Fri, 26 Apr 2024
17:55:14
Financial Messiah:
02 Apr 2013
03:00:17
'Unorthodox Business Model' that brought up 'Trillium' to stand tall!
Apr 02, 2013 (SLBO) - Whilst world financial crisis kick started in western part of the world, five years ago in 2008 in our small country thousands of creditors, depositors and investors of then Sri Lanka's largest financial conglomerate hardly imagined and dreamt of their worst nightmare ever in which they would lose their hard earned money and savings that kept safe under a 'branded philanthropist' and his financial conglomerate that was into real estate, banking and investment banking, insurance, leasing, money broking, asset management and even education and retail with over 500 subsidiaries that were under 21 sub groups.
Times passed by and still many people curse 'Lalith Kotelawala' for losing their investments and hard earned money as well as for taking away their old parents from 'heart aches' that killed silently in sleep when some old lost their life's biggest ever savings as part of a 'Ponzi scheme' that were led by 'Ceylinco Business Empire'.
Ceylinco had over hundreds of real estate projects and 20 real estate companies that indirectly contributed to a 'Boom' as well as a 'Collapse' in Sri Lanka's real estate market which still continues from generation to generation, although publicly it is not well known.
At the height of the peak of the 'Ceylinco Crisis' although many then Ceylinco held subsidiaries fell into some unsuccessful businessmen and entrepreneurs who wanted to make a 'Quick Buck', among them there was and still an one company that fully recovered and stand strong among those giant real estate projects started by Ceylinco.
'Trillium Residencies' the iconic real estate project of City Housing and Real Estate Company PLC (former Ceylinco Housing & Real Estate Company PLC) is Sri Lanka's one of the largest projects that were build to offer the luxury lifestyle to meet market demand. Lalith Kotalawela on 29 October 2004 celebrated his 62nd birthday with a ground breaking ceremony when he launched Trillium Residencies in Narahenpita.
Although Lalith Kotelawala would have wholeheartedly offered his gratitude to his Real Estate group's Deputy Chairperson at the launch of 'Trillium' - today Kotelawala's thanks should in fact go to a person who actually rescued the iconic 'Trillium' project and turnaround the company to a profitable entity.
We shared the experience of present Chairman of City Housing and Real Estate Company PLC (CH&RE) Janaka Rathnayake who rebuild the 'The Trillium' to where it stands today. Ratnayake turned around many entities of fallen Ceylinco when he was heading the country's one of the largest state owned merchant and investment banks - Merchant Bank of Sri Lanka (MBSL) and converted MBSL to a group of companies with a savings arm and an insurance arm and extended bank's expertise as a 'Successful Manager of Toxic Assets and , sick companies'.
Trillium Residencies and CH & RE Chairman, Janaka Rathnayake
Could you tell us about the history of 'Trillium'?
Initially Trillium Residencies was a Rs.3 billion flagship project of the Board of Investment (BOI) approved Ceylinco Condominiums Ltd, a subsidiary of Ceylinco Housing and Real Estate Company which is now City Housing and Real Estate Company PLC (CH & RE : Stock Code - CHOU).
Ceylinco bought the land way back in 10 years ago from Dilmah Tea Chief Merril Fernando, and then company Chairman Lalith Kotelawala launched the project for his 62nd Birthday on 29 October 2004.
How bad was the company at the time of 'Ceylinco Crisis' in 2008?
I must first say that the City Housing and Real Estate Cmpany PLC (CH & RE) and Trillium Residencies are the only entities that stand strong to date after the 'Golden Key Tsunami' washed off the entire Ceylinco Business Empire.
At the time of Ceylinco Group's collapse CH & RE had liabilities over Rs.4.5 billion and as usual and 'typical way of Ceylinco Style' similar to other financial entities and real estate companies of Ceylinco, CH & RE was also used to accept public deposits engaging in financial activities although it is a real estate company. Under the Lalith Kotelawala led leadership of Ceylinco management that time this company was having a public deposit base amounting to over a billion and was paying over almost 20% to 30% unrealistic interest per annum for depositors.
When I took over the company as Chairman I realized by going through accounts that almost another billion rupees was due to be paid to the contractor; company being unprofitable at that stage still there were enormous intercompany and related party transactions that pulled out cash and borrowings
What else did you see as 'Key Indicators' that lead company to rugs?
Situation was chaotic as far as I reviewed from my business skills. Similar to other 'Ceylinco businesses operating model and culture' - company had over and highly paid directors. Almost could be equally compared to the 'Rats of a Sinking Ship' in this case too many of those directors quit their board seats but profited by their unofficially and forcefully acquired apartments of Trillium.
Those director types also did not forget to credit millions of rupees to their accounts under gratuity from a loss making company when they took off to home. Former deputy chairperson even had reserved the best apartments of the 'Trillium' added with a 4-room Penthouse without paying due total value for the apartments. But she had been making millions of money by renting them to different tenants.
Other directors too were reportedly had two to three apartments per director which some directors still claim profits earned from selling the apartment units.
Most of the directors had been paid enormous amount of emoluments and other perks while at the height of controversy CH & RE and Trillium both incurred Rs.230 million losses with Rs.4.5 billion liabilities.
How did you involve in the rescue operation of this iconic 'Trillium' project?
It was the time that, I then the chairman of Merchant Bank of Sri Lanka was spearheading the management of many distressed companies of Ceylinco including two of the oldest finance companies of
Sri Lanka The Finance Company Ltd (TFC) and The Finance & Guarantee Company Ltd (F&G),
That time remaining few directors of those CH & RE approached me pleading for my expertise and involvement which I first declined to do so.
Why they specifically wanted you on the board?
May be they thought I am a 'Brand' to market their business again to rebuild since I was already handling the management of many other subsidiaries of Ceylinco such as Asian Finance Ltd, Ceylinco Building Society (CBSL), Ceylinco Realty and Investments (CIR). Ceylinco Savings Bank (CSB), Fingara Country Club and the largest private school network of the country Ceylinco Sussex
International school and its branches that faced crisis.
Finally after vigilant consideration looking at the opportunity to extend my support and my risk appetite, passion for turning around sick companies I agreed to be the executive chairman of CH & RE.
How far were you involved in the operations of the company?
I looked at the entire financials of the company came up with a business model of my own to recover the business. It was not a 'formal business plan that was pen downed in a set of A4 sheets' like other CEOs and Chairpersons do but a practical successful business model 'That was in my head' with a realistic time frame to achieve.
In fact at certain situations I infused my personal savings to run day to day operations of the company. Subsequently this was also the time as the Chairman of MBSL, that I extended my expertise on managing the largest and the oldest financial company in Sri Lanka - The Finance Company PLC (TFC) which was incurring over almost Rs.800 million loss per month. Central Bank of Sri Lanka as the regulator palmed over the responsibilities to me over when Lankaputhra Development Bank failed to manage the situation.
We brought down the TFC loss to Rs.100 million a month at the time of my departure from MBSL. Many of the Ceylinco subsidiaries that were managed with my leadership at MBSL are now under hands of new investors except for a few which are still under litigation in cases related to Golden Key.
Were there any other difficulties that you faced upon recommencing the construction of 'Trillium'?
Unlike in the case of other entities although tasks were very tricky and tenuous at CH &RE at 'Trillium' we convinced to the contractor to continue to build and construct without delay. It is noteworthy to mention that Sunken Lanka extended their fullest corporation to recommence the complete construction of the project.
The last two towers comprising 120 apartments including the sunset wing were to be completed and we wanted another billion rupees to complete the project.
Not a single bank or a prominent financial institution was willing to extend even a single rupee as this was part of Ceylinco group of companies 'a group company brand well known for financial mismanagement during the worst financial crisis we faced in our time'. So we had to find much needed funds from other ways of various financing sources.
The task that was in our hands was very challenging and we recommenced the project and started the business activities with all that difficulties.
How did you settle financial issues of the company then?
This has been case in which one of the extraordinary ways for turning around the distressed companies was followed when compared with other risk aversion methods in difficult financial situations.
When we were looking to finance the project the options available at many financial institutions were squeezing the limited cash flows of the company.
To manage the crisis in the company we first reduced the interest paid for depositors and creditors from 30% to 12%. And we promised the deposits to the value of a billion rupees will be repaid in 36 equal payments. We also negotiated with lenders to amortize the loans. It helped out the company to pay back its loans and interest over a longer period in negotiated installments.
Trillium have had borrowed in huge chunks of money under earlier Ceylinco management, some from private lenders mortgaging apartments for half the value. We had a possible chance of losing those apartments unless we settle them with financier's own terms.
After that what did you do?
Then we started marketing and advertising since when post war era emerged the finance sector of our economy was cooling down after the 'hot fire' that burned off many fingers of stakeholders. Economy was becoming stable and we realized it is time again that demand for high living standards will be rising. So we started to re-launch the sales of the project.
It was the right time for sales, demand for high luxury apartments were rising and unlike other apartment projects Trillium was unique and offering the state of the art of living in Colombo metro with convenience and a luxurious lifestyle. Trillium offers spaces, layouts, and design and all the amenities connected with on the best neighbourhood.
Did your hard work for Trillium payoff?
Of course yes, we were able to sell all the apartments and after selling a majority of apartments in the beginning we revised the prices several times with an upward trend and it was profitable to the company.
I must gladly say that company reported a profit after tax of Rs.63.42 million for the nine months ended in 31 December 2012, the highest in its history and 5,501% increase compared to Rs.1.13 million in December 2011.
In addition to the landmark 'Trillium' project we launched two other real estate projects one in Wattala and another in Nugegoda.
Don't you think the progress you made at 'Trillium' is an 'Unorthodox Business Model' to recover similar real estate companies that have affected from financial crisis?
You have got the right understanding. If you actually compare with all the other real estate projects of Ceylinco group to date we have been successful because of the financial management model we followed to rescue the company and its assets.
Five years ago all other Ceylinco companies virtually ran a monopoly in controlling Sri Lanka's real estate market with over 20 real estate companies and 60 financial companies ( regulated & unregulated) and had abundant of projects costing billions that failed to complete and launch the final phase.
Some of the which has even fall in to the hands of other investors as a result, Ceylinco Celestial Towers and Hyatt Hotel, Frances Residiencies, Fingara Apartments of F&G, Ceylico Homes International, F&G Continental Residencies, 6th Avenue Apartments, Prominent Residencies, Country Homes Housing Scheme of F&G Property Developers, Eden Garden Housing Scheme, 'The Sanctuary' Housing Scheme are some of these large projects that failed.
And Ceylinco group financed all these projects by famous way of ponzi schemes via Ceylinco subsidiaries accepting public deposits and promising returns from the real estate projects. You can only do that if you are Real Estate Investment Trust (REIT) but in Sri Lanka we do not have any Real Estate Investment Trusts and law allowing launching of REITS.
Our Business Model had only a few steps, aim was the project completion and we had to find low cost project financing and we reduced the cost of funding and borrowing.
We proceeded recoveries timely and revised the prices of apartments to be in the market rates and operations of the company were carried out with a few left out loyal employees.
As a result we were able to finally complete the project.
And today we should thank depositors of CH & RE who patiently tolerated and accepted our repayment schemes without acting similar to other frustrated depositors who opt all sorts of ways to get their investments from other Ceylinco financial companies but ended up getting nothing.
I believe revival of these two companies could be considered as a benchmark which other companies and entrepreneurs should follow in their business as well.
Times passed by and still many people curse 'Lalith Kotelawala' for losing their investments and hard earned money as well as for taking away their old parents from 'heart aches' that killed silently in sleep when some old lost their life's biggest ever savings as part of a 'Ponzi scheme' that were led by 'Ceylinco Business Empire'.
Ceylinco had over hundreds of real estate projects and 20 real estate companies that indirectly contributed to a 'Boom' as well as a 'Collapse' in Sri Lanka's real estate market which still continues from generation to generation, although publicly it is not well known.
At the height of the peak of the 'Ceylinco Crisis' although many then Ceylinco held subsidiaries fell into some unsuccessful businessmen and entrepreneurs who wanted to make a 'Quick Buck', among them there was and still an one company that fully recovered and stand strong among those giant real estate projects started by Ceylinco.
'Trillium Residencies' the iconic real estate project of City Housing and Real Estate Company PLC (former Ceylinco Housing & Real Estate Company PLC) is Sri Lanka's one of the largest projects that were build to offer the luxury lifestyle to meet market demand. Lalith Kotalawela on 29 October 2004 celebrated his 62nd birthday with a ground breaking ceremony when he launched Trillium Residencies in Narahenpita.
Although Lalith Kotelawala would have wholeheartedly offered his gratitude to his Real Estate group's Deputy Chairperson at the launch of 'Trillium' - today Kotelawala's thanks should in fact go to a person who actually rescued the iconic 'Trillium' project and turnaround the company to a profitable entity.
We shared the experience of present Chairman of City Housing and Real Estate Company PLC (CH&RE) Janaka Rathnayake who rebuild the 'The Trillium' to where it stands today. Ratnayake turned around many entities of fallen Ceylinco when he was heading the country's one of the largest state owned merchant and investment banks - Merchant Bank of Sri Lanka (MBSL) and converted MBSL to a group of companies with a savings arm and an insurance arm and extended bank's expertise as a 'Successful Manager of Toxic Assets and , sick companies'.
Trillium Residencies and CH & RE Chairman, Janaka Rathnayake
Could you tell us about the history of 'Trillium'?
Initially Trillium Residencies was a Rs.3 billion flagship project of the Board of Investment (BOI) approved Ceylinco Condominiums Ltd, a subsidiary of Ceylinco Housing and Real Estate Company which is now City Housing and Real Estate Company PLC (CH & RE : Stock Code - CHOU).
Ceylinco bought the land way back in 10 years ago from Dilmah Tea Chief Merril Fernando, and then company Chairman Lalith Kotelawala launched the project for his 62nd Birthday on 29 October 2004.
How bad was the company at the time of 'Ceylinco Crisis' in 2008?
I must first say that the City Housing and Real Estate Cmpany PLC (CH & RE) and Trillium Residencies are the only entities that stand strong to date after the 'Golden Key Tsunami' washed off the entire Ceylinco Business Empire.
At the time of Ceylinco Group's collapse CH & RE had liabilities over Rs.4.5 billion and as usual and 'typical way of Ceylinco Style' similar to other financial entities and real estate companies of Ceylinco, CH & RE was also used to accept public deposits engaging in financial activities although it is a real estate company. Under the Lalith Kotelawala led leadership of Ceylinco management that time this company was having a public deposit base amounting to over a billion and was paying over almost 20% to 30% unrealistic interest per annum for depositors.
When I took over the company as Chairman I realized by going through accounts that almost another billion rupees was due to be paid to the contractor; company being unprofitable at that stage still there were enormous intercompany and related party transactions that pulled out cash and borrowings
What else did you see as 'Key Indicators' that lead company to rugs?
Situation was chaotic as far as I reviewed from my business skills. Similar to other 'Ceylinco businesses operating model and culture' - company had over and highly paid directors. Almost could be equally compared to the 'Rats of a Sinking Ship' in this case too many of those directors quit their board seats but profited by their unofficially and forcefully acquired apartments of Trillium.
Those director types also did not forget to credit millions of rupees to their accounts under gratuity from a loss making company when they took off to home. Former deputy chairperson even had reserved the best apartments of the 'Trillium' added with a 4-room Penthouse without paying due total value for the apartments. But she had been making millions of money by renting them to different tenants.
Other directors too were reportedly had two to three apartments per director which some directors still claim profits earned from selling the apartment units.
Most of the directors had been paid enormous amount of emoluments and other perks while at the height of controversy CH & RE and Trillium both incurred Rs.230 million losses with Rs.4.5 billion liabilities.
How did you involve in the rescue operation of this iconic 'Trillium' project?
It was the time that, I then the chairman of Merchant Bank of Sri Lanka was spearheading the management of many distressed companies of Ceylinco including two of the oldest finance companies of
Sri Lanka The Finance Company Ltd (TFC) and The Finance & Guarantee Company Ltd (F&G),
That time remaining few directors of those CH & RE approached me pleading for my expertise and involvement which I first declined to do so.
Why they specifically wanted you on the board?
May be they thought I am a 'Brand' to market their business again to rebuild since I was already handling the management of many other subsidiaries of Ceylinco such as Asian Finance Ltd, Ceylinco Building Society (CBSL), Ceylinco Realty and Investments (CIR). Ceylinco Savings Bank (CSB), Fingara Country Club and the largest private school network of the country Ceylinco Sussex
International school and its branches that faced crisis.
Finally after vigilant consideration looking at the opportunity to extend my support and my risk appetite, passion for turning around sick companies I agreed to be the executive chairman of CH & RE.
How far were you involved in the operations of the company?
I looked at the entire financials of the company came up with a business model of my own to recover the business. It was not a 'formal business plan that was pen downed in a set of A4 sheets' like other CEOs and Chairpersons do but a practical successful business model 'That was in my head' with a realistic time frame to achieve.
In fact at certain situations I infused my personal savings to run day to day operations of the company. Subsequently this was also the time as the Chairman of MBSL, that I extended my expertise on managing the largest and the oldest financial company in Sri Lanka - The Finance Company PLC (TFC) which was incurring over almost Rs.800 million loss per month. Central Bank of Sri Lanka as the regulator palmed over the responsibilities to me over when Lankaputhra Development Bank failed to manage the situation.
We brought down the TFC loss to Rs.100 million a month at the time of my departure from MBSL. Many of the Ceylinco subsidiaries that were managed with my leadership at MBSL are now under hands of new investors except for a few which are still under litigation in cases related to Golden Key.
Were there any other difficulties that you faced upon recommencing the construction of 'Trillium'?
Unlike in the case of other entities although tasks were very tricky and tenuous at CH &RE at 'Trillium' we convinced to the contractor to continue to build and construct without delay. It is noteworthy to mention that Sunken Lanka extended their fullest corporation to recommence the complete construction of the project.
The last two towers comprising 120 apartments including the sunset wing were to be completed and we wanted another billion rupees to complete the project.
Not a single bank or a prominent financial institution was willing to extend even a single rupee as this was part of Ceylinco group of companies 'a group company brand well known for financial mismanagement during the worst financial crisis we faced in our time'. So we had to find much needed funds from other ways of various financing sources.
The task that was in our hands was very challenging and we recommenced the project and started the business activities with all that difficulties.
How did you settle financial issues of the company then?
This has been case in which one of the extraordinary ways for turning around the distressed companies was followed when compared with other risk aversion methods in difficult financial situations.
When we were looking to finance the project the options available at many financial institutions were squeezing the limited cash flows of the company.
To manage the crisis in the company we first reduced the interest paid for depositors and creditors from 30% to 12%. And we promised the deposits to the value of a billion rupees will be repaid in 36 equal payments. We also negotiated with lenders to amortize the loans. It helped out the company to pay back its loans and interest over a longer period in negotiated installments.
Trillium have had borrowed in huge chunks of money under earlier Ceylinco management, some from private lenders mortgaging apartments for half the value. We had a possible chance of losing those apartments unless we settle them with financier's own terms.
After that what did you do?
Then we started marketing and advertising since when post war era emerged the finance sector of our economy was cooling down after the 'hot fire' that burned off many fingers of stakeholders. Economy was becoming stable and we realized it is time again that demand for high living standards will be rising. So we started to re-launch the sales of the project.
It was the right time for sales, demand for high luxury apartments were rising and unlike other apartment projects Trillium was unique and offering the state of the art of living in Colombo metro with convenience and a luxurious lifestyle. Trillium offers spaces, layouts, and design and all the amenities connected with on the best neighbourhood.
Did your hard work for Trillium payoff?
Of course yes, we were able to sell all the apartments and after selling a majority of apartments in the beginning we revised the prices several times with an upward trend and it was profitable to the company.
I must gladly say that company reported a profit after tax of Rs.63.42 million for the nine months ended in 31 December 2012, the highest in its history and 5,501% increase compared to Rs.1.13 million in December 2011.
In addition to the landmark 'Trillium' project we launched two other real estate projects one in Wattala and another in Nugegoda.
Don't you think the progress you made at 'Trillium' is an 'Unorthodox Business Model' to recover similar real estate companies that have affected from financial crisis?
You have got the right understanding. If you actually compare with all the other real estate projects of Ceylinco group to date we have been successful because of the financial management model we followed to rescue the company and its assets.
Five years ago all other Ceylinco companies virtually ran a monopoly in controlling Sri Lanka's real estate market with over 20 real estate companies and 60 financial companies ( regulated & unregulated) and had abundant of projects costing billions that failed to complete and launch the final phase.
Some of the which has even fall in to the hands of other investors as a result, Ceylinco Celestial Towers and Hyatt Hotel, Frances Residiencies, Fingara Apartments of F&G, Ceylico Homes International, F&G Continental Residencies, 6th Avenue Apartments, Prominent Residencies, Country Homes Housing Scheme of F&G Property Developers, Eden Garden Housing Scheme, 'The Sanctuary' Housing Scheme are some of these large projects that failed.
And Ceylinco group financed all these projects by famous way of ponzi schemes via Ceylinco subsidiaries accepting public deposits and promising returns from the real estate projects. You can only do that if you are Real Estate Investment Trust (REIT) but in Sri Lanka we do not have any Real Estate Investment Trusts and law allowing launching of REITS.
Our Business Model had only a few steps, aim was the project completion and we had to find low cost project financing and we reduced the cost of funding and borrowing.
We proceeded recoveries timely and revised the prices of apartments to be in the market rates and operations of the company were carried out with a few left out loyal employees.
As a result we were able to finally complete the project.
And today we should thank depositors of CH & RE who patiently tolerated and accepted our repayment schemes without acting similar to other frustrated depositors who opt all sorts of ways to get their investments from other Ceylinco financial companies but ended up getting nothing.
I believe revival of these two companies could be considered as a benchmark which other companies and entrepreneurs should follow in their business as well.
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