Chairman’s Statement

Review of Global Operating Environment
The global economy faced several challenges in 2022 with growth significantly losing momentum. Increased geopolitical tensions arising mainly from Russia’s invasion of Ukraine led to natural gas supply cuts, surging energy prices, hampered industrial production and food shortages, ultimately driving inflation to record highs and creating a cost-of-living crisis. The US dollar appreciated against other major currencies across the globe, hitting a two-decade high in September 2022. Many economies had to deal with the inflationary pressure resulting from the relative weakness of their currencies, especially emerging markets with higher import dependency and greater share of dollar-invoiced imports compared with their advanced counterparts.
Central Banks of most advanced economies employed tighter monetary policy measures particularly aimed at curbing the effects of inflation. Overall, slowdown in the growth of advanced economies owing to declining confidence, dampened risk appetite, high inflation and rapid monetary policy tightening with higher interest rates led to widespread capital outflows and slowing bond issuances across Emerging Market and Developing Economies. As a result, many developing countries have struggled with worsening domestic conditions.
Global growth prospects have continued to weaken amid the effects of negative shocks witnessed in 2022. The World Bank expects global growth to slow from 2.9% in 2022 to 1.7% in 2023 occasioned by sub-potential growth in the United States, the Euro area and China as well as the spill over effects on emerging markets and developing economies.

Global Real Estate
Economic headwinds across the globe weighed notably on real estate market activity in 2022. Occupiers took a more cautious approach to decision making with reduced requirements in some cases. Investor sentiment dampened as a result of sustained volatility in the economy and financial markets. Transaction volumes also weakened as monetary policy tightening by major central banks drove borrowing costs significantly upwards. Global investment volume is estimated to have declined by 20% year-on-year from 2021 with rising interest rates and worsening economic conditions negatively impacting investment activity particularly in the second half of 2022.
Investor demand continues to tilt towards the residential sector, albeit cautiously due to higher financing costs. The industrial and logistics sector demonstrated resilience with healthy levels of demand and strong fundamentals. Rents continue to rise across the globe, however, with rising cost of energy, industrial occupier demand should shift to sustainable new facilities as well as retrofitting of existing ones. Retailers have taken a cautious approach to acquiring new space with more emphasis on optimizing profitability across their existing space. The hotels and hospitality sector showed growth supported by increased travel demand and recovery of urban activities to pre-pandemic levels. Global office leasing volumes witnessed greater momentum as more employees return to the office.
The Nigerian Economy
The year 2022 was marked by heightened political activities in the build up to the 2023 general elections. The Nigerian economy however, maintained its economic recovery albeit short of expectations due to several factors including the impact of the Russia-Ukraine war, inflationary trends and weak industrial productivity across the globe, domestic policy
uncertainty, sustained devaluation of the Naira as well as fiscal and monetary tightening. Nigeria’s annual Gross Domestic (GDP) growth rate in 2022 fell to 3.1% from 3.4% reported in 2021 with a contraction in the oil sector, weak industry sector performance and reduced agricultural production largely driven by severe incidences of flood. As with most countries across the globe, the socioeconomic situation in the country deteriorated.
Nigeria fell short of its revenue projections due to gross underperformance of the oil sector. Despite higher global oil prices, factors including oil theft, fuel subsidy payments and insufficient investment negatively impacted the sector. Public debt position also continued to be a major challenge for economic growth as 89.4% of government revenue between January and November 2022 was expended on debt service. Analysts estimate Nigeria’s debt service to revenue to have reached 91.8% by the end of 2022. Capital expenditure was significantly weighed by this huge public debt service burden, which exceeded projections by 75.7%.
The Central Bank of Nigeria (CBN) employed monetary policy tightening measures in order to maintain an elevated interest rate environment and curb inflation. The Monetary Policy Committee (MPC) increased the Monetary Policy Rate (MPR) four times from 11.5% to 16.5% and the Cash Reserve Ratio by 0.25% to 32.5%. Similarly, in December 2022, the CBN initiated the redesign of the N200, N500 and N1,000 notes to manage the supply of money. This amongst other domestic and external factors like the country’s heavy dependence on imports triggered further depreciation of the Naira against the US Dollar, especially in the parallel market. The Naira closed the year at N 461.50/$1.00 at the official window down from N435/$1.00 at the beginning of 2022. In the parallel market, the exchange rate nearly hit the N1,000/$1.00 mark in the fourth quarter of 2022 compared with the $561 to $570 range where the currency traded in January 2022, before settling at N735 to N745 to a dollar at the end of the year.
Based on the IMF’s projections, the Nigerian economy is expected to grow by 3.2% in 2023. However, the policy direction of the new regime following the conclusion of the 2023 general elections would be critical to shaping the economic trajectory of the country in the future.
The Nigerian Real Estate Industry
A report by the National Bureau of Statistics (NBS) shows that the construction and real estate sectors contributed N29 trillion to the Gross Domestic Product (GDP) of Nigeria in 2022. While construction services earned N18.7 trillion, real estate contributed N10.2 trillion to the GDP. The steady return to normal activity following the pandemic has driven demand for both residential and commercial facilities particularly in major cities like Lagos and Abuja.
The year 2022 witnessed increased demand for prime residential apartments. Despite rising construction costs, supply of high-end residential apartments continues to grow in response to surging demand for better quality homes while increase in the cost of travel and accommodation continues to drive demand for short-let apartments in Nigerian cities. The National Pension Commission (PenCom) approved the issuance and implementation of the guidelines on Retirement Savings Accounts (RSA) Holders accessing their account balance towards payment of equity contribution for residential mortgage. This approval should result in increased demand for residential accommodation as Pension Fund Administrators (PFAs) are partnering mortgage banks to ensure that contributors benefit from the scheme.
Weak demand characterized the office market as work-from-home policies and hybrid working patterns continue to subsist in a lot of businesses. Occupiers have continued to reduce their office footprints in order to contain costs. In the industrial sector, there is rising demand for high quality warehouses. However, inadequate utilities infrastructure and unreliable transportation continue to weigh on the growth of the market.
Review of Operations
Despite the challenging business environment, the Company continued to execute its ongoing development projects and recorded significant growth in property sales and other revenue lines as compared with the previous year. Our hospitality business – The Festival Hotel was fully re-operationalized during the year following completion of renovations of the Hotel facilities, while our Facility Management business – UPDC Facility Management Limited, maintained a steadied improved performance in 2022 growing revenues by N239 million and increasing assets under management to 34 estates.
In December 2022, UPDC acquired c.50 Hectares of land located along Monastery Road in Sangotedo, Lekki. The focus of this acquisition is the development of a site and service scheme targeted at the middle-income class.
UPDC also marked its 25th anniversary over the course of the year with a summit tagged Housing Development Imperatives for Nigeria: Prospects and Challenges. The summit provided a platform for industry experts to discuss various pathways to solving the challenges and maximizing the opportunities in Nigeria’s real estate market.
Financial Performance
UPDC Group posted total revenue of N5.9 billion in 2022 compared to N825 million recorded in 2021 (company: N3.9 billion revenue in 2022 compared to N541 million in 2021). Property sales accounted for N5.1 billion of the total revenue in 2022 compared to N404 million in 2021.
The Company’s interest-bearing debt reduced to N4.7 billion as at December 2022 compared to N5.5 billion as at December 2021 due to repayment of the bridge portion of the Shareholders’ loans from CIP & UACN Plc. Borrowing costs also reduced from N764 million in 2021 to N464 million in 2022.
After 6 consecutive years of losses, the Company returned to profitability with a profit before taxation (PBT) Group of N331 million compared with a loss before taxation of N1.6 billion recorded in 2021 (company: N323 million loss before taxation compared with a loss before taxation of N8.5 billion in 2021). The Total Comprehensive Profit for the year was N7 million, compared with a loss of N2.02 billion recorded in 2021 (company: N103 million loss, compared with N8.7 billion recorded in 2021).
Outlook for 2023
Economic growth prospects for Nigeria appear positive based on analysts’ projections. However, developers, investors and occupiers will likely adopt a wait-and-see approach in the first half of the year in order to gauge the economic climate after the 2023 elections.
We expect to see expansion in the real estate market as local developers capitalise on mid-income markets. The growth in supply of new towns and senior living centres supported by strong infrastructure is expected to continue, accompanied by strong demand for affordable housing, particularly in major cities like Lagos and Abuja. UPDC has identified some key strategic imperatives that will drive its performance in 2023.In addition to closing
out on Pinnock Prime Estate, UPDC intends to launch at least 2 new developments targeted at the middle-income class in 2023. The Company will continue to seek development partnerships with landowners in order to manage the capital outlay required to start new projects. The management team will continue to drive sales on existing inventory, to generate more revenue and grow the Company. For new developments, the Company will focus on site and service schemes due to the speed of revenue generation. Plans are also in place to grow the Development Management, Asset and Property Management business lines by onboarding new clients. We will also leverage more on Information technology to achieve better efficiency, especially in Finance, Sales, Operations and Project Management.
Leadership & Board Changes
I would like to inform you that since the last Annual General Meeting, there have been changes to the Board of Directors and leadership of the Company. Ms. Bidemi Fadayomi was appointed as Executive Director of UPDC Plc. while Ms Tokunbo Lawal was appointed as Managing Director of UPDC Facility Management Ltd. (UPDCFM), following the resignation of Mrs. Alaba Fagun. Please join me in thanking the former Managing Director of UPDCFM for her invaluable contributions and services to the Company and welcoming the newly appointed directors. I wish them all the best in their new roles.
I wish to thank all our esteemed Shareholders for your continued interest in our Company. Notwithstanding the face of harsh economic conditions and operating environment, we have demonstrated resilience with our performance and charted a new course of growth and profitability due to your unwavering support. I also wish to thank our customers, consultants, contractors, all our staff and other stakeholders for their continuing support. We believe that the Company will consolidate its 2022 performance as we all continue to work towards growth and profitability. The Board and Management of the Company remain committed to realizing these goals.
Thank you all for your attention.
Wole Oshin

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