pay at the right time or the economically viable amount, which cascades into poor or failed service delivery, if the facility manager does not have the shrewd acumen in fund management. Lastly, people tend to appreciate good facility management until there are unplanned breakdowns and then they come to understand the importance of how the service is being rendered flawlessly. To help tackle these later problems, we need a different mentality, better laws on managing payment default, which expedites the process of redress before much financial damage. We also need to develop a stable pool of skilled manpower with dedication to facility maintenance.

What is the patronage level and market impact with respect to your core services and brand products?

We have essentially a simple market strategy, which is firstly providing good and reliable service delivery by maximizing our economies of scale and pushing ourselves to operate innovatively in solving problems. At 1004 Estates, our rates are the most affordable in Victoria Island and that is why you find our estate in high demand. Most corporate organizations now have several units in the estate to house their staff due to our very competitive rates and our proximity to the business hub of Victoria Island. We also ensure that we attract financial institutions to provide the basic banking on the estates all (GTB, Zenith, UBA), MedPlus pharmacy and retail supermarket, children’s crèche and a new Chinese restaurant opening soon to service the estate. 

  We are finalizing arrangements for a gym and we have a programme called Play@1004, which has staged concerts and events well attended by the residents. We are working with some brands to have a wine tasting and international food event because of our diverse multi-cultural population. The Indian New Year, American thanksgiving and Chinese New Year and all our Christian and Muslim holidays are well observed on the estate.

  We have also partnered with Mansard insurance to provide special car insurance rates, home and fire insurance products. We have a travel club membership programme affiliation for vacations. We have a good relationship with the Police Command, with a police post and security patrols to compliment the estate security. This, I believe, has kept us in prime place in the market. Our investors are also getting very good returns on their investment as there is easy entry and exit for divesting of units on the estate.  1004 Estates, by its location and clientele base, services the high and upper middle income  bracket and while there is still a lot to do to meet all our clients’ service delivery expectations, we will continue to train and improve our staff quality and the tools they work with to cover our areas of deficiency.

Are you expanding outside Lagos and beyond Nigeria in the near future?

We recently received the African Development Award in the Best Facility Manager category in Ghana and honestly, one can see that the Ghanaian economy is beginning to gain traction due to the oil income that they are soon going to begin to experience. A lot of study will be required in designing a product that can provide either a niche product or if a large-scale solution of the size of 1004 Estate to that market is workable. We have, through an allied investments company in a consortium to redevelop the transit village in Victoria Island and we are expecting that the court issues will soon be resolved for the area to be redeveloped into a mixed use estate. This is also another of our pipeline projects.

What is your view about professionalism with regards to global best practice and qualitative service delivery?

Professionalism in facility management and real estate is critical and it is important to maintain a level of standard or quality in any enterprise. It ensures a level playing field for all stakeholders. The problem in Nigeria is that we always expect the same laws we agreed should be professionally dispensed with to be waived or changed when it involves our personal interest. Maintaining the tenets of the regulations for all clients will sometimes bring you into conflict with those you have to say no to or who want more than is legally possible. Therefore, altruism is required to balance the interests of the majority with demands of the minority in a fair manner.

What do you think are the critical success factors for the industry?

I believe the critical success factors will have to be, having a strong financial base, a strong team that is passionate about service delivery and properly reading the market cycles and being frugal because it’s a long term business by nature and maintaining adequate focus is very important.