EcoHouse is one of the few British firms making it big in Brazil. But the social housing developer has not exactly been welcomed with open arms. Emily Wright travelled to Natal to meet chief executive Anthony Armstrong Emery.
I have a reputation here in Brazil for being aggressive," says British developer Anthony Armstrong Emery. He pauses - a little for dramatic effect but mainly to light a fresh cigarette - and leans back in his leather chair before adding: "It’s usually true. But then this is an extremely hostile environment. I have plenty of enemies."
Meet the self-confessed "big-headed, phenomenally successful" chief executive of EcoHouse Group - the £65m social housing developer set up in 2009 that, as of December last year, became the biggest company in north-eastern Brazil. It is one of the few examples of a British property firm making it big on Brazilian soil. And it has not come without some fallout. Indeed, on journeys between construction sites in Natal - the backwater beach city on Brazil’s north coast and home to EcoHouse HQ - it becomes clear just how seriously Richmond-born Armstrong Emery takes the threat of those aforementioned enemies. The chauffeurs in his reinforced, bulletproof 4x4s are all ex- BOPE officers - a special forces unit of the military police of Rio de Janeiro state, trained in urban warfare - and he travels in the middle of a three-car convoy.
When asked whether such high security is necessary in a seemingly quiet seaside region, he is quick to explain: "Three years ago I rolled into a town once run by four or five powerful local families and became one of the most influential people here. I have killed off business for a lot of local people who were doing poor-quality social housing units by pushing up land prices with my product. And because we are not being funded by Brazilian banks, our source is not controlled by anyone here, so no one can do anything to curb our growth. The security is necessary." Over the course of two days in Natal, Armstrong Emery, 44, explains how he plans to help plug Brazil’s 8m homes deficit by building 40,000 social housing units over the next five years. He also reveals how, so far, he has been able to guarantee his investors a 20% return on their investment within 12 months and insists that not even the most vicious of opponents will get in the way of his ambitious expansion plans.
Offering the option
EcoHouse has over 1,000 staff working across offices in London, Singapore, Dubai, São Paulo and Toronto. Armstrong Emery set up the HQ in Natal in 2009 to focus on Brazil in particular over the next four years in response to the unprecedented investment taking place in the country and to piggy-back on the Brazilian government’s $1tn Minha Casa, Minha Vida (My House, My Life) programme, which aims to deliver 3m new homes to low-income families by 2014.
And Armstrong Emery claims that his investment model and large-scale development has given him the edge to provide a premium product. "People in Brazil were accepting what was given to them because there were no options," he says. "Now I am offering that option." EcoHouse’s fifth social housing scheme has now started on site in Natal as the group plans to build 8,000 social housing units this year, followed by 10,000 in 2014. At £23,000 a unit, sales are expected to bring in revenues of £184m this year, £230m in 2014 and £920m over the next five years.
The units are funded by international investors - mainly from the UK and Singapore - which Armstrong Emery bills as the ultimate opportunity for overseas firms to get in on the Brazilian market while the iron is hot ahead of the World Cup and Olympics. Up until earlier this year, EcoHouse has delivered investors 20% ROI within 12 months. That has now been reduced to 10-17%. "It’s three years on, I have a 1,500-strong client base and I don’t feel I have to dangle the 20% incentive anymore," he says. But it is still an attractive offer when twinned with the security. The company uses a secure investment structure which has been risk-assessed by CAIXA banks, registered with the Brazilian government, and is protected by UK legislation as all investment is placed in an escrow account with Lloyd’s of London. The return uplift comes from every investor putting in £23,600 per unit to fund construction, which is then sold for £31,700 as part of the government-backed scheme - well in line with local prices. Some £27,000 goes back to the investor and the rest stays with EcoHouse. "We sold out one entire scheme with sales worth £5.8m over one weekend last year," says Armstrong Emery. "This is partly because I am able to use quantities of scale to provide a very middle class product for the same price as other, lower-grade units. I am upping the game and eating into everyone else’s margin. "I put in granite work surfaces, porcelain tiling, barbecues and gardens. We are the first social housing developer offering centralised sewage works, for God’s sake. I can do this because we are developing with private funds rather than banks, so we can build quickly, more efficiently and - because I have the money invested in full upfront - I am in a strong position to negotiate with the factories. I don’t want 1,000 of their bricks. I want all of their bricks. As a result I am hitting 30, 40, even 50% reductions on my materials."
Friends in the right places
And despite earlier conversations, life and work in Brazil is not all about battling enemies. Armstrong Emery has friends on hand too. He just makes sure they are the right ones. "Brazil is a third-world country and it is all about who you know," he shrugs, lighting another cigarette. "You need to know the town planners, the local architects. How good a friend you are with these people will determine how quickly you can get things done. You imagine a planner with 5,000 building applications on their desk. I make sure mine go to the top. I don’t pay anyone. It’s all legitimate. But I make sure I know people or that I am working with people who do. We have projects outside Natal in Brasilia, São Paulo, Rio, and for those we need builders. I pick one of the top three construction firms in the area and I make sure they know the right people. This is why it is so important to use local firms."
Expansion plans
Last month Armstrong Emery opened an office in his birthplace of Richmond and says that London will become the hub for all future European deals and Singapore will be the Asia Pacific equivalent. "EcoHouse was initially set up to raise funds for investment in Brazil," he says. "But we are doing more commercial work now across Brazil - we are hoping to deliver 500 office units in São Paulo over the next two years to generate £35m - and the rest of the world. "I am keeping an eye on Europe - any deals there will be done through London. Spain and Portugal, for example, are struggling at the moment. But there might well be some great opportunities on the horizon to pick up real estate at low prices - especially from bank repossessions." Capitalising on the weak, he says, is the British way. "We take advantage of those in weak positions. It is what we have been doing throughout British history. We may have done it in a velvet glove but we did it all the same. I don’t mind admitting this is how I sometimes do business. I can be pretty hostile when it comes to deals and aggressive when it comes to politics. I am on the front page of most local newspapers here every day and I have cut very close to the bone. But I will absolutely carry on what I am doing." On balance, the reinforced, bulletproof 4x4s were probably a wise investment.
