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Colombia: Sam Zell May be Onto Something

Freaking Heck's picture




 

By Chris at www.CapitalistExploits.at

Many, many years ago on a flight from New York to Vancouver I recall sitting next to a C-level executive from a pharmaceutical company which conducted business "globally," as he put it. "Global" being, as it turned out, the US and Canada. I had to humbly submit to his "international experience."

Upon hearing of my origins being Africa, he launched full-steam ahead, educating ME about Africa. Before I completely tuned out and started searching for the air hostess to see what hard liquor was available, I learned that Africa was ONE place. Of course... how foolish of me to think of it as a continent of 53 (if we include the islands) countries!

I also learned about the huts that we all lived in, and the wildlife (of course, the wildlife). Wildlife which littered the place like politicians litter the streets of DC. It all sounded tremendously exotic and I was eager to experience it!

African House

A typical African mud hut (extensively photoshopped, of course)

I was reminded of that conversation the other day when reviewing some of the statistics on Latin America's fastest-growing economy, and conversations I've had recently with investors while discussing Colombia.

To the uninitiated, Colombia is seemingly an equally misunderstood place... as misunderstood as my travel companion's understanding of Africa. It is presumably wallowing in grinding poverty, social decay and despair, with gun-toting guerrillas on street corners, and mafioso shaking down every oxygen breathing organism.

I'm very fortunate to have such a diverse and knowledgeable global network, both within our team and indeed extending out to the readership of this blog. Long-time readers may recall that Mark lived in South America for years, and has traveled Latin America extensively. We also now have a member of our team putting longer term boots-on-the-ground in Colombia in order to further develop our existing network in the country.

What has caught our attention are some of the following cold, hard facts:

  • Colombia is growing steadily at between 4% and 5% per year, while inflation sits comfortably under 3%.
  • A recent World Bank report ranked Colombia alongside the United States for protecting individual property rights, and #1 in Latin America.
  • A World Health report recently ranked Colombia at #22 for overall health system performance and - to put this into perspective - the US ranks at #37. The high quality and low cost of healthcare has caused Medellin to become a centre for medical tourism, sporting 5 of the top rated Latin American hospitals.
  • The signs of growth are as clear as pigeon droppings on an urban windscreen. As shown below, FDI has been strong and rising for the last decade.

Colombia FDI

This is balm to an investor's soul. What is even more interesting than the gorgeous Colombian señoritas is the fact that very little leverage exists in the real estate market. The domestic finance market is underdeveloped, and much of the real estate changes hands on a cash basis, or with owner financing.

In case you're thinking that gringos have already have bought up all the real estate... less than 1% of Medellin real estate is taken up by foreign investment. We, like Sam Zell who is investing heavily in Colombia, suspect this will change.

Medellin - Poblado

Medellin skyline (photo by: Grupo Colviva)

What we like to look for in a real estate market is not just relative value, comparing cities around the world on a square metre basis or even build cost, for example. Instead (or at least in addition to the standard metrics), what we really like to see is a rising middle class, preferably combined with low levels of leverage, which often is a result of a pubescent finance and banking sector. Colombia sports all of those!

Human nature rarely changes, regardless of what country you're looking at. We all want a home to call our own, have our kids spill food on our own carpets instead of a rental (crazy, I know), and this is typically the single most important purchase the middle class tends to make.

As I mentioned last week, safety has dramatically improved in Colombia and, while not as safe as a Volvo, it's certainly not as dangerous as a tuk-tuk. Though, when looking at real estate prices the market appears to be priced as though it's as dangerous as a tuk-tuk being driven by an underage Mumbai teenager full of beer which, if I'm not mistaken, many US cities seem to be looking like! Baltimore being the last, unfortunate set of fireworks.

The funny thing is, if I was to ask Baltimore (or Chicago, DC or Detroit) residents what they thought of moving to Medellin, Colombia the odds are high that not 1 in 10 would make the move, and most would think it more dangerous than their current environs.

We're looking forward to getting real-time feedback from within our own team on Colombia, and we will be sharing that with you herein as time permits.

- Chris

"Colombia is the next star of Latin America" - Sam Zell

 

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Sun, 05/03/2015 - 12:15 | 6056380 q99x2
q99x2's picture

Restribute Sam Zell's stolen wealth.

Sun, 05/03/2015 - 07:52 | 6055850 gmak
gmak's picture

""Colombia is the next star of Latin America" - Sam Zell"

 

If I had put my money into some corrupt drug-lord controlled country, I would pump it up so as to create an exit strategy when the herd followed.

 

If you want a country in Latam with any possibility of going somewhere, look to Brazil with its increasingly educated populace and DEMOGRAPHICS on its side. It's where Northam was in the 60s.

Now if only the leaders can avoid becoming Argentina or Venezuela  with their desire to stay in power 

Sun, 05/03/2015 - 09:32 | 6056052 weburke
weburke's picture

brazil?  talked to a brizilian banker just on friday, the bank of brazil charges 312 percent on loans. yup. also, they are doomed due to lack of water. 

Sun, 05/03/2015 - 07:21 | 6055814 PermaBug
PermaBug's picture

Anyone who thinks real estate is cheap in Colombia has probably never been there, and they sure as hell have never shopped for an apartment in north Bogota/Usaquen. Sure you can get a poorly built small place in a strata 2 or 3 neighbourhood cheapish, but I'd say comparable USA prices are cheaper.

But it's true the country has a lot going for it, especially a  cultured, educated and most of all hard working and ambitious population. Anyone who knows a 'paisa' knows that. Unlike every other country in Latin America, the people appreciate governments that are pro-business and in favour of free trade.

There is very, very little support for the lefty FARC terrorists, even in the rural, poor population (where fear and intimidation keeps their 'support' alive)

There's a corruption problem of course, but that's true of every country in the world, with the possible exception of a handful of nordic countries.

Medellin is not even remotely beautiful, nor is it particularly dangerous. Rather boring actually. Only place in the world I know where every day you can meet a super-model looking young woman who is working 3 jobs, usually all self employed, and is looking for a way to get her next business off the ground.

I passed on a great opportunity to invest there many years ago, and I'd pass again, much as I like the country and its people. Far better to make and keep your money in North America and live and play in south america.

Sat, 05/02/2015 - 21:18 | 6054998 Psquared
Psquared's picture

Not much debt? Shhhhh ... don't let Wall Street hear that.

Sat, 05/02/2015 - 21:10 | 6054973 armageddon addahere
armageddon addahere's picture

 I hear it is a beautiful country.

Sat, 05/02/2015 - 21:08 | 6054969 armageddon addahere
armageddon addahere's picture

Should be easy to get work done with all the coffee and cocaine, maybe that is why the economy is growing so fast?

Sat, 05/02/2015 - 17:14 | 6054303 kchrisc
kchrisc's picture

Sam Zell is such a Zionist tool that he allowed himself to be forced into that Chicago Tribune transaction to save some banks and/or big investors.

If he is gong into Columbia, you can be assured that their is a bigger game afoot.

Liberty is a demand. Tyranny is submission.

Sat, 05/02/2015 - 20:41 | 6054890 jimmytorpedo
jimmytorpedo's picture

It has already been pointed out once, but every time you spell Colombia wrong you look like total morons.

Colombia rocks, beautiful women, safer than the US.

Please stay home and don't ruin it for us

Sun, 05/03/2015 - 00:52 | 6055456 kchrisc
kchrisc's picture

Damn it! Colombia needs to change the spelling of their country's name to accommodate me. ; - )

Liberty is a demand. Tyranny is submission.

 

I'll write "Colombia" 100 times tonight to atone. ; - )

Sat, 05/02/2015 - 17:06 | 6054296 Flicker
Flicker's picture

Venezuela was once democratic and safe compared to what it is today.  At least there seemed to be some rule of law there.  But Chavez was elected and everyone said ecstatically, "Another Bolivar!"  That one event, and look at what Venezuela is now.

At that time Colombia was fighting and seemingly losing to the narcotics traffickers.  A decade later Venezuela is a pit, a predatious dictatorship with a whimsical legal structure, and Colombia it the new entrepreneurial safe-haven.

I'm not saying either of these countries was ever perfectly free of hazard, but that in a very few years, the political and economic and social compass has turned 180 degrees.  It will just as likely turn again before long.

Sat, 05/02/2015 - 18:02 | 6054453 Pancho de Villa
Pancho de Villa's picture

What the Fuck do YOU know about Venezuela? It was once, "democratic and safe..."? It was "democratic" in that it was controlled by two corrupt Political Parties, just like another country you Should know all about! "Another Bolivar!"? WTF? The currency is the Bolivar! Safe then, but not now? I'm not wasting another second of my life to "debate" a Fool... 

 

Where did you "learn" all this nonsense? TV? You are truly Full of Bullshit! 

Sat, 05/02/2015 - 21:42 | 6055062 Thirtyseven
Thirtyseven's picture

I believe he was referring to 'Simon', not referring to the currency (which adopted his name). 

That guy Simon, he not only got a currency named after him, but another country (a bit further south) as well.

Sat, 05/02/2015 - 23:59 | 6055311 Pancho de Villa
Pancho de Villa's picture

Why yes, of course... A reference to Simon Bolivar, El Libertador! When I first read that posting, I thought he was making a mis-spelled reference to Bolivia, another S. American Country with an indigienous President. The rest of the nonsense was what I was reacting to! I don't believe ANYONE in Venezuela ever thought of a comparison between Hugo Chavez and Simon Bolivar, not even his supporters! It is Stupid for anyone to even make that assertion! 

 

Simon Bolivar, "The Liberator" dreamt of Liberation from Spanish Rule and a united South America, leading armies that defeated the Spanish Forces of the Countries of NW S.A. and Panama, but he was pushed aside by his own generals before the fighting was even finished. Currencies were mostly named after these originally subordinate officers, Balboas, Sucres, etc, with Bolivianos en Bolivia or Bolivares in Venezuela, "Little Venice". 

 

I found "The General in His Labryrinth", by Gabriel Garcia Marquez to be an enjoyable read. It's a fictitious account of Simon Bolivar's last days. 

Sat, 05/02/2015 - 18:55 | 6054583 samjam7
samjam7's picture

Wow, you take your mouth pretty full! Well for a starters there were no political prisoners compared to now, corrupt or not corrupt and the military wasn't in the narco business.

With "another Bolívar" they meant Chavez not the currency I guess he knows that the currency is also called Bolívar. 
I was just in Venezuela a few weeks ago so if you know so much about this country, do enlighten me about the paradise that is 21st century socialism, but be aware I know a thing or two about that place as well! So come with facts and sapre me with consipracy theories from induced cancer through to an iminent US invasion, all not happening...I wonder where you get your infos, must be great sources indeed!

Sat, 05/02/2015 - 19:59 | 6054755 Pancho de Villa
Pancho de Villa's picture

My sources Live in Caracas! They hated Chavez also, but I have no desire to waste my day defending myself from attacks of Poseurs! 

 

If you were just there "a few weeks ago", then you must certainly know more about the Country than my friends who live there? 

Sun, 05/03/2015 - 05:46 | 6055738 samjam7
samjam7's picture

Well at least I know the country from my own experience, let's agree that any opinion is highly subjective even if your husband or wife were Venezuelan it would still be subjective since the country has become so populist. I'm not even saying Venezuela was a perfect little island of peace and calm before Chavez came to power, I know about the problems of the fourth republic. But he certainly did dismantel some institutions that worked more or less before that and now people are stuck with a butthead who ships of their oil for free and the military that live off the spoils of subsidised goods. You see infrastructure decaying, which once used to be pretty good when compared to neighbouring countries, all signs that the country has passed its hayday and I won't even begin to talk about crime and violence...

Sun, 05/03/2015 - 17:17 | 6056905 Pancho de Villa
Pancho de Villa's picture

 

"Flicker" posted…

 

"But Chavez was elected and everyone said ecstatically, "Another Bolivar!", and… 

"At that time Colombia was fighting and seemingly losing to the narcotics traffickers.  A decade later Venezuela is a pit, a predatious dictatorship with a whimsical legal structure, and Colombia it the new entrepreneurial safe-haven."? 

 

It struck me as Pretentious BS and I responded. There are Families that live in Venezuela that are divided over Politics, like here. I know that from my personal experiences, but they agree that a lineup of ZZ Top and Aerosmith is a concert worth seeing while in the US, even though they'd never heard of "that little old band from Texas"!  

 

Yes, All "opinion is highly subjective".  I agree one hundred percent! 

 

But, if you "google" Venezuela, political history", you can find this statement in Wikipedia, "By the end of the 1990s, however, the now two-party system's credibility was almost nonexistent…", so "Flicka", claiming a "180 degrees turn" IS Bullshit, no?  

 

Sat, 05/02/2015 - 17:13 | 6054294 Salsipuedes
Salsipuedes's picture

Caveat emptor as always. My wife is Colombian. Great deals anywhere if you can assimilate (harder than a Jade Helm muscle dude with tats at an L.A. Walmart so don't get any ideas.)

Beautiful homes, reasonably priced in the beautiful outlying foothill areas (still makes you a potential target depending on your profile).

Last week FARC (The Xe of Colombia- i.e., corporate henchmen) just cut the electricity on a Military Outpost in Cauca, 3 hours outside Cali, waltzed in and machine gunned twenty-five good, young soldiers straight to the Lord Jesus Christ.

San Andres Islands, Cartagena and lux zones of the big cities are attractive and competitive but if you don't speak Spanish these days, you better move to Ireland. 

Since we copped the heroin market the pressure is off the coke cartels. The U.S. is still all over the rest of it. 

In short, if the FED ain't FIXED soon, every paradise is lost.

Sam Zell, go home.

 

 

Sat, 05/02/2015 - 21:45 | 6055076 libertysghost
libertysghost's picture

My own caveat...my fiancee is Colombian as well.  And ya get about a +1000 (or +1001) on the need to speak Spanish...hablo un poco espaniol ;-)  As a visitor it's not a huge deal as people are pretty patient and accomodating but to do any realy business there you would have to know the language pretty darn well. 

But even if you speak the language you're probably going to "stick out" in most of Colombia.  I hear the people in Medellin tend to be more fair in their complexions, and a tad taller, but everywhere else I am stared at constantly.  It can be kind of flattering (although Colombian woman are natoriously jealous and my fiancee fits that steroeotype well), but here's a telling standard we do.  

We like to take off on short trips out of Bogota.  When we hail a cab...I stay back while she negotiates the fare before I come up and get in...or you might get the gringo up charge.  When we get to a hotel (you get better rates not booking ahead), she goes in and gets the room and I stay outside so we don't get the gringo up charge...and so on and so on...

Now restaurants and stuff, the price is the price.  But still, I love the country and I'm thrilled I'll be going there the rest of my life.  I actually hope to buy a place there, rent it out for a decade and have it paid back by the time I retire.  I do think there's a lot more up side in Colombia than here when that time comes...and possibly before.  They seem to have a real economy being created...they have much better demographics than here (or most of western society and of coure JAPAN!), and they don't have the debt.  That is going to matter.  They also don't have all the background radiation...just saying ;-)

 

I mean...the place is a shithole!!!  Please don't go there!!!!! ;-)

 

Sun, 05/03/2015 - 14:28 | 6056654 ebear
Sat, 05/02/2015 - 21:57 | 6055113 Salsipuedes
Salsipuedes's picture

Assimilation in action! Good on ye mate! And yes, sovereign DEBT is the operative word. Thank God Goldman Sachs was busy with the yachty set instead of the panga set. Hope springs eternal....somewhere.

Sat, 05/02/2015 - 21:24 | 6055013 Ignatius
Ignatius's picture

Nice summary of 'Plan Columbia."

Sat, 05/02/2015 - 22:20 | 6055141 Salsipuedes
Salsipuedes's picture

Mas o menos pero gracias. Here's a starter feed for the semi-delusional, like Sam Zell who couldn't give a fuck about Colombia.

https://www.youtube.com/watch?v=SQ89wDa64wU

 

Sat, 05/02/2015 - 18:58 | 6054592 Oldrepublic
Oldrepublic's picture

re: San Andres Islands

actually, English is spoken there by many native people

Sat, 05/02/2015 - 20:13 | 6054807 Salsipuedes
Salsipuedes's picture

As in most tourist destinations, even Cartagena.

Want to buy there? Live there? Love there? Know there?

Habla Español?

Sat, 05/02/2015 - 17:13 | 6054311 kchrisc
kchrisc's picture

Going to get a lot worse when the DC US and dollar collapses.

When the DC US expanded their war against the people--"Drug War--into Mexico in 2006, the "unemployed" cartel rank and file from the losing cartels took up kidnapping, etc.

So when the DC US and dollar go "poof," most of the cartel rank and file in Central and South America will be out of work. Oh joy.

Liberty is a demand. Tyranny is submission.

Sat, 05/02/2015 - 21:56 | 6055107 Anusocracy
Anusocracy's picture

Liberty is natural. Tyranny is an artifact.

Sun, 05/03/2015 - 10:47 | 6056204 BlindMonkey
BlindMonkey's picture

Tyranny is as natural to gov as breathing is to us. It has been the natural state for thousands of years with brief visits by liberty.

Sat, 05/02/2015 - 16:04 | 6054129 uncle_disgusting
uncle_disgusting's picture

Medellin is a great town, sited among lush green hills. Seemed prosperous when I was there 5 years ago. And yup, las chicas son guapas.

Sat, 05/02/2015 - 15:35 | 6054076 ABG LINE
ABG LINE's picture

Hey! Sam Zell! Tu no sabes NADA!

Sat, 05/02/2015 - 16:04 | 6054130 kaiserhoff
kaiserhoff's picture

Eso no es cierto.
La cocaína, que es muy rentable.

Sat, 05/02/2015 - 12:03 | 6053694 gimme-gimme-gimme
gimme-gimme-gimme's picture

I'm sure those african mud huts aren't photoshopped, but I bet the mile high fence to keep out all the poor (black) people was cropped out of the picture.  (since I'm assuming that picture is of a white neighborhood somewhere in South Africa)

 

Same goes with Columbia.  The realestate is dirt cheap cause it has a rampant violent crime rate like a lot of countries in South america. (you can thank the CIA and US foreign policy/war on drugs for that)

 

If you are going to move to South america, best to choose one of the nations where you won't have your place broken into and your throat slit while your family is asleep.

 

http://www.neighborhoodscout.com/sc/columbia/crime/

Sat, 05/02/2015 - 13:46 | 6053891 SleepyLagoon
SleepyLagoon's picture

A reliable anti-authority, for sure. Doesn't even know how to spell the name of the country.

Sat, 05/02/2015 - 15:50 | 6054097 Babalooee
Babalooee's picture

Sleepy,

   Thank God you're around. After all these years I never picked up on the spelling

Sat, 05/02/2015 - 21:43 | 6055072 Oracle of Kypseli
Oracle of Kypseli's picture

The problem is not the spelling but the fact that the redirect gets you to Columbia South Carolina.

 

Sat, 05/02/2015 - 21:53 | 6055092 Anusocracy
Anusocracy's picture

Colombia is the next POS toady country orbiting the super-massive black hole that is the US.

Sun, 05/03/2015 - 01:55 | 6055540 Manthong
Manthong's picture

Absolutely nothing wrong with thatched huts on the beach or riverfront as long as you have a little screening and enough 55 gallon barrels of DEET to keep the insects at bay.

 

Sun, 05/03/2015 - 06:14 | 6055756 Keyser
Keyser's picture

Same goes with Columbia.  The realestate is dirt cheap cause it has a rampant violent crime rate like a lot of countries in South america. (you can thank the CIA and US foreign policy/war on drugs for that)

Yet another arm-chair quarterback that has never been to Colombia, but knows everything there is about the country... Come on now, if you are going to rag on a country you have never been to, you should at least spell the fucking name correct... Admit it, you know fuck-all about the place...  I've been going to Colombia for decades and lived there for years, back in the days of Pablo Escobar, when Colombia was dangerous and Venezuela was safe... Now the opposite is true, but gimme-gimme-gimme dumb as does not know or care about facts... 

Fuckwit Americans think their shit doesn't stink and that they can piss on anyone with impunity... Fuck that and fuck you gimme-gimme-gimme... 

Sun, 05/03/2015 - 07:28 | 6055826 eishund
eishund's picture

If you fuck an imbecile, you'll most probably produce a moron....just saying.

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