There has been a boom in the volume of investment in vacant real estate over the past decade;this boom seems to be driven by certain misconceptions which have been fed by advertising campaigns and the mass media. This misconception is that land values appreciate at a rate which exceeds rates of return on alternative investments such as treasury bills, stock or other asset classes. These misconceptions have led to the growth of a speculative bubble which seems to have driven the costs of available real estate beyond reasonable levels whilst creating a surplus of under-developed real estate.
Property for sale. - stock photo

In general, by investing in developing the land you may destroy an option and at the same time you may create other options. Vacant land represents an option of retaining it in its vacant form and expecting an increase in value of the land, or turning the vacant land into a development, thereby increasing its intrinsic potential for value creation through the injection of capital.


The valuation of land requires the computation of risk-neutral probabilities that generate expected cash flows corresponding to various project outcomes. The computation of these probabilities requires the calculation of current and future construction costs, current and future market prices of real estate in the area where the land is located.


Prior to purchasing land, it is pertinent to have an idea of the use to which the land is to be put, including the proposed structures which are to be constructed upon the land and the market prices or rental values such structures would fetch in the future based on the surrounding properties in the area. In calculating the values of the property, provision should be made for the probability that the property may fall in value in the future.


We hope these tips will prove useful to you as you begin to navigate the world of real estate investment. For further information and consultancy, we may be contacted directly on +2348036258312, or by email on :



Legacy debts are one of the hidden costs which bedevil companies in transitional situations (mergers, acquisitions, business transitions). Legacy debts refer to debt obligations incurred by a target company and its predecessors in title, which are inherited by the acquiring company. These debts are usually difficult to identify during transactional due diligence, as they are sometimes concealed within obscure transaction documentation.

The concept of odious debt refers to the particular set of equitable considerations that have often been raised to adjust or sever debt obligations in the context of political transitions based on the purported odiousness of the previous regime and the notion that the debt is incurred did not benefit, or was used to repress the objects for which the loan is taken.

It should be noted that the legal obligation to repay a debt has never been accepted as absolute and has been frequently limited or qualified by a range of equitable considerations, some of which may be regrouped under the concept of “odiousness” which may be invoked in order to invalidate debt obligations. In determining whether to assume the legacy debt, regard is often had to the purpose for which the debt was incurred. If the legacy debt was incurred for an illegal purpose or a purpose which is profligate or inconsistent with the objects of the company, the acquiring company may apply to the court to adjust or sever the legal obligations arising from the transaction.

Debts that may be viewed within this spectrum include debts undertaken by a board in order to prevent a takeover attempt, debts undertaken to subsidize personal expenses of managerial staff, as well as debts incurred to finance criminal activities. A problem may however arise where the purported odious debt conferred some tangible benefit in whole or in part upon the corporate entity and its successors in title. This implies balancing the concept of sanctity of contract against the reality of protecting the funds of the company from embezzlement or wastage.

Generally speaking, when corporate succession occurs, whether through dismemberment, acquisition or some other change that alters the nature of the corporate entity itself, legal obligations are not thought to be automatically transferred to the new corporate entity because as a formal matter the identity of the corporate entity has changed and the new company has not expressed its will to be bound by the debts incurred by its predecessors. The question thus arises whether to commence business on a clean slate, thereby reducing the incentives of companies to enter binding contracts or enshrine financial stability by inheriting the debts incurred prior to its existence.

There is a rich case law concerning the limits of contractual freedom, whereby contractual obligations have been found unenforceable or partly enforceable without substantially preventing the growth of sophisticated financial markets. Some scholars are of the view that contracts made by a predecessor that are of no advantage to the company should not be honoured, in particular where the funds have been applied to purposes that are harmful to the company. Other authors suggest that the total repudiation of the debt would cause substantial injustice and in order to equitably invoke this principle the debtor would have to partially repay the debt. This position places emphasis on equitable arguments to do what is right and just in the circumstances.

In general, the law of contract provides ample room for a judge or adjudicator to balance the equities in a case involving illegal or immoral behavior of one or more parties to the transaction. The treatment of odious debt should therefore be based on the equitable considerations underlying the transaction and the after effects of the legacy debt on the affairs of the company. Consequently, a legacy debt which enhances the book value of the firm over the long term is easier inherited than a legacy debt which leads to long run reduction on the book value of the firm. In the event of the former, the principle of promissory estoppels may apply to prevent the successor company from repudiating the debt.

Milton and Cross offers investment advisory and due diligence services to individual and corporate organizations engaging in merger and acquisitions as well as related transactions. We may be contacted directly on +2348036258312, or by email on :


Diversification is the best protection investors have from the risks of capital investment. Modern portfolio theory requires that investors diversify their holdings by investing in firms or assets whose financial returns are influenced by different factors. That has traditionally meant investing in firms in different industries. The object is to identify the factors that could cause a firm’s return to vary from what is expected and to invest in firms that differ with regard to those elements of risk. By employing this investment strategy, investors can “diversify away” firm-specific risks.

To further explain the concept of diversification, let us assume that Milton and Cross is in the business of real estate development and had invested all its capital in the development of real estate assets during the period preceding the global financial crisis in the hope that the investment would produce substantial profits, as was the case at that time. It consequently follows that the financial crisis would have caused Milton and Cross to suffer immense loss (or even enter insolvency!).

However, let us assume that Milton and Cross had divided up its investment portfolio, investing 50% of its capital in real estate, 25% in the stock of highly profitable pharmaceutical companies, 15% in 91-day Treasury Bills and 10% in a high yield mutual fund. In this situation Milton and Cross would suffer less negative impact in the event of any economic shock affecting the Real estate sector. The company may lose some money, but it would still be able to hold off the Grim Reaper for a while.

We have often been advised to avoid placing all our eggs in one basket. The best course of action would be to invest in creating another basket and placing some eggs in there, thus preventing you from losing all your eggs in the event that something happens to the first basket.

Milton and Cross Commercial Solicitors provides due diligence and advisory services to individuals, companies and unincorporated organizations desirous of creating, changing or effectively implementing their diversification strategies. We may be contacted by telephone on +2348036258312 or by email at

Hope you enjoy this post.



The introduction and exploitation of new ideas, the source of all major growth, requires considerable capital investment. Consequently, the degree to which an organization will develop is highly dependent upon its ability to marshal and direct a consistent flow of external funds towards the development and marketing of new products and services. This is the concept of using OPM (Other Peoples Money).

The Pecking order theory of financial management states that all things being equal, a company with high prospects of success is more likely to finance its investment projects using internally generated capital, followed by debt finance (mortgages, debentures), and finally equity based financing (common stock, preferred stock). This is premised on the view that the company would be able to generate sufficient income from the project to refund the monies borrowed and the interest thereon.

However the ability of a firm to invest in new projects is directly tied to its cost of capital; that is, the interest rate at which the organization may raise finance from a bank or financial entity. As a general rule, the higher the risk free interest rate, which is the interest rate at which 3-Month Treasury Bills are sold in the money market, the higher the cost of capital within the economy.

Look at it this way, if a bank could receive a sure return of 10% per annum by investing its funds in Treasury bills, wouldn’t it require a higher rate of return from a prospective borrower who presents a substantially riskier project? Banks are assumed to be risk averse, and consequently they are likely to penalize borrowers for each additional unit of risk in the form of increased interest rates.

Money is expensive and when we look at balance sheets of Nigerian companies it becomes readily evident that the cost of loans is a growing problem. A high cost of capital has the effect of stifling innovation and often leads to capital flight and domestic unemployment, as companies seek greener economies with more favourable costs of capital.

Fortunately, alternative means of finance presently exist which seek to circumvent the high costs of capital imposed by banks (who by the way need to finance their high overheads by charging high interest rates on loans to customers). These means include Peer to Peer Business lending, SME financing programs (especially for entrepreneurs in the agricultural space), Soft loans and Business support grants from non governmental organizations. Furthermore, most states have in place business empowerment programs which provide low interest finance to entrepreneurs who have viable business plans.

The concept of using OPM still exists, but unless management can objectively justify the assumption of debt, it is advisable that the use of debt financing be minimized whensoever Treasury bill yields are high. It is also advisable that firms invest in Capital projects designed to boost its revenue base, as opposed to revenue expenditure, which only serves to deplete the organization’s capital base.

If you feel you need to discuss options for capitalisation of your business, feel free to discuss with one of our consultants by calling +2348036258312 or send and email to and someone will get back to you.