Investing in properties within serviced estates

——  January 15, 2018

“The only bad time to buy property is later” – Steve Bolton Mr. Benson lives abroad and wants to invest in Real Estate within a serviced estate in Nigeria. However, he is a little skeptical because he has heard that most serviced estates in Nigeria tend to run down over time due to poor maintenance practices and he does not want the value of his investment to depreciate as a consequence of this trend.

There is no gainsaying the fact that, all things being equal, Real Estate investment holds a lot of potential financial rewards. However, some investors are sceptical about buying Real Estate in serviced estates because of the apparent perception that there is a widespread lack of adequate property maintenance culture in Nigeria. There also seems to be an unwritten perception that many serviced estates in Nigeria run down within a relatively short period, and that this is mainly due to poor facility management/maintenance services.          

Quite a number of seasoned Facility Management professionals seem to believe that the maintenance culture in Nigeria is still at a rudimentary level and this poses quite a challenge with regards to preservation of real estate value both in the public and private sector. Unfortunately, the prevailing evidence appears to support this view even though the trend is more evident with public or government-owned properties whilst privately owned and managed properties appear to fare somewhat better. Generally, it would appear that very little premium is placed on the use and maintenance of communally-owned infrastructure and equipment by the various stakeholders but notwithstanding, there are quite a number of Real Estate developers that still maintain a high standard when it comes to provision of Facility Management/Maintenance services, thus preserving and increasing the value of real estate assets within the estates they have developed.

Having taken a cursory look at several serviced estates that have rapidly become dilapidated or are showing signs of heading in that direction, one common denominator that apparently can be discerned with such serviced estates appears to be the relatively “poor management” of such estates though it is noteworthy that there may be in addition to some other factors responsible for this unwelcome state of affairs.    

In the light of this observation, it thus appears pertinent to pose the question; What do serviced estates that have sustained their post-construction ambience and have been able to maintain delivery of quality facility management services for many years have in common?

The right strategy and team: Serviced estates that have maintained the provision of high level services to the residents over a long period of time have done so as a result of putting in place the right long-term strategy and having the right property and facility management team to drive this strategy. No matter how sophisticated the maintenance plan, without the right team, there will likely be failures in delivery of service. 

Selection of residents (buyer/tenant): As much as every developer of serviced estates desire to sell all units within their developments as quickly as possible, the more discerning developers understand the importance of proper screening of the buyer/residents that will eventually live within the estate. From experience, one key success factor in the management of serviced estates is co-operation/teamwork between the facility Managers and the residents. Getting the right mix might initially seem difficult but certainly, a considerable step in the right direction would have been made through an effective use of the screening process towards this end.

Transparency: When residents perceive that the facility managers are not being forthright, issues in the estate could degenerate to the level of non-payment of service charge, increased number of vacant apartments, litigations etc, all of which would certainly affect the Estate managers’ ability to maintain the estate adequately. Facility managers of well-managed serviced estates are well aware of this trend and thus they endeavour to maintain a visible sense of transparency and inclusiveness.

In the words of Benjamin Graham, “Successful investing is about managing risk, not avoiding it”. Investing in Real Estate within a serviced estate is a generally very good option, therefore what is essential is to eliminate or reduce the potential risks as much as possible.

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