Prominent businessman Paul Henri Schelfhout, son of the founders of the International School of the Algarve in Lagoa, tells the Resident why Portugal is a safe place to invest, why he does not agree with the national pension system and what the Algarve needs to boost its economy.
His track record is extensive both in the Algarve and abroad: Paul Henri Schelfhout, 47, studied at the International School of the Algarve, founded by his parents, Paul and Eva Schelfhout, in 1972, took a bachelor’s degree from Franklin College in Lugano, Switzerland, and lived and married in New York – his wedding was publicised in The New York Times – before moving back to Portugal, where he specialised in real estate and asset management. But when recession struck, the local businessman, who is known in the Algarve as Henri, continued his career abroad, mainly in Canada and the US. In 2015, he bought Finangeste, an investment company which specialised in the credit recovery of assets owned by commercial banks and whose major shareholder was the Bank of Portugal. Back in Portugal as Finangeste’s president of the board, Schelfhout has been in the spotlight due to the company’s multi-million deals. However, this international player still describes himself as a “local boy”, with the Algarve very much on his agenda and the plans to prove it.
You were born in Germany, raised in the Algarve and lived abroad for many years. Why did you come back to Portugal?
In 2013, I got a phone call from Portuguese people in high positions saying they were going to sell Finangeste. And I know Finangeste because between 2001 and 2005 I worked as an asset manager for Leon Levi [Swiss equity investor]; we bought €16 million of assets out of the company and we packaged those up to make a really big portfolio. So I got a history of knowing this company. And when the Bank of Portugal decided to sell it, I was invited to be one of the bidders. There was a proper bidding process and we successfully managed to raise the necessary sum to buy the company.
Is Portugal a safe place to invest?
Absolutely. Over €2 billion have been invested in Portugal in the last six months in the top-end of the market. This investment is not going to be felt in the local community for another six to eight months. But it’s the first really strong indicator that international investment funds are taking large stakes, buying assets off the banks and redeveloping them and putting money back into the economy. From an economical stand point, Portugal just hit the bottom of the curve six months ago. So this is where it goes up the line.
From our macroeconomical point of view, we are currently negotiating properties which are 60% to 70% undervalue, under replacement cost. And we’re putting those on the market with a 30% to 40% discount on replacement cost. So for property buyers coming to Portugal right now, there’s value in the economy, there’s no bubble. Will values go back to those of 2008? No, not for a long time. Land values have gone down ridiculously. We have one property in our portfolio valued at €3.6 million, but we would sell it for €2 million, because the value just isn’t there anymore. So for international developers to look at something valued at €3.6 million and getting it for €2 million and then building something on it, they still get a very advantageous price at the end.
But those who invested in a €3.6 million property are probably not very happy.
Yes, of course they are not, and I am one of them (laughs). I have a beautiful portfolio of properties in the Algarve. Luckily, being a local we always bought really well. I feel the pain of being a land owner, because I lost tremendous value, but the main point is that there is now demand for this product again. If you are at the bottom of the cycle like we are right now, and you’re coming to Portugal you’re going to be on the up curve. Now where does it stop? That’s the million-dollar question.
Why invest in Portugal?
From a fiscal point of view, there’s the Non-Habitual Resident and the Golden Visa scheme.
From a second point of view, property law here is very safe. No one is going to expropriate your property. So if you buy and follow the rules, it’s yours, you have your rights, you become a resident. There is almost no racism in Portugal, there are cases, but people here are very tolerant. Looking at what’s happening in the world, where else are you going to go? Turkey? Tunisia? Greece? Climate-wise, there are maybe three or four countries in Europe within the same sort of climate range. You can be outdoors for 300 days of the year. Food. Yet again, here I’m biased (laughs). Safety. We have some issues with crime, but if you look at the statistics of what is happening in Italy, Greece and Spain, we are still probably the safest country in Europe when it comes to organised crime. Why Portugal? Fantastic connections: Faro has 18 to 22 daily flights to the UK in the high season, flights to Berlin, Amsterdam…I’m not isolated. Health care has come a long way, there are 40 senior homes and retirement villages in planning and in construction in Portugal at the moment. You should invest in Portugal because Portugal has massive potential. Portugal is its own worst enemy. You can see that in the government, they’re bickering and fighting and it’s all about power.
Do you think that the current political instability is affecting Portugal’s image?
In terms of short-term perception, absolutely, the markets react immediately. Having lived in Portugal for as long as I live, I know that nothing really changes. There will be a lot of bickering, they probably will have another set of elections…Would we like to see political stability? Absolutely. Have political minority governments in the past affected Portugal in a good or bad sense? No. Nothing really happened.
Is there something missing in the Algarve that could help kick-start the region’s economy?
Half of the problem of what is missing is already being addressed. What is missing is international investors buying large developments and putting real money into the economy. The Algarve really needs a body of investors; we need to select a group of 10 to 15 top investors or business people and propose a plan for the region. The target would be to sit down and make a 10-year plan for the Algarve. I have very clear ideas for that plan: it should focus on healthcare, an absolute priority, and we should continue to focus on safety. If you’re foreign and you move to Portugal, you probably won’t speak Portuguese and you’re not going to understand the local GNR agent. So you feel isolated and we need to fight that isolation; that is one of the priorities. We could have a call centre for people who need to call the police or have some issue, establish a network where there is an emergency line for local residents who can’t communicate, which then relays the information to the local authorities. We should call it Citizens of the Algarve, something to bring the community together, as the Algarve is lacking community spirit. And this could be funded by membership. With that support system in place, I believe you would see the Algarve boom.
Why don’t you agree with Portugal’s pension system?
That is a personal issue. It’s absolutely tragic when you have a system of social equality, which Portugal is supposed to have, and you have people in the public office or in the banking sector with pensions anywhere between €5,000 and €15,000 a month and they have discounted for 10 years, and then you have somebody in the Alentejo, who has discounted for 40 years, on a €300 pension. The disparity between the poor and the others in Portugal is huge. It’s not that the average pension in Portugal is rich, it’s not; the average pension in Portugal is around €800. It’s the difference between what the really needy people are getting, and then on the other hand you have people with a 15-year career discounting pensions of €10,000 a month. Morally, for me, it’s just wrong.
Sábado magazine wrote an article about Finangeste, questioning how a company that is worth €62 million was sold for €35 million to a company which you manage and whose social capital is only €4,000. Would you like to comment?
This has to do with different approaches doing business, and that has nothing to do with value. The values they quoted were wrong anyway. When you look at value, you can have a face value and a real margin value. What is value? It’s what someone is willing to pay for something. And when they mention the social capital of €4,000 – if you look at Anglo-Saxons, if you look at Warren Buffet for example, if you look at any of these big guys, their personal holding companies are $100, $1,000, it has nothing to do with the business. It’s a vehicle that borrows money from one side and buys assets on the other side, and then manages its business and pays back its loans. The fact that it has 4,000, 40,000, 400,000, 4 million euros has nothing to do with the business.
Your parents are respected members of the business community. Your father was a businessman himself. Is there any particular advice he gave you that stuck with you?
I miss my dad very much. My parents came here and they built something and they are very respected members of the community and I hope to keep our family name like that. He died when I was 19, a crucial time of my life, and I don’t think I’ve ever gotten over it. But he said to me: “Henri, it’s not what you know, it’s who you know.” In other words, if I don’t know something, I need to find out who does and take good advice and surround myself with people who are smarter than me.
By ANA TAVARES [email protected]