What was the main aim of Devtraco when you started and how has that changed over the years?
The aim of the company was to become one of the go-to developers for real estate as well as for concrete product manufacturing—this was and still is our main strategy. We have since vertically integrated to include other production units while maintaining real estate as our main focus as a developer, and we have moved up from eighth position in 2008 to become the number one real estate developer in terms of dollar value as well the number of units produced per annum. We have added different segments of the market so that we are focusing on the middle-income market with one business unit, the low-end segment with another unit, and the higher-end segment with another unit. Middle-income households are expected to increase spending from $8 billion in 2015 to $11 billion in 2019, so it is a high-growth segment. We have developed a total of approximately 2,500 units.
Can you explain the three projects that Devtraco recently launched aimed at the higher-end market?
We have already launched three projects, namely the Avant Garde, Acacia, and Niiyo projects. We are handing over Avant Garde next week, and the two other projects in July 2016. They begin at one bedroom with 60sqm and go up to 350sqm, five-bedroom town homes. These properties can be sold for up to $850,000, but our low-end spaces start at $36,000, so we cover a wide range of price brackets. An interesting part of the Ghanaian market is that cash buyers make up 70% of our business, while units purchased with a mortgage make up just 30% of our sales. This has been consistently the case since I took up my position in 2009. Ghanaians are generally debt-averse, and the lowest mortgage rates available are around 13% APR. Therefore, most Ghanaians would rather gather money from relatives and friends and try to repay this informal borrowing as soon as possible.
How do you overcome the problems of accessing long-term funds?
Access to long-term funds remains a problem. When I took over the responsibility of the company, I identified this as one of the biggest hindrances for a real estate developer. We started talking to a few financiers regarding equity and debt, and we eventually signed a debt agreement with FMO to fund a $120 million mixed-use housing project. We are always looking for partners in this regard. What we try to do is underwrite each project on its own within reason, meaning that we specifically underwrite a project so that it has its own proprietary set of both debt and equity stakeholders. For our new projects, we are always looking for new financiers, however we have not encountered any issues with financing our projects. We have been fortunate and the market has received us well, as has the commercial banking sector.
Have your expansion plans changed in response to the increase in competition and slowdown in demand?
We no longer have plans for many more projects in Accra. Our expansion plans are now focused on Liberia and the Ivory Coast. We have not had any projects outside of Ghana before, so these will be the first time that we work abroad. Nigeria is also a market that we are interested in, but it is difficult to navigate independently, so our priority there is finding the right partner. Without the right local partner, we cannot seriously engage in an operation there. Nigeria has 180 million people, but it is a difficult and complicated market in which to operate if we lack a proper understanding. The best way to understand it is to have the right partner. In Ivory Coast, we do not feel like we need a local partner, as the country's dynamics are similar to Ghana—but we do need a translator.