Paradise lost as UK investors are left without their investment or dream home.
If everything had gone according to plan, Alison Landell would be holding the keys to her very own holiday home in northeast Brazil by now. Four years ago she put down a €30,000 deposit on an off-plan one-bedroom flat in the Lagoa do Coelho resort and encouraged her mother and brother to do the same. Between them they spent €90,000 on three flats, each with a price tag of €75,000.
Back then they could not believe their luck. The resort included plans for 30,000 homes, a marina, golf course, sports centre, spa, heliport, shopping centre and a plastic surgery clinic, all on an idyllic beach and around a lagoon. “We got in at a fantastic time, really early,” says Landell, 39, a mother of three from North London. “Everyone was excited about the development.”
None of it was ever built. Instead, Luís Mateos, the Spanish developer behind the scheme, is languishing in jail in Spain charged with fraud, while the site of the project, one hour’s drive north of Natal, is untouched. Mateos, the president of Grupo Nicolás Mateos, was sent to prison last December after a handful of Spanish investors who had bought in Lagoa do Coelho pressed charges against the developer. The number of investors who lost out is estimated to be more than 500 across Spain, the UK and the rest of Europe. Many of them, including Landell, are taking further legal action to recoup losses.
“It appears that the money was transferred to Spain and never forwarded to Brazil. It looks as if the developer just spent the money,” says Landell. “The sad thing is that I don’t really want my money back. What I really want is my apartment in Brazil. We went in at the right time and our dreams are ruined because of some dishonest people.” Those who bought into the scheme may have been diddled but plenty more have been disappointed for other reasons.
Many who were sold the dream of northeast Brazil as a paradise and property hotspot while prices rose steeply in the mid-Noughties still have little to show for their ventures. With the property boom officially over, the coastline of almost continuous beaches, from Bahia to Rio Grande do Norte, is littered with plans for property developments that have never come to fruition.
Schemes by Spanish developers, launched with enormous fanfare, are the most notorious.
The Grupo Sánchez, a Spanish developer of 20 years that made its name in the Costa del Sol, is one example. Sánchez was planning Grand Natal Golf, a flashy scheme of 3,200 homes in Natal, advertised by Antonio Banderas, when it went into administrative receivership with debts of €97 million in March last year.
Farther south, the Reef Club, a hugely ambitious scheme an hour’s drive from Recife, has caused much consternation among locals for failing to get off the ground. The developer, Qualta Resorts, a company with Spanish roots now registered in Brazil, says the project was hit by delays in planning permission as well as the global economic crisis. Plans for a luxury holiday resort of 3,700 homes, a 300-bed hotel and golf course set in 500 hectares of Atlantic rainforest and mangroves, were held back as the developer was forced to revise the masterplan to obtain the environmental licence. The paperwork was granted last November as the credit crunch deepened and scores of investors who had reserved homes off-plan pulled out.
However, David Gordon, a shareholder and commercial director for Qualta, says that the project is back on track. He expects building work to begin in November and the first 600 homes to be completed at the end of 2011. “It is the only project in Pernambuco of this size and we will hold it through,” he says.
Felipe Cavalcante, president of ADIT Nordeste, the Association for the Real Estate and Tourism Development in northeast Brazil, says that foreign developers’ failure to deliver is bad for the country. “This sort of thing damages our reputation. Now buyers and agents are scared of Brazil,” he says. He believes that many of the developments envisaged by foreign developers floundered because they were overambitious, too large and environmentally insensitive.
Despite the gloom, some still believe that Brazil has potential. Last March, Nordeste Invest, a real estate conference organised by ADIT and aimed at property developers and hoteliers from around the world, attracted 40 potential investors from the UK, Spain and Portugal, double the number who attended last year.
Alison Akinrinlola, the sales director at Eden Overseas Property, an overseas property agent, was there, scouting out investments that will weather the economic downturn. “The good thing about the credit crunch is that the companies which set out to make a quick buck are now out. Those that remain are in it for the long term,” she says. Ask any of the investors why they attended the ADIT conference and the answer would invariably be that Brazil has “enormous potential”. Many quoted the 2001 Goldman Sachs report in which the bank famously argued that the combined wealth of the growing economies of Brazil, Russia, India and China (the so-called BRIC countries) could eclipse the current richest countries by 2050.
In the short term, Brazil is bracing itself for the 2014 World Cup, which is expected to attract further investment and tourism. In preparation the Government is spending $250 billion (about £150 billion) over the next six years on airports, roads, sanitation and hydroelectric power. Add to that an emerging middle class with greater spending power and government plans to finance one million affordable new homes by 2010, and there is scope for cautious optimism.
Alessandro Teixeira, the president of ApexBrasil, which promotes trade and investment, sums up his country’s current appeal: “Investors are keeping their money under the mattress right now. For us, this means that the crisis can create opportunities if we present investors with viable deals. We are not immune to the crisis but we are in better shape than most countries.”