TBY talks to Luis Fernando Correa Bahamón, President of Red Empresarial Luis F. Correa, on the evolution of the real estate sector in Colombia.

Luis Fernando Correa Bahamón
Luis Fernando Correa Bahamón is a specialist international real estate developer with 32 years of experience. He graduated from the Universidad Javeriana with a degree in Economics, and obtained an MBA in Marketing from Xavier University. He is currently the President of Red Empresarial Luis F. Correa.

How do you assess the evolution of the real estate sector in Colombia?

Politically, we are very stable now, but we have a lot of reasons to remain concerned about what is going on around the country in terms of the economy, security, and controls on handling cocoa crops. The world is in turmoil, and this makes countries like Colombia attractive for investors looking to grow businesses. Plus, the next generation of Colombians, educated abroad, are returning to Colombia in much greater numbers than they did in the 1990s. Now that they are coming back, they are managing and generating huge interest from their peers working in real estate funds, which is a very popular method for accumulating wealth in today's world. Many real estate and construction companies are basing their future growth on real estate funds. This makes a big difference because we are not simply thinking about initial sales or presales to fund projects anymore. Now, we're getting new and fresh money to build projects, and then evaluating which markets will be able to buy mature products in four or five years. This is another way of enhancing property value. With regard to retail, office space, hotels, and industrial space, we have been selling everything piece by piece. This is how the sector operated until about five years ago, when builders and investors began to keep properties with the intention of renting or offering them to different funds, such as pension managers. This development is changing the whole spectrum and horizon of the real estate sector in Colombia, and it will bring more and bigger investors to the country.

Fiduciary rights are becoming more popular with local investors. What advantages do these rights offer?

Our company began the fiduciary or trust style of sales 20 years ago. We were the first company in Colombia to do so, and we successfully brought this model to Ecuador. However, when we took it to Panama, people didn't pursue it. At that point, the biggest problem was that we didn't have the money to fund whole projects, and we had to go to small investors to get them to fund pieces of a project. At this time, maybe from 1991 to 1993, individual hotel suites, which might cost $50,000 to $60,000 per unit, were significant investments for small investors. We divided the units into five or six parts to make it easier for people to get into the market and expand it. Now, people can get into the real estate sector or hotel business by paying only a fifth of a room; this is the basis of the fiduciary trust system. When we began doing this we had a lot of success because we could bring investors with just $5,000 or $7,000, and let them gain access to the profits of a high-yield business with only a small investment. That was a big hotel investment title (HIT) at that point. We did very well in the 1990s with this model and sold many hotels in this manner, including all of the Sheraton hotels in Colombia. This model hasn't changed, and it is still a valid model for raising money for a project. However, it is just one of many tools that we have for raising funds.

With 20 years of experience in the hotel sector and developing large projects such as the Sheraton and Capital Towers, what are you expecting with your latest project?

We've had several good years; we've been growing steadily for more than six years. About two years ago, we decided to focus mainly on hotels. Even though we do some residential, second-home, and retirement developments, our main focus in the current period is hotels. We just opened our first hotel, the Tryp Hotel. This was recently bought by Wyndham, a US company. This is a great location because it is safe and close to the airport. We're planning to open the others in the coming months. We also operate hotels through a management company called Diplomat Hotels, and we are pursuing many more opportunities. Colombia is similar to a child that is beginning to grow, and we want to nurture this growth. Colombia is a new economy.

“The next generation of Colombians, educated abroad, are returning to Colombia in much greater numbers."