EATING AN ELEPHANT
Prime Lands Group’s Co-Founder and Chairman, B. Premalal, has built a remarkable business from scratch. He believes this success has been due not only to turning calculated risks into opportunities, but also knowing when to let go.
“You can eat even an elephant,” says B. Premalal, Co-Founder and Chairman of Prime Lands Group, “but it has to be piece by piece.” This advice given to him by a professor at graduate school has stuck by Premalal’s side for the past twenty years as he, along with Co-Founder Sandamini Perera, has grown Prime Lands from a small real estate firm to a group active in 14 districts around Sri Lanka in the real estate, property development and finance sectors.Sometimes the biggest leap of faith is that first venture into entrepreneurship. Looking back, Premalal says this is true in his case.
For eight years he had held secure accounting jobs, including three years at The Finance Company. Most people would have stuck to the ‘easier and safer’ option of remaining in a steady private sector job. But Premalal was not ‘most people’. He saw a different opportunity and grabbed it. Entrepreneurs are individuals who see opportunities that others do not. But what makes Premalal’s decision a leap of faith rather than a mere step is that Prime Lands’ founders had very little capital to work with. But with a vision in mind, they launched the company in 1995 with just four employees, and started eating the elephant, piece by piece.
With no capital to invest in land, they acquired real estate on trust, negotiating with owners and signing contracts to pay once they sold the land. Selling this land was no simple task, but required that entire physical infrastructures be put in place, such as roads, water and electricity. But Prime Lands’ secret was their efficiency and integrity, and with all their projects they managed to sell and pay for the land before the contract deadlines. The more projects they completed thus, the more trust they built in the community, earning the company a worthy reputation. They approached potential clients in the same way, ensuring they received what they paid for. As a small real estate firm just starting out, Prime Lands had to fight established players, even giants like Ceylinco who dominated the sector at the time. But what made them stand out in those initial years was their reputation for integrity, persistence in identifying appropriate markets and personal touch.
Having a vision alone, though, is not enough. You need someone to believe in you. Prime Lands got their big break in 2002 when conglomerate John Keells Holdings (JKH) offered it a 15-acre land in the heart of Wattala. Taking on such a large property was a risk, especially considering that it had idled for years, as even JKH had found it difficult to develop. But rather than focus on negativity, Prime Lands chose to see it as an opportunity. Again, it negotiated with the owner to acquire the property on trust, with an obligation to pay the full settlement once the land was sold.
Big risks pay out big rewards. The decision turned out to be beneficial, as it enabled the company to move into the real estate market on a large scale. The rest is history. By the end of 2013, the company had completed over 1,000 real estate projects, with 100 in 2014 alone, and sold land to over 75,000 customers, placing the company in the upper echelons of Sri Lanka’s competitive real estate market. The company has grown from its four employees in 1995 to over 150 today. Today it has 4,000 land plots in its data base, and the company is growing at a steady 25% to 30%.
Premalal pinpoints being able to identify opportunities before others and act on them quickly as an important part of his success. One such opportunity opened up in the mid-2000s. While working with real estate clients, Prime Lands’ founders saw a yawning gap in the middle-income housing market. With real estate prices booming, and construction material and labour costs increasing, most middle-income earners were facing difficulty building homes. Many players in the high-luxury housing market were building lavish, high-priced apartment complexes, but middle-income earners couldn’t purchase good-quality homes with amenities like 24-hour security and common swimming pools and gyms.
So Prime Lands entered the housing construction market in 2005 with the launch of Prime Homes. In its first project, the subsidiary constructed 104 houses in Athurugiriya, each of which sold at Rs.4.9 million. Following this, it completed similar projects in Wattala and Battaramulla. The price range at Prime Homes continues to be between Rs.6 million and Rs.10 million. The group is currently building seven apartment buildings in prime locations in Colombo’s suburbs, as well as two housing developments in Athurugiriya. Most of the apartments have already been sold. The company has four more projects lined up as well. The apartments sell at Rs.7 million to Rs.24 million.
Nine years after the launch of Prime Homes, the company instigated Living Homes. Aimed at low-income group, this subsidiary offers housing at just Rs.3 million to Rs.4 million. An ongoing project in Ranala is constructing over 500 homes. At a maximum of 800 square feet each, payment for these homes can be made through installment schemes. A second project is billed for Pallekele.
Thus far, the group’s housing projects have been located in and around Colombo. But it is currently constructing a condominium apartment project in Kundasale comprising 39 apartments, of which almost 30 have already been sold.
Anyone looking from the outside may see Prime Lands as a risk taker. But there is more to it than meets the eye. Prime Lands sees these so-called risks as opportunities. “It’s not just taking risks,” says Premalal. “They have to be calculated risks, not gambling risks. You have to take these on and turn them into opportunities, and that takes a lot of work. It requires training, leadership and communication skills, a shared vision, a personal touch and, most of all, patience.”
Looking back, the group’s biggest risk to date might be its 2011 acquisition of the struggling Ceylinco Grameen Finance Company. The microfinance firm had become insolvent as a trickle-down effect from the collapse of some unregulated financial companies in the Ceylinco Group, and had net losses of Rs3.3 billion and fixed deposit liabilities of Rs1.1 billion. It was losing money at a rate of Rs50 million per month. In Premalal’s own words, “Nobody wanted to take it on.”
So why did a group with consistent growth take on a company no one else wanted to touch with a 10-foot pole? Because while others were afraid of the risk, Prime Lands identified it as an opportunity. Where others saw Rs3.3 billion in net losses and Rs1.1 billion in fixed deposit liabilities, Prime Lands saw the microfinance firm’s 10 years of success in the field, large customer base, over 1,000 experienced personnel and already established infrastructure. “We saw the possibilities of turning it around,” says Premalal. “What the company lacked was funding, direction and leadership. Sometimes the leadership has to think unconventionally. The balance sheet said no, but we saw the potential beyond
the balance sheet.”
At the time, Prime Lands was shopping for a finance company license and, when the Central Bank offered the troubled microfinance firm, the group decided to take it on. Rechristened as Prime Grameen and bolstered by a Rs1.1 billion infusion, the new management won customer confidence by lifting the moratorium on withdrawals. The company introduced innovative financial products, which found a ready market in the more than 3,000 unsecured depositors who had been allowed to withdraw the money they thought they had lost and were ready to do business with the new management who they now trusted. The firm also settled the salaries and arrears of its employees, granting a minimum 25% increment, and paid out bonuses. This helped them establish a loyal employee group.
Today, Prime Lands Group has turned around the microfinance firm. It made Rs450 million in profit last year and is on track to repeat that performance this year. In August 2014, owing to the consolidation process, the group sold a 51% stake in Prime Grameen to Hatton National Bank for Rs660 million.
Of course, not everything Prime Lands touched has turned to gold. In 2011, the group ventured into manufacturing cement-based roofing tiles. When the management realized the volumes didn’t justify staying in the sector, it made a quick decision and discontinued the subsidiary. “When certain projects don’t give us the return we’re looking for, we don’t let it drag on,” says Premalal. He believes it is important to take these decisions quickly. “If it doesn’t seem like a success, we take the loss and move on quickly to the next project. Instead of overanalyzing the issues and trying to stick by it, we need to learn to let go. We need to be flexible.”
Despite being flexible with regard to changing markets and trends, Prime Lands’ approach to its customers has remained consistent. The company is known for lending a personal touch to each of its projects. Even today, although it has completed more than 1,000 real estate projects around the country, the co-founders and two DGMs personally visit and select any real estate they hope to develop. The company does not just sell land or housing to its clients. It also provides value-added service through its in-house legal, architectural, engineering and design teams. The group also facilitates bank loans for clients who need these to purchase land and housing.
Within the company’s office, management maintains an open door policy, encouraging employees to talk to them and building a family environment. “We want to make sure that we give our vision to the next rung of management and that they pass this culture onto the next level and so on,” says Premalal.
Premalal admits that continuing to provide this personal touch even as the company grows will be a challenge. “With time it is becoming difficult,” he says. “But that was our success, and that will be our success. We’ll make every effort to do that because it was our recipe for success. That was our mantra, and we have to keep to it.”
Going forward, Premalal does not intend to change his attitude or his approach to leading Prime Lands Group. “It has to be piece by piece,” he says. “That’s the way we did it and that’s how I feel it should be done. Sometimes I see people who are in a mighty hurry. They need to see that some organic growth also has to be built into it.” Even as the company takes on more work piece by piece, Premalal emphasizes its focus on real estate. This was where it started, and this is where the company intends to stay.