Americas > South America > Colombia > Colombian real estate, "Real estate has to be sold part by part"

Colombia: Colombian real estate, "Real estate has to be sold part by part"

2015/05/29

Oikos closed 2014 with 25% increase, with a turnover of COP 479.000 million. For 2015, it has set the ambitious target to grow 20%.

After the historical Summit of the Americas –one of reconciliation, as Cuba was present–, how do you see Colombia\\\'s positioning as a regional leader over the years?

Important things are happening, and I see Colombia has great capacity to reflect and guide in these critical moments. No one can deny that Colombia is going through a critical moment regarding the guerrilla situation, the problems with crude oil and the dollar, etc. However, it is significant to highlight the precious capacity of reaction we have, as we have quickly acted in response.

The peace evolution is dangerous, difficult and complex, but can have brilliant results and it could change Colombia\\\'s image. Colombia's relationship with other nations has not been easy, particularly in the case of Venezuela. It has been a controversial dialogue, hard to handle and with ideological opposing poles that did not make things easy. However, the dialogue was managed with intelligence and accuracy.

The proper handling of a crisis or a problem can lead to interesting opportunities. It is admirable how the rest of the world sees us as a great opportunity, whereas we Colombians are sometimes too shy to think about our country in that way. I see foreigners often come to Colombia, not only in the construction area but as well in different entities and for the Presidents\\\' Forum. We frequently meet people abroad who are planning on coming, or talk to managers who tell us that there are people in Brazil, in USA, who want approaching to Colombia. There were several times in which we had to build warehouses for the Venezuelan industry, which is starting to settle here. Conversely, we have as well had to visit Venezuela to see what is going on there, so as to replicate it here.

I believe that, if Colombia seizes the opportunity it has, and if we avoid confrontation and extreme positions, we can achieve a good year and great position to face what is coming. Nonetheless, the moment is critical, dangerous and fragile. If done wrong severe consequences, may take place, but I feel confident and calm that everything will be dealt with the way it should.

The peace process in Colombia has received unanimous support from all America, from Felipe Gonzalez, Jonathan Powell and Barack Obama, for example. What opportunities does this peace process create for the private sector?

Many, I think. Firstly, because numerous people who are presently among the conflict will integrate into everyday life. It is possible that not each guerrillero –there are about 5,000 to 7,000 of them– will want to integrate, but it is different to transaction with an organized guerilla than with 300 or 400 people who do not wish to integrate and are still outlaws. This would be a different fight, since we would not be dealing with a recognized organization that has considerable economic capacity, but with a group of people who do not wish to integrate. A common vision part businessmen is that we have to help. If businessmen have to take in the guerrilla, we will. If we have additional than 10 million employees as 1% needs to cover the guerrilla, we have to make that effort.

Work is an opportunity for the people who will integrate; those people need education and evolution. Some people will want to start their own company, or SME or trade, and we have to give them the luck to do it. If a group of former guerrilleros wants to start a company, we have to listen and support them. I believe this is very significant, since peace is not only completed by the government or the army: peace is finished by all of us. If we all acknowledge on this, again we can take the step forward.

Construction and housing are economy-boosters; they propel the increase and employment of the country. Colombia is capable of improving its competitiveness through construction. How would you describe the development in competitiveness that construction will bring to the country?

An interesting phenomenon is going on regarding credibility and safety in construction. Two years ago, we started an area in the company called Metalikos, which is a merger between Metaza and OIKOS. We started it because the metallic construction –metallic structures and warehouses– is going to peak. About eight years ago, we shifted towards the construction of warehouses, we built a large terminal and the result was very good, so we realized there was an interesting niche there. We have by presently built additional than ten warehouse complexes, and we are currently working on a very large one in Tocancipá, and an extra one in Barranquilla. Baranquilla is providing great momentum, and it is Colombia\\\'s gateway for other things. We as well have a large warehouse project in Ibagué, which is Colombia\\\'s center, its heart. But Ibagué needs a cardiologist, because it is a heart lacking veins, and a heart without veins does not work. Ibagué has no train, river, airport or highway at the moment, but as any minute at this time as it has those four things, its heart will start beating and pumping. Ibagué has a road presently; what presently takes two or three hours used to take four. From Ibagué you can presently go to Cali, Medellín or Bogotá, as the city is exactly in the middle, a strategic location. We have done well, and the initial stage of the project is ready. People did not understand that Ibagué had all this potential, but they presently get it. We will probably start a second and a third stage of the project, as the warehouse complex is very large.

In the meantime, Tocancipá has a great next ahead, as a lot of people want to leave Bogotá because of the heavy traffic. This will boost the twelve cities close to Bogotá, as these will be an outlet, causing housing to increase. For example, we are undergoing a large housing project in Zipaquirá, because we see the people density will increase. We are as well undergoing housing projects in Funza, Mosquera and Cota. These are mainly middle and lower class houses, as for a person travelling from Cota to Bogotá it implies two hours of commuting in the morning and two hours in the evening. If that person has the luck of living ten or twenty blocks away from their job, we are giving their whole family a better lifestyle. However, schools, hospitals, services, supermarkets, shops, etc. need to be built as well. If not, people would be left isolated. It is good that home and job are close to each other, but there needs to be an infrastructure around it, and the vision of a city. We have always believed that and we have applied this notion into a lot of of our projects. We are presently starting a 1,400 houses project in Cajicá, which will have a shopping mall. The same goes for the project we are finishing in Tocancipá, which has office buildings that were sold in two shakes. It is crucial to build these small cities that cover people\\\'s needs.

You mentioned the approach you have regarding the construction of cities and of business clusters at the same time as it comes to building houses. Last week, we met with Felipe Sardi, the Vice-Minister of Business Development, and he said they want to boost and multiply exports, and generate an industry that does not depend upon oil. How significant is what you are doing for business development?

I believe the next has to do with looking ahead. The completed can bare a lot of problems, but we need to get over it and look forward. Someday, people will need comfort at work and relieve of travel, so the vision of small cities that can cover all these necessities will benefit people. At the same time as people work with additional comfort they become additional productive. Colombia has an chance, and that is its location. We are one step away from the USA and South America, and we are on the route to Europe. If we have relieve of work, we will encourage evolution for people. The other issue is attracting people from outside Colombia. Provided people see that it is nice to live and work in Colombia, they will be tempted approaching to the country.

Regarding the housing situation, the government wants to start a project called \\\'Mi Casa Ya\\\' (My Own Home, Presently), which is aimed at the lower class –getting them a home but as well fostering saving. What impact does this program have on a group such as OIKOS?

We have always had a social philosophy in the company, since it was born with the idea of building social–interest houses. We have always kept a minimum of two of these projects. We are not keen on handouts, as that can stimulate poverty. It is not about rewarding someone for being poor, but helping them not to be anymore.

Poor people need help in order to evolution, and that is why these new plans give the poor help but they as well request something back. We are currently working with \\\'Ser Vivienda\\\' on a project that devices houses where people do not need a down payment or they do not have to ask for a loan. How can a person who does not have enough for a down payment or who cannot ask for a loan buy a home? We sell it piece by piece. The person is given the home and pays rent, but they can buy brick by brick in the meantime. The home is securitized. For example, a home can cost 30,000 security titles, and the person can purchase on title at a time until they own the whole home. Maybe it will take them twenty years to do so, but they have the luck. It is not a handout nor have they to deposit a down payment or ask for a loan. They pay rent and buy the home piece by piece. We need to create mechanisms so that they can access a home, but as well request evolution so that they overcome poverty.

Where you the one who devised the mechanism? Are there other applications as well?

This idea was born twenty five years ago. The director\\\'s board always had one or two people who did not know anything about construction so as to open our eyes. At the same time as it comes to construction an all of us think the same we may miss something, so there should be someone who sees things differently. That is how securitizing was born. Twenty five years ago, we were dealing with a large crisis as real estate was paralyzed. We were wondering why no sales were being made, and we concluded it was simply because, as we were among a crisis, people would not buy real estate in spite of it being a sound investment . So the philosopher again said that if real estate is the best investment there is and people are not buying, it was not because of the crisis but because we were not selling it well.

If you are buying real estate, it is hard to do so with little money, and if we are selling a whole property again we are leaving a large market out. Real estate has to be sold part by part, and that is why we brought securitization to Colombia. For example, the Mobil building is yielding an annual 26% between rent and valuation, but you do not care because the building costs $35,000 million and you do not have that kind of money. However, if we divide it into 35,000 units of $ 1 million each, again you are interested. By getting the hang out of real estate, we enabled a lot of people to enter the market, and we can presently serve the people who do not have enough to buy at once and do so brick by brick, inclunding the one who bought the whole building but presently needs the funds, so they securitize it and get the money back. Mobil had the money to buy the building, but they are presently paying a monthly 2% rent and investing the money on petrol at a monthly 18% interest. Think of a bank were deposits yield an annual 4% rate while loans cost an annual 15%. Why not combine the two, lend at an annual 10% and benefit both parties? They do not do it because of a lack of trust. How do we generate trust? Through a trust fund. At the same time as we out the Mobil building in a trust fund, we split it into $1 million units and sell it to anyone who will buy it. Mobil gets the money and invests it in petrol, while the trust fund has a legal framework in which Mobil only can rent the building, at a monthly 2% rate.

We carry out a lot of securitizations for people that do have the funds to buy but need them. For example, Newman School needs money to build an extension, but cannot ask a bank for a loan because banks do not lend to schools. Therefore, they securitize the school, take the money and buy the titles back next twenty years of paying a very low sum. Securitization may be for people who cannot purchase the whole property at once, and buy it little by little, or for those who by presently own the property and need cash without forsaking the property. Securitization is a liquidity mechanism.

You were in securitization for twenty years. What is the next of that area?

There are between ten and fifteen fiduciaries that carry out securitization in Colombia. At the same time as we brought the concept in, people did not know what it was. Nowadays, there are a lot of people doing it. Even hotels and shopping malls are being securitized. For example, the Andino shopping mall\\\'s fourth floor extension was not sold but rented, on my approbation. Some said that it could be built for $ 3 million the square meter and be sold for $30 million. But by renting it, Andino are receiving $ 4,000 per square meter a month. Is it not better to sell a property each year during fifty years, than to sell it only once? We you rent property you are receiving additional a year than what it cost. Today, Andino receives additional for renting the fourth floor than what it charges in government fees for the whole mall.

Nowadays, all international investors\\\' eyes are set on Colombia, as proved by the fact that the major North American investment funds have invested additional than US$ 400 million in the last year. What can alliances with private companies and investors from other nations generate?

These companies have the capacity to purchase a whole building, which is good for construction, as there is less risk in building something that has by presently been purchased than building in order to later sell the properties. During the 2000 crisis, people would build in order to sell the property afterwards, so at the same time as the crisis struck it caught us off guard. I do not think this would happen presently, as everyone sells initial and again builds. We have twenty-three ongoing projects, and not one of them begun without reaching the 60% equilibrium point.

The Colombian businessman is about to face a tax reform –as Colombia is joining the OECD– that will imply new requirements. What advantages can a foreign investor or an alliance with a foreign company bring in order to overcome these difficulties?

When it comes to taxes, a foreign investor can bring additional liquidity and economic relief. These investors have large budgets and can bring considerable financial security for the construction area.

You have highlighted the diversification of the \\\'where\\\' and the \\\'what\\\' as one of the salient points of your management. You have diversified at a regional level, expanding throughout the country, and at a product level with a new line of business. Where do you think next opportunities lie?

We have always maintained diversification within construction. The five areas that we currently have are construction, real estate, securitization, storage and metals. These five lines enable us to overcome a crisis, because they are solid enough for us to rely upon.

There is a constant battle between the architect that designs a building with a modern approach, and the engineer, who provides a additional technical service that considers the economic aspect. Which side are you on?

One has to be aware of both the legal part inclunding the technical aspect. I respect and admire the architects\\\' work, but it is not my forte. The architect has to contribute, not damage. The architect has a vision in certain fields of construction, such as design, what is next, avant-garde. However, the architect sometimes lacks a notion on the costs and the commercialization. They tend to fixate on what they like and what is appropriate, but they do not ask themselves whether the property sells well or if it is useful for people. We have to combine both aspects, which is why I believe the dialogue between architects and engineers is productive provided one listens to the other. To believe on is always right and to avoid asking help from others is dangerous, because that is where architecture and engineering are destroyed. At the same time as we listen to others, it is possible they end up convincing us we were not right. If both parties know how to listen and see, the combination of the architect and the engineer is completely productive, as both poles of an idea are present.

Construction has always been very criticized at the same time as it comes to sustainability. In your group, what could you highlight regarding your social and environmental responsibilities?

Ever since OIKOS was born, our philosophy has been a social one. We have always attached great importance to people working at relieve at a company, because if people are at relieve they work better and additional. At the end of the day, I benefit from this, because the employees produce additional. If my employees only come to earn a wage and meet schedules, they will produce less with each day. I am not paying them for sitting; I am paying them for thinking.

For people to dedicate their thoughts to the company, they need to care about it. This is something that has always been significant to us. We have made our best efforts so that employees will care about the company and will feel pride of working at OIKOS. This has been completely useful because people tend to last additional at their jobs, and because people produce happily and at the same time as they see a problem, they point it out. If you do not have a work team that cares about the company, making people think is very hard. This has been one the things that has given us strength.

We as well care about returning customers. How do I make a customer come back? It is easy; they need to leave happy. A happy client who just bought a home not only comes back, they bring additional people with them. The greatest thing about a company is seeing the people one served speak well of one –partners and coworkers alike. We own OIKOS and two large societies, Caledonia and Koboko. In these two societies, in which we are partners, we have six or seven projects each. We own a part because that enables us to bring additional customers and makes people care about us and trust us. The price of trust is very significant for a company, particularly a construction one, because people buy real estate before it exists. We always do it through a trust fund, so that people invests in the trust fund and knows that whatever happens, that money cannot be touched. The additional confidence one receives the additional security one has to answer with. It is very significant that people come to OIKOS happily and feel at home. They come back that way.

Regarding USA, the world\\\'s most advanced market and Colombia\\\'s major geopolitical and commercial partner, Mauricio Cárdenas himself told us they want to encourage exports again, since Colombia became a net importer this year. How do we turn this situation around and make Colombia an exporter again?

The additional capacity Colombians have of producing, the additional possibilities we will have of exporting. We will export to the extent that we offer good quality agricultural and manufactured products. If we lower the quality, we will not be able to compete despite the fact that our prices may be low. It is very significant that we keep a quality level, and to do so employees need to be able to produce accordingly. This is completed through education, training and technology. The world has a lot to gain from importing our products, but we need to provide a reasonable level of quality.

The FTA\\\'s benefits have been considerable and have multiplied during these two years. As President of the OIKOS group, what are the major opportunities you can see?

Basically, Colombians purchasing power has improved in an outstanding way, thanks to all the factors you have just described. Colombians\\\' purchasing power has multiplied a lot in the completed twenty years because of the additional entrepreneurship, productivity and ability to do business, which keeps money flowing and generates wealth. We have lowered the poverty level considerably, and we should keep doing so for everyone to overcome poverty.

How do you see the relationship between Miami and Colombia?

Miami has a great chance, because people speak additional Spanish than English there. So for people who cannot speak English, it is just like being here in Bogotá. Besides, the lifestyle is very Latino and there is much to learn. Miami is an interesting market where to learn, bring new ideas and participate in businesses.

The Austrian philosopher Peter Drucker used to say that the best way of predicting the next was to create one. What made you to transition from philosophy to engineering?

I initial studied philosophy because I was on my way to becoming a priest. I was in the seminar and I needed to study philosophy. At the same time as I was done, I realized I had a career in engineering. My father was a civil engineer and I completely liked engineering because of what I saw in my father, so I studies civil engineering like him. They complement rather well. Philosophy is not easy to exercise in the professional world, because it is a additional introspective profession. Philosophy enables you to exercise engineering in a rational way, since it studies knowledge and truth. One can learn plenty from philosophy that will not study in engineering. Exercising engineering with a philosophical foundation enriches one at the same time as it comes to the professional world. A company has to produce, but the majority significant element in a company is not money but success: to be admired, to propel forward, and approaching up with interesting phenomena. Of course making money is good, but we need to do so while looking ahead. I believe most of the people that work with OIKOS come back and do so happily, because we treat people well.

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