Overseas Properties

In March, The Straits Times reported that Brazilian developer EcoHouse Group had netted $70 million from Singapore investors for three of its housing projects in Brazil, the latest one being the 2,176-unit Bosque Residencial project in Natal, in the north-east of the country.

The promised return is 20 per cent within a year, when the units are resold to Brazilian buyers later at a higher price.

One forumer noted: "How come these people can afford to spend so much money in super expensive marketing, hire the priciest office in Singapore and Dubai, buy football clubs in Brazil and Italy, pay 20 per cent returns in just one year and still make a profit?

"I would believe it if they were developing luxury properties for the highest segment . . . but for goodness sake, it is social housing in an emerging economy!"

A forumer at Valuebuddies.com highlighted that EcoHouse on its website said: "Across its global companies, EcoHouse employs more than 1,000 people in eight countries and 2013 revenues are expected to top £250 million ($400 million)."

He asked: "If revenue is 250 million pounds, and at 23,000 pounds per house, they would have to sell and complete 10,869 houses."

Think of it this way - why is the Government allowing foreigners to profit from social housing? And why would they fly half the world to sell you the project? Why aren't they selling it straight to the poor?

Just recently, two companies in the overseas real estate business - Dolphin Capital Asia and Shenton Wealth Holdings - have been put on the Monetary Authority of Singapore's Investor Alert List. Both companies are related.

In doing due diligence for a client on the investments proposed by the above, a financial adviser noted that "the Beneficiaries' Representative is someone whose registered address is in a place called Seychelle - Never heard of."

Yes, he noted, there is a well-known island called Seychelles with an "s" at the end. "How can a legal document written by a law firm got the spelling of a country wrong or is there another explanation? Or is there really such an address '306, Victoria House, Mahe, Seychelle'?"

The financial adviser searched the address using Google Earth assuming it's Seychelles. "Very puzzling to find the closest match is a Hilton Resort. Further digging uncovers a disturbing info that it may be a popular identical address used by some get-rich-quick schemes (as reported at http://info.hyip-expert.com/stoic-capital-review-and-information/)," he said.

I attended these seminars more than a year ago. Then they were touting 12% over 12 months (2% per month from the 7th to 12th month).  But now if you go to the website of the company selling this, the holding period has increased to 24 months. It is now 24% over 24 months. Why has the holding period increased? Does borrowing from a bank in Germany cost the developer more than 12% a year which is why they must look for equity investors?

Remember to do your due diligence. Also, if it is too good to be true, it usually is.