Secrets of success revealed

Portsmouth FC chairman Al Fahim is the author of book "Brand Builder" which spells out, in typically swaggering manner, how he built up Hydra Properties. Although we would dispute his aides contention that it is a 'best-seller' it does offer some interesting insights into how he managed to establish the now-failing venture.

In quite brazen fashion, he explains the pitfalls of taking customers' deposits and then using the money for other ventures. Al Fahim must wish he had taken his own advice:

Brand Builder extract:

I sell all the units long before I have started building it. My investors begin with a 10% down-payment and, if I do my sums correctly, that gives me US$ 10 million.

I give that to the contractor who begins his work. After he finishes the first phase, my investors owe me another 10% - another US$ 10 million - which I happen to owe the contractor again, and effectively pass this money straight on to him.

In some ways, with this your return on equity is infinite because you don't even pay for the land. I call it IRR - infinite rate of return. This is the dream scenario, but it will not last forever because you will not always have a market with huge demand and short supply. These kind of markets are very hard to find.

The liability is with the customer in this scenario. But, as a developer, you have to be very careful and only use that money for that project. I am aware of some developers who have used the money to invest in second and third projects. That can bring you trouble. A friend of mine owns ten towers but, for three of them, he doesn't have the money to actually build them because he used it on other projects. This is rather like taking out a new credit card to pay for the one you have already used up but cannot afford the repayments on. It seems like a good idea, and is very easy to do but, ultimately, you will hit a brick wall. Or, in this case, no wall; you can't afford the bricks anymore. For pre-sale to succeed, the most important thing you need is a brand. And people have to trust in you. Simple as that. If they do not, you won't get a single pre-sale. Suffice to say, branding is something that I think we at Hydra have done exceptionally well on.