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Carlos Alberto Serna Londoño

COLOMBIA - Real Estate & Construction

A Place in the Sun

General Manager, Espacios Urbanos


Carlos Alberto Serna Londoño studied Economic Development at Antioch College in Ohio, and later continued his studies at Oxford University. He began his professional career at the University of Chicago in the Statisics Department, and has occupied many positions across a plethora of companies, including Director of the Finance Department in Bolton, Mississipi, and even set up an apiculture farm between 1974 and 1977, reaching 1,500 bee hives. Before his current position, he was Executive Vice-President of Distribuidoras Unidas.

"We are deeply engaged in the conceptualization and structuring of projects."

What are your company’s most significant developments of late?

We have been developers for 24 years, which means that we are deeply engaged in the conceptualization and structuring of projects, as well as their management, and sale. We do not undertake architectural design or construction, but rather hire architects, contractors, and builders. We have undertaken a wide diversity of projects in the past that range from hotels, office buildings, and housing developments, to residential clubs with golf courses, warehouses, shopping centers of all kinds, and medical centers, among others. We are particularly proud of having created the Hotel Santa Clara in Cartagena. When we purchased it back in 1990 it was a ruin; in fact, it was built back in 1621, making it almost 400 years old. We have since transformed the old convent into a beautiful, six-star establishment. The other project we are very proud of is the Central de Carnes Guadalupe, located in southern Bogotá, and which is a meat distribution center serving up to 44% of the city’s 8 million population. From the outside it resembles a shopping center, although in reality it is a total of 116 shops that sell meat. It is hygienic, organized, and well designed. Another project we have completed in Bogotá is a large shopping center on Avenida 26.

What were the main challenges that you faced in securing a leading position in the sector?

In the construction sector of the economy, the main problem that we traditionally faced was the lack of government commitment to an effective legal framework. You would plan a project under certain rules and tax regulations but, all of a sudden, without announcement, the rules would change. The other thing is that, in the past, the investor was a very strange breed because of the violence that the country was suffering. Colombians were in the habit of keeping their money abroad in foreign banks. Banks had the highest interest rates, which is what the construction industry greatly depends on. First, a developer must obtain construction loans to build a project, where interest rates are the most important consideration determining whether a family can afford your product or not. This has changed considerably, however, and, while we still have abundant credit and loans priced too high when compared to other parts of the world, business is still doable. Today, we are securing loans at an interest rate of below 10% per annum, whereas not too long ago the construction business had faced interest rates of over 48% per annum. At such rates it is is impossible to conduct any business. The other novelty is the trust that both foreigners and Colombians alike have in the country today. This has made it possible to attract considerable foreign investor interest in Colombia’s economy. Furthermore, there are many Colombians investing in the local economy, which is very good news, having broadened the horizon for the property business.

“We are deeply engaged in the conceptualization and structuring of projects.”

What are your expansion strategies for the near future?

We are teaming up with private equity funds and family offices from abroad. We put together the first project four years ago with Avenida Capital, a fund from New York. We developed an excellent relationship and are now working with other funds as well. These provide the significant capital that each of our projects demands. In 2012 we had four projects, and in 2015 we will have nine projects underway. That doubling of project number requires abundant capital, which today is available at suitable interest rate terms, or else which we obtain in the form of equity. We now choose between loans for construction, or equity, and sometimes we opt for a mix of the two.

Can you comment on the current interest rate situation in the market and your projections for the future? What can your company offer foreign buyers?

Interest rates, although much higher in the past, are now at between 7% and 8%, and as high as 12% per annum, depending on who is doing the borrowing. This is still too high, and inflation this year will be very close to 2%, which makes this scenario untenable. Inflation is one of the basic elements that leads to improved interest rates. One should bear in mind that for the first time, the middle class is acquiring housing or real estate. When a middle-class family considers buying a home, it looks more at the monthly payment than at the price of what they are buying. Everyone in the business knows that the amount is more sensitive to interest rate movements than the actual term of the bank loan. This is revolutionizing our economy. For example, the airline industry is growing at a rate of 18%-20% per annum in terms of passengers, but not in revenue terms. This has been the case for the past four or five years. It is very difficult to find a country anywhere else in the world that for five or six years is growing by 20% in terms of passenger number. It tells us that the livelihood of many people has been improving to the extent that they can today afford purchases formerly unavailable to them. This is very important for the real estate business, and tells us that now we need to focus not on making projects for the rich and super-rich, but rather tap into the burgeoning middle class market.

What leads you to believe there is no bubble in the residential real estate market?

I don’t think we have a real estate bubble in Bogotá, although we certainly do have a distortion due to the lack of building land available amid prevailing uncertainty over legal zoning. This has kept capital and companies away, redirecting them to develop cities in other parts of the country. We are seeing outrageously high-cost products, especially in the north of Bogotá, which suggest that there will have to be an adjustment in the long run. When more land becomes available, prices will drop. My recommendation to my friends is not to buy now, but rather to lease or rent.

Where do you identify the best property investments in Colombia?

I would say that the best opportunities are located on the Caribbean coast, and that in the future potential lies in Buenaventura on the Pacific coast, the port of which handles over 60% of Colombia’s international trade. New roads and highways to Buenaventura are now being laid, and I believe it will enjoy a very bright future, especially thanks to the recently signed free trade agreements (FTAs). Subsequent development should be concentrated in Santa Marta, Cartagena, and Barranquilla. Around 80% of our projects are located in that area, as they sell faster and local authorities seem to better assist entrepreneurs complete their deals. On the coast, I see opportunities for logistics projects and warehouses. I also perceive a need for office space in Barranquilla, Cartagena, and Santa Marta. There is opportunity in the residential segment for all buyers, from lower to upper segment, in all three cities. There is still some room for growth in commercial, especially mixed-used projects, and also for second homes, especially for foreign nationals. Over the past four years we have been trying—despite no success to date—to have a law passed along the lines of that passed in Panama around eight years ago to attract foreign investment in real estate.

Can you share your vision of the Colombian economy and the role that infrastructure projects play in it?

Colombia has much potential in mining and especially in energy. We will remain self-sufficient for at least the next seven years thanks to sufficient oil and gas, one of the largest coal mines in the world and an abundant water supply to generate electricity. In terms of energy, which is a key factor of future global development, Colombia is one of the richest countries on the planet. In terms of agriculture, the potential is even higher. Colombia is one of the few countries in the world with millions of as yet unused hectares that can be allocated to agriculture. And so while most countries have already fully exploited their land, Colombia today is making use of less than half of what it has. We also have access to high-quality technology. Yet a key factor here will be the social aspect, and specifically the peace talks currently underway. These are important for both Colombia and the wider region.

© The Business Year – April 2014



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