In this section:
Over the last nine years, we have numerous Americans and Europeans contacting us with questions about investments they have made, with other people, in Brazil that went sour. The requests for help and support have become so frequent that we determined to add investment resolution consulting as one of the core areas of our business.
What we have found is that certain individuals in the business of “attracting foreign investors into Brazil” are not reliable, present themselves as professionals, but have an incompetent capacity or are nefarious in their actions.
Why do we help?
The affected foreigner investors, when faced with a negative situation of their investments, have difficulty to discern what happened, who was responsible, and how to move forward to resolve. The big law firms in Sao Paulo charge fees on the margin of US$500 to US$750 per hour and this is simply unreasonable for preliminary investigation type work.
What are our fees?
Our current fees are US$150 per hour and we are hired by clients to complete the preliminary review.
How do we work?
We see our selves as the preliminary review people. In many cases investors only suspect they have made an investment that has “gone bad”. They have no proof, so we are hired to find proof and put together a report showing what happened and how to resolve it. Once we know the problem, if a legal route is not necessary for resolution we work on behalf of the client to resolve the problems. If a legal route is necessary, then we recommend an experienced attorney and brief the attorney on what happened, so the attorney does not have to repeat all the preliminary work, at great expense to the client.
Case Studies and Experience
We have consulted in several cases for problem resolution. Our conduct is of utmost discretion, we act responsibly and decisively, preserving the confidentiality of our clients.
Below we list a few examples of cases that were analyzed by Big Lands Brazil. It´s good to emphasize that In all the following cases, Big Lands Brazil did not sell the properties and were only hired after the investments turned negative for the buyers:
Case Study I - Client A
In 2008 an American client acquired two properties in Brazil, totaling approximately 4,000 hectares directly from a Brazilian seller. The American client never had the titles of the properties properly transferred to him, and when he decided to sell the investment, he couldn’t, because he was still technically not the owner of the land, he only owned the land based on his original purchase contract.
We were hired to unwind the investment and discover the reality of the situation. During our analysis we discovered that the situation was far more complicated than what was previously expected:
- 1.) The Brazilian seller never legally transferred the two properties to the American client.
- 2.) The better property out of the two, with area of 3,000 hectares was never owned by the seller. The said seller sold a property that he never owned, which could have been prevented with property due diligence. The buyer lost this property.
- 3.) To get the remaining property legally transferred to the buyer (nearly six years after it was purchased by the client), we had to track down the seller, which was not cooperative.
The conclusion is that the buyer did not have good guidance when he purchased the land, he bought land from a person who was not the owner, and he paid for land that was never transferred to him. The buyer could have avoided this by contacting Big Lands Brazil in the beginning.
The solution is to force transfer of the smaller piece of land and then sell to recoup as much of the original investment as possible.
Case Study II – Client B
In 2008 a European investment fund purchases approximately 20,000 hectares of land for tree plantations, they paid a value that was in excess of twice what the plantation was worth, thus, from 2008 to the present the investors have seen minuscule dividends and no land appreciation.
A bank that invested in this fund contacted us in the first half of 2014 to ascertain the reason why they were not getting the dividends that were original projected.
- 1.) We investigated the properties owned by the fund and found that the fund contracted management company for the property had inflated the number of hectares in the forestry plantation and falsely reported to the investors additional inexistent 1,000 hectares of the tree plantation that they actually had.
- 2.) We found that at time of purchase, the payment value for the land 300% above the market value for land in this specific region.
- 3.) We discovered by reviewing the seller’s records and the buyers records that between R$60 to R$70 million was siphoned off the top of the sale and went into the very pockets of either/or both the consultants and attorneys that were hired in Brazil to protect the fund in Brazil. It is possible that the actually fund managers made this R$60 million to R$70 million as a kickback to themselves.
- 4.) We confirmed that the fees that the management company made to manage the property each year were excessive, and yearly management was multiples above what it should be.
- 5.) We found that the properties were registered correctly for the buyer, however the land regularization wasn´t performed, the lands were still listed with the previous seller on INCRA system. (INCRA is the Federal Land agency).
- 6.) We did an appraisal for the land to find market price and to determine the accurate value of the land at the time of purchase.
The result was that the investment fund was not qualified to launch a project of the magnitude in Brazil. The people managing the fund did not have capacity and risk mitigation, and lastly the people managing the fund, must have an innate ability not to be able to calculate tree growth and wood prices, to be able to determine the land was grossly overvalued, which means they were not with the capacity to run a major forestry fund. The unfortunate truth is that the very reputable consultants and attorneys that they had hired to protect them in Brazil where the very people who hurt them and conducted dubious practices on their investments. Even today six years later, the market price paid for the land has not caught up with the amount they paid, so they would sell the land at a loss.
If the fund had contacted us in the beginning, they would have paid 50% to 65% less for the land, the price they would pay would be market price or lower, based on appraisals at time of purchase.
Case Study III – Client C
A client purchased a property through a Brazilian law firm, and the law firm registered the land in the attorney’s name instead of registering on the client’s name. We were hired to recuperate the land.
We resolved the case and recovered the land back for the client.
Case Study IV – Client D
In 2001 a New York Firm purchased 1,300 hectares along a lake with three other partners. In 2005 the company was dissolved after the main investor found out that the specific crop intended to be grown was not permitted in Brazil. As part of the deal one investor would buy out the other partners and end up with all the equipment and structures, the New York investor would end up with the land.
The Brazilian who managed this project for the New York firm ended up transferring the land to the former partner who was supposed to get the equipment, based on a particular document that was supposedly transferring the rights of the property to the NY firm.
We were hired in 2014 to investigate why the property was going to auction to settle a labor dispute with a former employee. What we discovered and reported to the New York Firm was:
- 1.) The land was not owned by the New York firm, it was in the partner´s name. The New York firm did not realize that they did not own it, as they were being told otherwise by their Brazilian representative.
- 2.) The person who started the lawsuit for the labor case was good friends with the Brazilian who acted as representative for the firm in New York. As they are friends, this Brazilian could have talked his friends out of such a case, especially as what is being claimed is related to work performed after the dissolution of the four partnership.
- 3.) Discovered that in 2011 the person managing the land for the firm in New York had tried to get the land transferred away from the old partner but did not succeed. This is contradictory to the statement heard in 2014 from this Brazilian stating that the New York firm owned the land when the firm did not.
This was one of the most complicated cases we worked on, we have seen, and the conclusion is the following:
- 1.) The Brazilian managing the land was creating problems and procrastinating the resolution of the problems in order not to be discovered he was incompetent.
- 2.) The person who ended up with the land had intended to give the land back up to the moment that the Brazilian managing the land for the New York firm tried to discredit him. Once discredited, the person who had the land refused to be co-operative, this caused the New York firm to have to hire a law firm in Brazil and sue. We guided them to a very experienced lower priced firm.
Case Study V
In 2012, a large investor from Chicago with a great track record for business in the United States, decided to venture into a very large business venture in Brazil. This venture included lawyers, consultants, other business partners from around Latin America, and the Brazilian government in Brasilia. The nature of the project involved the purchase of a plot of land in Goias, Brazil, the construction of a plant on this land, and the construction and distribution of street lamps for thousands of Brazilian cities. The price tag on the contract was close to 2 billion reais or 1 billion US dollars.
Starting in early 2012, discussions via email and in person began in earnest, but ultimately the consultants involved were not technically qualified and it was discovered that they had some prohibitive, pending law suits against them. Therefore, the Bank of New York, Mellon, and it subsidiary (Pershing Limited, LLC) that specializes in large transactions, did not authorize the transaction, and due to that, the project and its contract were stopped.
This, however, did not stop the communication between the Chicago investor and his Brazilian consultants. In late 2012, 20 million US dollars were wired to the consultant's private bank account in Brazil. The purpose and use of these funds is still not know and under investigation, and to complicate matters more, the Chicago investor suddenly passed away, victim of a heart attack at age of 50 and his estate is in Probate. Therefore, finding evidence of the purpose and use of these funds is quite difficult and maybe impossible to discover. For now, the transaction is considered a criminal one and is under investigation by a team of lawyers from Brazil and the United States, but without a testimony from the principal investor in Chicago, it is likely that the funds have been laundered into overseas bank accounts and various real estate investments.
The lesson here being that even very large and successful businessmen in the United States can get burned to the tune of 20 million US dollars if they don't have the right consultants who know the Brazilian market and the deception that typically takes place between Brazilian consultants and their US clients.
Our involvement was to do the initial investigation in Brazil on behalf of the probate attorneys in the United States to determine what happened, how much money was wired, how much money was lost, and where it was lost. After determining this, we gave the probate attorneys a summary of the scenario and then provided direction and a recommendation on which law firm to hire.
A major European bank hired us to analyze an investment they were thinking about investing in Brazil. They wanted to know if it was a solid investment or if it was full of holes. They came to us with some doubts on the amount invested to date.
The target was a 27,000 hectare Acacia plantation in Northern Brazil. The investment fund since the launch of this plantation 15 years ago had already invested US$320 million dollars.
What we discovered was the following:
- 1.) 27,000 hectares of land purchased in this location at the time of launch would be worth no more than R$2,000 per hectare. This is R$54 million reais. The historical exchange rate is US$1 to R$2 reais. Thus the land is no more than US$27 million. Even today the price is not much more than this price, in this location.
- 2.) Additional land that typically comes with the purchase of land, and is known as “reserve land” would have been another 27,000 hectares and this land is worth no more than R$500 per hectare. The price in dollars for this land would be US$6,750,000 dollars
- 3.) The tree planting based on the price from five years ago would be R$3,000 per hectare, and management would be about R$3,000 per hectare over the years, with very little management for any section of the plantation with trees over five years of age. The planting input was US$81 million dollars.
- 4.) Saw mills and other aspects would be no more than US$10 million.
In conclusion, based on the above calculations we found that the plantation current net present value is around US$124,750,000, and that the current plantation could be duplicated today for about the same value. This means the investors and the groups who invested in this Acacia plantation have lost 50% to 65% of their money. This money that was invested, but obviously didn’t go to the plantation was US$150 million to US$195,250,000.
In conclusion, the bank decided it was in their best interest not to invest in the plantation.
Those are only a few critical examples of cases that we assisted on. We are capable, trustworthy and affordable. Our extensive experience on the real estate market provides us with a comprehensive knowledge of all aspects; so that we can help people make investments, with more managed risk.
Contact us for more information, we will be glad to assist you and perform the best consultation of your case.