Oak International Finance (Oak IF) successfully raised 110.000€ for their social home developments in Brazil and now they are raising the second tranche for another 110.000€ through Ecrowd! Oak IF will use the funds to build approximately 800 homes for the underprivileged in Brazil. The homes will be build as part of the Minha casa, minha vida program.

We have met with Rob Meyer, who is the strategic planner of Oak IF. He will explain us more about the program and how they are planning to reach this ambitious goal.

Hi Rob,
thank you taking the time to explain in more detail the great work Oak IF is doing in Brazil.

Let’s start with how you ended up in Spain?

I was looking for investment opportunities in the Spanish property market in 2001, and the agency that sold me my properties was offering me employment. Within 12 months had set up my own agency selling properties to Expats from the UK.

How did you meet George and how did you start the collaboration in Brazil ? How come a Spanish Brit, and a British Polish are building homes in Brazil ?

We met through a mutual friend when I was trying to raise finance for some property developments in Spain. After the downturn in the property market in 2008 – 2009, we began to look for new opportunities. In 2011, I met with Julio Andres Iglesias, now our General Manager in Brazil. Julio is a native of Brazil but has family in Alicante and was in Spain looking to raise external finance to expand his own construction company working in the My House My Life programme.

In 2011, whilst visiting Brazil to explore the My House My Life programme and I was immediately taken by the enormous potential. I immediately went back to George with regard to raising finance. It took some persuasion, but after finally convincing George to travel to Brazil and to see the potential for himself, we agreed to work together again. We agreed that initially we would invest our own funds to test the market. Since then, we have invited friends and family to invest, which they have done successfully. Now we are an established player with a proven track record and we are looking to raise larger finance so that we can grow the company.

Since when are you building there ? How many homes have you already build ?

We started with just a couple of houses in 2013 as a project test and have grown steadily since then. The Oak IF Group has already built over 300 houses through our own finance and another 200 houses as building contractors for other promoters.

Aren’t local companies building there ? What competitive advantage do you have to be able to build in Brazil compared to local companies?

Yes. There are numerous companies building in the My House My Life programme. We are an established player and we compete on a level playing field with the local companies. It would be untrue to say that we have a competitive advantage, but demand far outweighs supply. So there is room for everyone.

Do you construct in the whole of Brazil, or only Natal ?

At the moment, we only build in Natal.

Why Natal only ?

At this stage of our development as a company, there is more than enough demand in Natal to satisfy our construction capacity. Natal is a rapidly expanding city, and with the recent opening of the new international airport, new initiatives and government investment in tourism, and Chinese investment in industry, we see this trend as going to continue. We have also built up a good network of contacts in such institutions as the local Land Registry Office, the Planning Department and the Utility suppliers which is a vital part of what we do. Because of this, we have chosen so far to concentrate our efforts in our established area. But as we grow, we will definitely look to expand to other geographical areas.

This is the second tranch, and together with the first tranche you’ll raise 220.000€. You claim you can build more than 800 homes with this amount. Can you explain how you do this ?

Yes. With the initial funds of 220.000 euros and an approximate cost price of 18.000 euros, we can build 11 houses. The profit margins on each property are approximately 30% over cost. The Ecrowd! investors receive their returns through the income generated by the Segorsolar Solar plant, the total profit from each phase can be applied as capital for the subsequent phase. Each phase of construction requires approximately 8 months to complete and sell, so that over the 8 years of the loan agreement with the ECrowd investors, we can build 12 phases.

Each home costs only 18.000€ to build ? Are they then not low quality homes ?

No, they are not low quality. Clearly material and labour costs are substantially lower in Brazil than they are in Europe. All homes must be built to a minimum standard as set down by the My House My Life programme. All properties undergo two separate inspections as part of the approval process – firstly by the town hall engineer and secondly by an independent engineer appointed by the bank that is providing the finance for the buyer. If the property does not meet the necessary quality and technical specifications, finance would be denied. Our General Manager, Julio, is a fully qualified Civil Engineer with an MBA. He personally oversees all the construction to ensure that it meets the quality standards required.

How long does it take to build a home ?

The physical construction only takes three months. The vast majority of properties are sold well before the construction is complete, with many being sold before construction even starts. However, we need to pass several administrative processes to register the properties before the escrituras can be signed. This can take as long, as the construction process itself. We work on a conservative estimate of 8 months per phase, from purchasing the plot to receiving the funds from the sale.

How large is the team in Brazil ?

We have five people in our management team in Brazil. We employ over 100 building workers on our construction sites.

From left to right:
Julio Andres Iglesias – General Manager
Daniel Gadelha – Not directly part of the team but shares an office. He is a public notary and therefore has to remain independent.
Rob Meyer – Director
Joao Simoes – Sales Manager
Lucas Duarte – Lawyer

So this program depends heavily on government support. The Brazilian government has recently been changed and Mr. Bolsonaro is the new president. Is he supporting the new program ?

Not only is Mr Bolsanaro guaranteeing his support for the programme, he is planning to improve and expand it. He has already guaranteed the government’s continued support for the full term of his presidency but he is rebranding the programme under the name Casa Brazileira. This is a typcal political move of someone who wants to put their own stamp on a project so that they can say their version of the programme is bigger and better than his opponents version.

Are you developing other projects ? Why do you use the funds of the Ecrowd investors to this project specifically?

We are fully focused on the My House My Life market. Over 90% of residential construction in Brazil comes under the umbrella of My House My Life and demand continues to grow. There are opportunities in the open market and the margins can be higher, but demand is much lower and that market is over saturated.

We have numerous opportunities that we would like to develop within the My House My Life programme and we are always looking for additional investment.

So, if you are developing other projects, Ecrowd! is not the only way to collect funds, right ? What returns do you offer to other investors ?

We have people that invest directly into our company. The typical minimum investment is 100.000 euros but this can be syndicated. If we had four investors that wanted to put 25.000 euros each, we would accommodate that.

For our direct investors, we offer two options for the financial package. The investment is 3 years with option to extend/reinvest. If the investor wishes to receive their interest annually, we offer a 10% annual return. Investors who are willing to wait until the end of the 3 years term before receiving their interest can earn 12% per annum. These higher returns reflect the fact that the repayments are not backed by the Segorsolar Solar Plant.

What risks do you foresee for these projects ?

A: The most discussed risk factor for investors is currency exchange. For those investing through ECrowd as part of our crowd funding, this is not a factor as the repayments are guaranteed by the income generated by the Solar Plant in Spain. For direct investors, our cash flows show that we have sufficient margin over a 3 year period to cover any currency fluctuations

B: The second most discussed risk factor is the political situation, but as explained above, the new government which has just started a 4 year term has already guaranteed to continue supporting the programme for that period as a minimum. Given that over 80% of households meet the financial criteria to qualify for the programme, any politician choosing to end the programme would be committing political suicide.

C: The other risk factor that has to be considered is corruption. Even with the high demand for properties, this is a very competitive market with developers all trying to obtain the best projects and at times to “jump the queue” when it comes to the administrative process for registering new properties, for example. Previous governments have already stamped out the majority of corruption and the new government has vowed to introduce even more stringent measures.

D: Other investors also ask about whether rising material costs during construction can affect our cash flow plans. All our building contracts are set up on a fixed cost basis which protects us against such rises.

How come you have invested in this solar installation ? Why didn’t you use the proceeds of earlier years to invest in Brazil ?

In 2008, we took the decision to invest in Solar Energy in Spain because of the government subsidies offered under RD661/2007. At that time, the My House My Life programme did not exist in Brazil. As mentioned earlier, our initial entry into the Brazilian market was financed with our own funds, including those that we had received from the production of the Solar plant. So we have in fact used some of the proceeds from Segorsolar in Brazil already. Refinancing the investment we have done in solar plant, allows us to bring forward future income and develop new homes faster.

How do the funds flow to Brazil. There is no free movement of cash between the countries is it ?

Finance going into and out of Brazil is strictly controlled. No person or company can trade in Brazil without being registered. For an individual, this means having a CPF (equivalent of a NIE) and for companies, a CNPJ is required (equivalent to a CIF.)

For this reason, we have set up a Spanish company called Roble Investment 2020 SL to act as a conduit for funds from Europe into Brazil. Roble has been registered to trade in Brazil and has its CNPJ and investors can invest directly into Roble under Spanish legislation. In order to transfer funds from Roble to the Brazilian company, formal loan contracts between the two companies have to be registered with the Brazilian Central Bank before they release funds to the Brazilian company. Any funds returning to Spain from Brazil, have to be cleared by the Brazilian Central Bank under the terms and conditions of the registered loan contract.

And the last question, how are the funds of the first trance invested ?

I would like to thank the Ecrowd! investors that have invested in our projects. We have sent the funds to Brazil, but due to anti money laundering checks by the Brazilian Central Bank, this process can take 2-4 weeks, but they will very soon be changing people’s lives for the better

Once we were sure of the success of the first tranche, I have travelled to Brasil and pre-purchased building plots in a large development in Natal, which you can see on the photo below. We will start construction of the houses on those plots the first week of July.

Thank you…