AMCON Won’t Unleash Its Assets to Avoid Overwhelming the Market
SEC and some of the regulatory agencies. We try to create products together, sometimes whether it is Writs or shares, so that we can manage how our assets come into the markets. We do it in such a way that we don’t overburden the market. The CBN has created platform for everybody to go there and access information.
Is AM CON still considering publishing the names of debt ors?
We have done it before and we will still do it again. You will see it this week. We are going to publish the names again. Maybe not the 350 key people at the same time, but by installments. Already, last week we advertised, advising people to come and talk to us so we can have an understanding. But we are already compiling the lists and we will release the first batch this week, and we will continue to release them. As an organisation , we are not under any obligation to keep anybody’s exposure in secret. The only way we can keep it secret is if you come and negotiate with us, otherwise, we are going to publish it. Those who honour the invitation to come, won’t have their names published, but those who refuse to come will have their names published.
You said if an asset is N 1 billion, it is possible to sell it at N 450 million. One of the reasons you gave is current economic situation. What are the other factors?
It is an accumulated perception about property value. The values of properties over the last six years have gone down but people have refused to accept that. Before this administration (President Muhammadu Buhari’s) when a lot of people had a lot of funds to dispense, if somebody sees this building and he likes it, you tell him it’s N1 billion, he’ll pay you without any valuation. So, developers have built their own framework around that. Go to Ikoyi; go to Maitama in Abuja; go to Asokoro; go to Victoria Island; and go to Lekki; somebody sees a building he has ‘free’ N500 million and likes the building, he’ll just pay for it. He doesn’t care what the valuer tells him. Somebody buys a land at N80 million, spends N100 million to build a property on it; he won’t sell it below N500 million. If the property is well built, he’ll find somebody to get him that N500 million during that period (before the current administration). Developers and valuers have that mindset. Now, if you ask that person to sell that property for N230 million, he will not sell. He’ll tell you that three years ago somebody was ready to pay N500 million – but that wasn’t realistic. It’s all about their mindset. The market has shifted, but the industry hasn’t recognised that shift – that’s a major issue. Even when exchange rate was inching towards N400, people were still importing building materials. Now, exchange rate is going down but I can tell you that the prices of the materials haven’t changed. That affects the cost of building – but that’s not the realistic value of that building. So, a valuer will give you the realistic value because when he comes to tell you that ‘this window costs N10; this tile is N20.’ It’s upon that basis they do their valuation – because if you go to the market that’s what you’ll pay to get those materials. And, they’ll tell you your property is worth N1 billion. But if somebody wants to buy he doesn’t look it from that angle. No valuer has sold a property at that rate: they come with what they call open market value, forced sales value, and sometimes they come with average market value. Ask the same valuer to sell the property, he tells you, ‘Oga, you know the market isn’t booming, I think I’ve found somebody that can pay 70 per cent of what I valued the property.’ He was the one that valued the property; that property was acquired in exchange for cash (by AMCON); so, somebody is supposed to pay me N1 billion. I called my valuer and he looked at the property and agreed it is worth N1 billion. So, I asked him to sell it and the valuer tells me it is N700 million. What happens to the N300 million? But if he tells me the real market situation – you tell me, ‘no, this property in the market is not more than N400 million. I’ll tell the obligor, you either go and bring N1 billion or you go and find somebody that can buy the said property at N1 billion; or, you give it to me at N450 million. Somebody brought one land around this Eko Atlantic; he said AMCON should take it in exchange of about N6 billion. I said nobody is buying the land. He said it’s ‘hot’. So, we told the person if it’s ‘hot’, sell it and give AMCON the money – now it’s almost two years (the property hasn’t been sold). We need the money more than the assets because AMCON has no business holding any assets. We hold assets because we couldn’t sell them. Any assets we have are supposed to be for the market, because our debts are not in assets; they are in cash.
Did you say, for Aero, AM CON is looking at the end of this year?
Definitely; it’s in the best interest of the business. AMCON isn’t going to put any money into those airlines (anymore); we’ve put enough. Therefore, if I don’t do that, it puts the business in serious, uncompetitive position because the industry is evolving. Somebody needs to come with fresh capital, which is very key and the only way to do that is to bring fresh investors. AMCON has no business anymore to put money into anybody’s business.
In view of that, your plans to dispose of the airlines would appear to be in sync with the federal government’s plan to float a new national carrier by the end of the year amid a speculation that Aero and Arik will be merged to form the national airline. Does that mean AMCON is working in concert with the ministry of aviation?
Nigerians like conspiracy theories. We love conspiracy theories. If today AMCON is going to use Arik and Aero to create a national carrier there won’t be any apology around it because the assets belong to AMCON. Such plans won’t be hidden and it will be in the interest of the organisation. However, there’s never been any discussion – formally or informally – about converting those assets into a national carrier; nobody has ever invited me or called me to talk about the idea of the national carrier or bringing AMCON’s assets to establish a national carrier.
Number two, even if I had been called I’d have advised against it. You don’t want to create a national carrier with all the problems you have in Arik and Aero. How can you set up a national carrier from crisis? AMCON isn’t part of any national carrier plans. It’s not even in the national interest to do that.
How transparent is AMCON no win terms of sales of acquired assets against the back drop of alleged shady deals?
AMCON’s process is well defined by the Central Bank of Nigeria. Because we can sell any asset there must be a process: first, we must advertise. There’s what we call asset committee; we must value the assets by professional valuers. After advertising, then we must have a transparent process, we go and open it. Frankly speaking, regardless of how close you are to me, if you want to buy AMCON’s advertised asset I can’t help you. This has created a lot of problem between me and my friends or associates. They believe I can sell a property to them, but it’s not possible. Let me give you a scenario: you want to buy this building and it’s valued at N500 million. Internally, AMCON agreed – because we have a fixed price internally – that our reserved price is N450 million and we advertised. Normally, we open it with all the bidders coming together under one roof. I called you and told you to bid for N455 million; I’ll even tell you our valuation is N500 million and our reserved price is N450 million. Unless you stole your money before you even come with your bid you’d have taken your valuer to check the asset. He’d have told you what the property looks like and might have advised you to even buy it at N600 million. Then, you decided to bid for N600 million. Then, I go ahead and open it and there’s a dude there that doesn’t know anybody (at AMCON), because his valuer said this property is worth N700 million and he made a bid of N700 million. Then, I opened his bid and found that his bid is N700 million and yours is N600 million. How can I say no to the dude? It’s not possible for me to say no to him. All our properties go through due process – that’s the requirement of CBN. However, it’s not every property that you can sell through bid. There are so many properties that we’ve advertised repeatedly but we couldn’t get to sell them. Therefore, for those properties, the AMCON law allows to go and look for buyers – that’s the willing buyer and willing seller situation based on valuation. Even at that, we can’t sell the properties below our reserved price. The properties were advertised along with prices. For instance, if we advertised a property for N1 billion and you come to me, there’s a possibility I can sell it to you at N950 million because I know that if I keep it for one year the interest I’ll pay will be more than N50 million.
The only thing we need to do is to write CBN, showing them efforts AMCON has made to dispose of the asset – letting them know that we’ve gone through bids and the asset had been advertised. We let CBN know we’ve gone through all the necessary process, but we couldn’t find a buyer. This man has come and this is what he has offered.
Already, we are inside problems, whether we negotiate or we don’t negotiate, it’s already a problem. However, the law that sets us up has anticipated those issues. The law encourages that we negotiate and that we have done in the last seven years