TBY talks to Juan Felipe Hoyos Mejía, President of Coninsa Ramón H., on the state of the real estate sector, current projects, and his positive outlook on 2013.
THE BUSINESS YEAR How would you describe the state of the real estate sector in Colombia?
JUAN FELIPE HOYOS MEJÍA The real estate sector is not as big in Colombia as it is in developed countries. However, we are receiving support from government policies in order to facilitate the development of different projects. For example, in Spain, they build around 500,000 new homes a year, whereas here in Colombia we build around 120,000 homes. There is a significant distinction between Colombia and developed countries, but the country is getting stronger.
How has Coninsa Ramón H. contributed to the development of the country’s urban landscape?
Coninsa Ramón H. started in Medellín; however, we are also in Bogotá and the coastal regions. In 40 years of operations, we have built many new homes, as well as commercial and institutional buildings. We do not just build real estate; we are also involved in the infrastructure sector. We have made a big impact on Medellín and the company is very proud of its accomplishments. Coninsa Ramón H. has constructed about 18,000 new homes in the city, and it also built the stadium suites for the South American Games. The company also built many non-residential buildings. When I go around the city with visitors, I am able to show them one of our buildings every five or 10 blocks.
Coninsa Ramón H. built the Empresas Públicas de Medellín building, nicknamed the “intelligent building.” Why is it an “intelligent building”?
When it was built around 12 years ago, it was the first intelligent building. It is an eco-building and a system-controlled building that has a master control room for fire protection, air-conditioning, and energy conservation. Because of its size, and this specialized control room, it was called the first intelligent building in Medellín.
What are the most iconic buildings in Medellín?
In my opinion, the Empresas Públicas de Medellín and the buildings we constructed for the South American Games are the most iconic buildings. Coninsa Ramón H. built four coliseums and the athletic field. It was extremely important for the city and we did not have much construction time. They had to be approved by the International Olympics Committee, so there was a lot of pressure, but we built them right on schedule and the South American Games were very successful.
How would you assess the country’s infrastructure needs?
Colombia is investing a significant amount in the infrastructure sector. For the first time in many years, infrastructure is the leading sector in construction. It was not always this way. The different forces of the country are pushing toward investing more in infrastructure. The government is improving policies for local investors, and especially for foreign investors. The amount of capital that has to be invested is huge. The government is giving excellent incentives for those investors.
Coninsa Ramón H. recently won the bid for the Hidroituango project. What will this project mean for Coninsa Ramón H. and for Colombia in general?
The project will cost approximately $1 billion and it must be built in 72 months. It is currently the largest project in the hydroelectric sector. It is good news for Coninsa Ramón H., and we are delighted with winning this contract. Coninsa Ramón H. has entered into a joint venture with a Brazilian company and Constructora Conconcreto. We also built Porce III, which was another hydroelectric project from Empresas Públicas de Medellín. Since Coninsa Ramón H. was part of the same joint venture, we were able to offer a very competitive bid. Our company is proud to participate in this project and many people have congratulated us. The Hidroituango project will help us strengthen our image as a market leader in infrastructure construction. The company has received a lot of publicity about this project due to it being the largest of its kind in Colombia. Along with Hiudtroituango, we are building various other smaller hydroelectric projects. Adding all of these together emphasizes our expertise in such projects.
What other projects are you focusing on?
Our company has four different business units. In the infrastructure sector, we specialize in hydroelectric projects, but also in roads and highways. We have won a contract called La Via to Chocó. Chocó is a very poor region in Colombia, and for many years the people of Chocó have wanted to be connected by roads and highways. Coninsa Ramón H. was awarded with a contract to improve Chocó’s infrastructure. Recently, the company also received a contract for road maintenance in Los Llanos, a region known for its strong agricultural industry. These two contracts are some of our other big achievements in the infrastructure sector. Coninsa Ramón H. is also involved in commercial, industrial, and rental property units in the housing and commercial sector. These three sectors, along with the infrastructure sector, are our core business. We started with housing units, and we continue to do very well in this area; around 40-50% of our business is dedicated to housing units. Regarding rental properties, we are managing about 5,000 homes. Our company does not own them; however, it does manage them. Coninsa Ramón H. introduces the owners and the renters. Another area of expertise is commercial building. Grupo Éxito, the largest commercial (retail) group in the country, has recently awarded us with a contract to build a $50 million shopping center in a city called Villavicencio in Los Llanos.
Describe the companies financial performance during 2011, and what do you expect over 2012?
During 2011, it was not as good as previous years. However, we are expecting a superior performance over 2012. In 2013 we will have an 80% backlog, i.e. the contracts we have won over 2012 will be constructed in 2013. That is why 2013 will be a very good year for income and earnings results. Coninsa Ramón H is improving its process knowledge and investing in technology to become the leading company, delivering good results for our customers and shareholders.
How do you see infrastructure of Colombia developing in the next 10-20 years and what are the main challenges?
The country is investing a lot in infrastructure. The government’s goal is to invest $20 billion over the next 10 years. The industrial, agricultural, and government sectors are aware that if the country does not invest in infrastructure, Colombia is not going to be a competitive country. There is a chance that not all of the $20 billion in investment will be completed over the next 10 years, but it will not be like in the past, where only 40% of the budget was used. We will see numbers in the 80% accomplishment range. There are very good opportunities for foreign companies that ally with local companies like ours.
Does Coninsa Ramón H. have plans for expansion abroad?
Not in the short term, there are no plans to leave the country yet. Coninsa Ramón H. has a lot of projects within Colombia right now. The market has enough opportunities for us here. However, we have in the past taken advantage of opportunities in other countries, such as Peru and Ecuador, or within the Caribbean region. We are not being pro-active in expanding abroad, but if there is an opportunity, we will pursue it.
How has the rental sector evolved in Medellín over the last 5-10 years?
The rental sector is not as volatile as other sectors are; it usually maintains a steady growth rate. The rental sector is expected to grow at about 4-5% per year over the next couple of years. Bogotá is the largest city in the country and it has grown faster than Medellín, especially in the housing sector. There is an increasing number of foreign companies in Bogotá, and as a result the possibilities in the rental sector there are better than in other cities around the country.
This interview will be published in 'The Business Year: Colombia 2013'. To pre-subscribe please e-mail us at info@thebusinessyear.com
© The Business Year - October 2012