Last week we caught up with Carlo Matta, CEO of Laurus Development Partners, an Actis joint-venture that was established to focus on property development in West Africa. Actis invested in Laurus in November 2009 to address the weak in-country development expertise in West Africa. So far, Laurus has been involved with 4 projects including the recently completed One Airport Square in Ghana as well as Heritage Place and Jabi Lake Mall in Nigeria, which are still under construction. The firm has its headquarters in Accra and offices in Lagos, operating in both the Nigerian and Ghanaian markets.
In this exclusive interview with ei, Carlo talks about his days at Hines, the story behind Laurus, what drove his decision to focus on Africa and the real estate sectors he is most excited about in Nigeria and Ghana.
Bio and Early Career
Can you share a bit of your background with us?
I was born and raised in Italy and educated in Italy and the US. I’ve worked in the four corners of this world, initially as an Architect in China and South East Asia then in development in Europe. In the past six years I’ve worked here in West Africa, developing commercial real estate. I’m married to a wonderful Nigerian woman, father of a little Ita-Naija tsunami called Gabriele Diepriye.
How was your experience at Hines?
In two words: enriching and fun. Hines is an amazing group of individuals who share the passion of creating great real estate the World over, and they are very good at it. They are also very good at making money out of it, which helps. Most of what I know today I learned there from the best people in the Industry. I own a lot to great mentors like Gerry Hines, Jay Wiper, Michael Topham, Riccardo Catella just to name a few. Leaving that Team has been one of the most difficult decisions of my career.
Laurus and beyond
Tell us a bit about the Laurus story. How did you decide the timing was right for you and this company?
Back in 2008 I was with Hines Capital Market group and things looked pretty boring from my office in rainy London as Investment activities in Europe where grinding to a complete halt. In the meanwhile, just six hours flight away, West Africa, where Gena (my wife) and I had been travelling often, was going through a sea of change: urbanization, emergence of middle class, political stability, growth. One did not need to be Elon Musk to see where that was going and its impact on the real estate industry. The main story was increasing demand and very limited supply. It reminded me of Vietnam in 1997 when it opened to the World and I thought the timing was right: I wanted to be part of it. I pitched the idea to Gerry [Hines] and Michael [Topham] and for one year we explored it. When Hines passed on it in 2009, Actis stepped in and they backed me up to set up Laurus Development Partners. The idea was to put together a team of outstanding individuals to develop Class A, sustainable projects on Actis’ behalf in Ghana and Nigeria. We searched and found talents in the Diaspora, within the “repats” and the “expats” communities, among locals and foreigners. At one point we had people from Ghana, Nigeria, Philippines, Spain, Scotland, UK, US and Italy of course. In fall 2010 we started our first project in Accra and in 2011 we opened an office in Lagos. It has been an exciting ride and six years later we are managing close to $450m of development on Actis behalf and we completed our first project, One Airport Square in Accra while our second project in Abuja will be completed in November.
What considerations drove your decision to focus on Africa?
Okwui Enwezor said “The future belongs to Africa, because it seems to have happened everywhere else already”. Africa is the last frontier where the future must happen, and in this part of the World future means first and foremost big changes. I believe that property thrives on the back of growth and demographic changes. Urbanization in Africa is a tsunami that will wipe away our conceptions of how cities should be built and managed and it will offer amazing opportunities.
Laurus has been a trail-blazer in eco-friendly office buildings, what steps do you think the government needs to make to adopt green building regulations in West Africa?
In the US the built environment is responsible for nearly half of all CO2 emissions. In this part of the World the figure is probably similar. Any government which is serious about tackling climate change will have to recognize that and support policies aimed at incentivizing sustainable development. I am thinking about tax incentive and exemptions for projects which achieve green certification. That will get people’s attention. Further down the line more prescriptive rules can be introduced, for example making the green certification a pre-requisite to obtain building permits.
Financing is one of the most crucial aspects in real estates, and interest rates are sky-high in this part of the world. Very briefly, can you share with us innovative ways you and the clients you work for have gotten around this?
All the commercial projects we worked on used plain vanilla debt, so nothing particularly fancy or innovative. On residential one could offer a lease guarantee for say two years at 5%, for example to increase sale velocity and therefore reduce the amount of financing needed: paying 5% to buyers is cheaper than paying 9% to a bank [assumes $ transactions].
West African Real Estate Markets
What do you think is the biggest misconception about the Ghanaian and Nigerian real estate market?
The market can only go up. Many players seem to think that they are both huge markets with endless demand. People generally overestimate the depth of these markets pretty much in any asset class. Any market in the World goes through cycles and Nigeria and Ghana are no exceptions. Real Estate cycles are a necessary evil to rebalance the market and there is a lot of money to be made with using them wisely.
What has you the most excited about the West African real estate market today?
The cycle is turning and that will create all sorts of new opportunities and challenges. I think we will see a lot of developments getting into trouble and many of them will stay on paper. But as my mentor Michal Topham at Hines used to say “we made the most money during downturns”.
I am still excited about retail although I think that the era of large shopping malls is coming to an end as there is only that many malls West Africa capital cities can absorb. We need to think about new forms of retail more in sync with the local way of shopping away from the “high-end” mantra.
What real estate sector would you deem the most promising in Nigeria and Ghana respectively going forward?
In Nigeria retail and logistics, in Ghana retail and hotel. In both countries low-income housing.
How do you feel the CBN’s restriction to FOREX for the importation of certain goods is affecting the market in Nigeria?
I do not want to comment on the Central Bank decision, I am sure the Governor had his good reasons for implementing those policies. The problem is the message of uncertainty to foreign (and to a lesser extent to domestic) investors; and uncertainty is the worst enemy to investment, with uncertainty comes risk and with risk comes higher cost of capital.
What’s one piece of advice you’d give to a young person just starting his/her real estate career today?
Focus on the financials and remember that securing the land is only the beginning of a long journey.
Are there any real estate or business related books you would recommend?
High Rise: How 1000 Men and Women Worked Around the Clock for Five Years and Lost $200 Millions Building a Skyscraper… as I said the market does not only go up.