Quarter 5 financial statement for 2024

UPDC REAL ESTATE INVESTMENT TRUST

ANNUAL REPORT AND FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2024

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UPDC REAL ESTATE INVESTMENT TRUST

ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2024 Parties to the Trust

Trustees

United Capital Trustees Limited 3rd, 4th & 5th Floors, Afriland Towers 97/105 Broad Street

Lagos

Telephone: (01) 2807032

Custodian

UBA Plc (Global Investor Services Division) UBA House

57 Marina Lagos

Telephone: (01) 2808349

Trustees

FBNQuest Trustees Limited 16Keffi Road

Off Awolowo Road, S.W. Ikoyi Lagos

Telephone: (01) 4622673

Fund Manager

Stanbic IBTC Asset Management Limited Stanbic IBTC Towers

Walter Carrington Crescent Victoria Island

Lagos

Tel: 234-1-2805595

E-Mail: mutualfunds@stanbicibtc.com

Website: www.stanbicibtcassetmanagement.com

Property Manager

UACN Property Development Company Plc (UPDC) REIT Business Manager

3rd Floor

1/5 Odunlami Street Lagos Island, Lagos. Telephone: (01) 2702201

Registrars

First Registrars Nigeria Limited Plot 2 Abebe Village Road, Iganmu

Lagos

Telephone: (01) 773086

Banker

United Bank for Africa Plc Head Office Branch UBA House

57 Marina Lagos

Telephone: (01) 2808349

Auditor

Forvis Mazars

18, Oba Akran Avenue Ikeja

Lagos

Report of the Trustee for the financial year ended 31stDecember 2024

The Trustees present their Report on the affairs of the UPDC Real Estate Investment Trust, together with the Financial Statements for the year ended 31st December, 2024.

Principal activity:

The principal activity of the UPDC Real Estate Investment Trust (the-generating Real Estate in Nigeria with high growth potential in accordance with the Trustee Investments Act, the Investments andSecurities Act (2007), the Securities and Exchange Commission’s Rules and Regulations and the Trust Deed thereto (

Results:

The results for the year ended 31st December, 2024 are set out on pages19and 22

Directors:

The directors of the Fund Manager who served on the board of the Fund Manager during the period under review and up to the date of approving these financial statements were:

Mrs. Wunmi Ehis-Uzenabor ******

* Mr. Olumide Oyetan was appointed as Chairman of the Board with effect from 01 November 2024 **Mrs. Busola Jejelowo's regulatory approval as Chief Executive was received 20 November 2024 ***Mr. Oluwatosin Odutayo was appointed as an Executive Director with effect from 09 August 2024 **** Mr. Dele Kuti was appointed as an Executive Director with effect from 27 June 2024 ***** Dr. Demola Sogunle resigned as Chairman of the Board with effect from 31 October 2024 ****** Mrs. Wunmi Ehis-Uzenabor resigned as an Executive Director with effect from 31 July 2024

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Directors' and related parties interest in the units of the Fund:

None of the directors of the Fund Manager, FBNQuest Trustees Limited and United Capital Trustees Limited has any direct beneficial interest in the units of the REIT.

Responsibilities of the Fund Manager: Responsibilities of the Trustee:

The Investments and Securities Act, 2007 requires the Fund Manager to keep proper books of account and prepare annual financial statements, which give a true and fair view of the state of affairs of the Real Estate Investment Trust during the period covered by the financial statements. The Fund Manager is responsible for keeping proper accounting records, which disclose with reasonable accuracy, at any point in time, the financial position of the REIT and enable the Fund Manager to ensure that the financial statements comply with the applicable regulations.

The Fund Manager is also responsible for maintaining adequate financial resources to meet its commitments and to manage the risks to which the Fund is exposed.

The responsibilities of the Trustee as provided by the Trust Deed and other Supplemental thereto, the Securities and ExchangeCommission’s Rules and Regulations made pursuant to theInvestments and Securities Act, 2007 are as stated below:

• •Monitoring of the activities of the Fund Manager and the custodian on behalf of and in the interest of the Unit Holders;

• •Ensuring that the Custodian takes into custody all of thescheme’s assets and holds it in trust for the holders inaccordance with the Trust Deed and the Custodial Agreement;

• •Monitoring the register of unit holders or contributors;

• •Ascertaining the Fund Manager’s compliance with theApplicable Regulations;

• •Ascertaining that the monthly and other periodic returns/reports relating to the Fund are sent by the Fund Manager to the Commission;

• •Exercising any right of voting conferred on it as the registered holder of any investment and/or forward to the fund manager within a reasonable time all notices of meetings, reports, circulars, proxy solicitations and any other document of a like nature for necessary action;

• •Ensuring that fees and expenses of the fund is within the prescribed limits; and

• •Acting at all times in the interest and for the benefit of unit holders of the scheme.

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Administration of the REIT:

During the period under review, the allocation to liquid assets exceeded the maximum 10% limit as provided in the Trust Deed. This was because of the decline in the valuation of the Real Estate assets which impacted on the percentage holdings of the liquid assets. Apart from this, the Fund was administered in accordance with the applicable regulations, taking into cognisance prevailing market conditions as well as preserving and minimising possible losses to

unit holders’ funds.

Charitable donations:

The REIT did not make any charitable donations during the year.

Auditors:

Forvis Mazars, the REIT’s Auditors, have indicated their willingnessto continue in office.

By Order of the Joint Trustees

Babajide Fetuga

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UPDC REAL ESTATE INVESTMENT TRUST

ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2024

Fund Manager’s Report

Global Economy

The global landscape in 2024 was shaped by significant geopolitical challenges, from the persistent conflict in Ukraine to rising tensions in the Middle East. These international crises not only threatened global stability but also contributed to economic pressures worldwide. The International Monetary Fund(<>projected global Gross Domestic Product(<>growth at 3.1%, a slight moderation from 2023 due to the lingering effects of inflation and high interest rates. Central banks initially responded to mounting inflationary pressures with tighter monetary policies, further intensifying the economic headwinds faced throughout the year. However, as reported by Reuters, a notable shift occurred in the last quarter of 2024, with seven out of ten major developed-market central banks beginning to ease their monetary policies.

Africa's emerging markets, particularly Nigeria, faced significant economic headwinds in 2024. The strengthening US Dollar triggered widespread currency volatility, with the Nigerian naira experiencing notable devaluation. According to the World Bank, this currency pressure, combined with capital outflows to safer developed markets, pushed global borrowing costs higher. As a result, access to international financing for critical infrastructure and real estate development became increasingly costly.

Domestic Economy Update

•GDP Growth and Inflation

In 2024, Nigeria's economy exhibited a mixed performance characterized by moderate growth amidst persistent challenges. According to the National Bureau of Statistics,(<>the GDP expanded by 3.46% year-on-year in real terms during the third quarter of 2024, surpassing the 2.54% growth recorded in the same period of 2023, largely driven by the services sector, which contributed 53.58% to the GDP.

Headline inflation remained a significant concern throughout the year, propelled by rising costs in food, utilities, and transportation. It first peaked at 33.95% in May 2024 and further closed higher in December 2024 at 34.80%. The Central Bank of Nigeria(<>responded with a series of interest rate hikes, which helped to stabilize inflation in the second half of the year but consequently constrained borrowing for property development and investments according to a report by PwC.

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UPDC REAL ESTATE INVESTMENT TRUST

ANNUAL REPORTS AND FINANCIAL STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2024

Fund Manager’s Report

In 2024, the Nigerian government implemented bold fiscal reforms aimed at stabilizing the economy. From a Reuters report, two key measures stood out: the removal of the long-standing petrol subsidy and the unification of exchange rates. These decisive reforms yielded positive results, reducing the fiscal deficit from 6.2% to 4.4% of GDP. The impact extended across multiple sectors, driving growth in services, bringing stability to the oil sector, and improving conditions in the foreign exchange market.

While the government's fiscal strategy prioritized infrastructure investments, with increased capital expenditure directed toward housing and urban development projects, these positive developments were tempered by persistent inflation which has significantly eroded disposable income, making it increasingly difficult for average citizen to acquire affordable housing in the residential real estate market.

•The Nigerian Construction Industry and Real Estate Market Analysis

The Nigerian real estate and construction sectors demonstrated resilience in 2024. In the third quarter, these industries contributed a combined₦9.2trillion to the economy, with the real estate sector accounting for 5.43% of the country's GDP according to NBS.

•The Nigerian Construction Industry and Real Estate

The Nigerian real esMtaaterkaentdAncaolnystirsuction sectors demonstrated resilience in 2024. In the third quarter, these industries contributed a combined₦9.2trillion to the economy, with the real estate sector accounting for 5.43% of the country's GDP according to NBS.

The construction industry experienced notable growth as reported by NBS, with a real growth rate of 2.91% in Q3 2024 improving from the 1.05% recorded in the previous quarter. According to Business Wire, this expansion was supported by the government's focus on infrastructure development and public-private investments in housing. Key drivers included:

- Infrastructure Development: Significant investments in transportation, energy, and healthcare infrastructure projects bolstered construction activities.

- Housing Sector Investments: Both public and private sector investments aimed at addressing the housing deficit contributed to growth in residential construction.

In a report by Novatia Consulting Partners, the real estate market was shown to be resilient despite economic challenges and the significant growth observed was driven by rapid urbanization and demographic changes. Moreover, inflation, which not only eroded disposable income but also contributed to increased costs of construction and property maintenance, coupled with housing supply pressure due to increased population and urban immigration, constitute major factors responsible for the upward trajectory in rental rates throughout the year.

A report by Augusto & Co in 2024 showed that the commercial real estate sector faced mixed performance. Lagos, Abuja, and Port Harcourt remained the primary hubs for Grade A office spaces, although demand slowed due to increased adoption of hybrid work models and cost-cutting measures by corporate tenants. On the other hand, the retail sector recorded growth, supported by increased consumer spending in shopping malls and e-commerce hubs. Mall revenues expanded by 9.4%, with Lagos retail centres averaging 70% occupancy.

The residential property market experienced steady demand, particularly for affordable and mid-income housing. Lagos, Abuja, and major urban centres saw increased housing developments, with a 12% rise in completed housing units compared to 2023. Major demographic trend observed according to Novatia was the rise of nuclear families is shifting housing preferences toward smaller units, particularly one to two-bedroom apartments.

UPDC REAL ESTATE INVESTMENT TRUST ANNUAL REPORTS AND FINANCIAL STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2024

Fund Manager’s Report

Outlook

Nigeria's 2025 real estate outlook reveals a market poised for substantial growth, projected to reach US$2.61 trillion according to Statista, driven by rapid urbanization and a significant housing deficit. The residential sector, especially affordable housing, presents the largest opportunity, though high construction costs, inflation, and limited mortgage access pose challenges. The Nigerian Housing Market report highlighted key trends likely to characterize 2025 which include increasing demand outpacing supply irrespective of government initiatives like the Renewed Hope Programme, rising property prices in urban centres, and the growing importance of proptech solutions. Emerging cities like Ibadan, Abeokuta, Kano, Kaduna, Uyo, and Calabar offer promising investment potential, while Lagos, Abuja, and Port Harcourt remain key markets with distinct dynamics.

Fund Performance Summary•Portfolio and Financial Analysis

The UPDC REIT Fund demonstrated robust performance across its diversified portfolio of mixed-use assets in Lagos during the 2024 fiscal year. The portfolio, encompassing retail, residential, and commercial properties, exhibited strong fundamentals marked by enhanced rental income streams and strategic cost optimization initiatives. A notable achievement was the consolidated occupancy rate's expansion to 96%, representing a significant improvement from 83% in 2023, with proactive lease renewal management and retrieval of outstanding rents contributing to this success.

•Financial Performance

The REIT achieved substantial revenue growth, with gross revenue reaching₦5.47billion in 2024, marking a 25% increase from₦4.37billion in 2023. This growth was primarily attributable to enhanced interest income from investments and gains from asset disposition. The investment property portfolio valuation appreciated by 6%, rising to₦27.24billion from₦25.59billion in the previous year, driven by fair value appreciation and strategic property development investments. TheREIT9sAsset Under Management(<>now stands at₦33.4billion which is13.2% higher than ₦29.5 billion recorded the prior year.

•Operational Efficiency

Operational excellence was evidenced by an improved cost-to-income ratio, which decreased to 26.5% from 28.3% in 2023, reflecting successful cost management initiatives and operational optimization.

•Unitholder Returns

The Fund distributed an interim dividend of 20 kobo per unit for the period ending June 2024, with disbursement executed on November 27, 2024, yielding a 4% dividend return for unitholders.

The Fund Manager will continue to maximize value generation through strategic facility upgrades, enhanced property management services, and stronger tenant partnerships. These initiatives, combined with proven track record of execution excellence, position the Fund to capture emerging market opportunities and deliver sustainable returns for investors in 2025 and beyond.

ON BEHALF OF THE FUND MANAGER

Executive Director FRC/2013/PRO/ICAN/001/00000001391 Stanbic IBTC Asset Management Limited

Chief Executive FRC/2023/PRO/DIR/003/022382 Stanbic IBTC Asset Management Limited

UPDC REAL ESTATE INVESTMENT TRUST

ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2024 Statement of Fund Manager's Responsibilities

The Fund Manager is responsible for the preparation of the financial statements which give a true and fair view of the financial position of the Trust for the year ended 31 December 2024 and of the net income for the year ended 31 December 2024.

The responsibilities include ensuring that: i. the Trust keeps accounting records which disclose with reasonable accuracy the financial position of the Trust and which ensure that the financial statements comply with the requirements of the relevant accounting standards;

ii. appropriate and adequate internal controls are established to safeguard the assets of the Trust and to prevent and detect fraud and other irregularities;

iii. the Trust prepares its financial statements using suitable accounting policies supported by reasonable and prudent judgments and estimates that are consistently applied; and

iv. it is appropriate for the financial statements to be prepared on a going concern basis.

The Fund Manager accepts responsibility for the annual financial statements, which have been prepared using appropriate accounting policies supported by reasonable and prudent judgments and estimates in conformity with:

• i. International Financial Reporting Standards

• ii. Financial Reporting Council of Nigeria Act

• iii. Investments and Securities Act

• iv. Relevant circulars issued by the Securities and Exchange Commission.

The Fund Manager further accepts responsibility for the maintenance of accounting records that may be relied upon in the preparation of the financial statements, as well as adequate systems of internal financial control.

Nothing has come to the attention of the Fund Manager to indicate that the Trust will not remain a going concern for at least twelve months from the date of this statement.

ON BEHALF OF THE FUND MANAGER

Executive Director FRC/2013/PRO/ICAN/001/00000001391 Stanbic IBTC Asset Management Limited

Chief Executive FRC/2023/PRO/DIR/003/022382 Stanbic IBTC Asset Management Limited

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