Access’ Drama Continues

The name Ermias T. Amelga may have become a household word and as this report by SOLIANA ALEMAYEHU, FORTUNE STAFF WRITER indicates, angry stakeholders of Access Real Estate are seeking justice. But the troubles of Ermias seem symptomatic of a real estate sector in trouble.

The cracks in his voice resonate with the deep emotional pressure he tries to communicate.

“My daughter got divorced because of Access,” Deboch Belay said. Won over by Access Real Estate’s impressive sales pitch that had literally come knocking at his door, he had convinced his daughter and son-in-law, who lived in England, to dish out two million Birr from their savings and buy one unit in Access’ Europa Site.

“Her ex-husband thought I had swindled them,” he said. “Not only has their investment gone to waste, but now, she has been forced into raising my grandson alone.”

Deboch and his daughter’s story is but one of similar stories that can be told by 2,703 homebuyers. Customers had been wooed by assurances of delivery times as short as six months, with money-back guarantees and a promise of 5,000Br for each month of delay. Yet, eight years after the company’s formation and six years after it started operations, Access Real Estate (ARE) has yet to deliver a single unit from any of the numerous sites it claims to have been developing.

In fact, of the 45 sites it had come to own, its holdings are now down to 19 sites, in addition to one site behind Lycee Gebremariam with an ambiguous status. The sites near Mesqel Flower, Bole Mini, and four in Megenagna are among those that were sold off, in some cases, without knowledge of ARE’s Board.

The company’s business record is riddled with such ambiguities. The aforementioned site behind Lycee, in particular, is an 8687sqm plot that was bought for 27 million Br but has yet to go through the process of legally transferring the lease-holding right. The lack of clarity emanates from the fact that an injunction has been placed upon it following a foreclosure that took place despite the fact that it had not yet been registered as Access’ property. An unconfirmed lead claimed furthermore, that the foreclosure transpired through a notice posted on neighbourhood fences. In an auction that had a total of two participants, the highest bid of 9.25 million Br – a third of the cost, was made by someone who has already put the land back on the market.

After three years in operation, a year more than ARE said it needed to deliver homes, homebuyers started demanding refunds of their payments. That same year, Ermias T. Amelga, founder, and at the time CEO of Access, held a series of presentations for homebuyers citing innumerable problems as causes for the delays. However, as the un-swayed homebuyers requesting refunds increased in number, Access’ already shaky liquidity began to crumble, and the company suddenly found itself in a “bank run” position.

Fantaye Makonnen, 75, was one of Access’s customers that demanded a refund. She is a widowed retiree who sold her house around Bole Airport five years ago and bought two apartment units from Access’s Ayat East View Site. She had met Ermias during the process, and he talked her into buying a third.

“I’m telling you what I would tell my mother,” she recalled him saying.

While the sale had gained her 3.5 million Br, the purchases, two of which were paid in full and the other-in half, cost her 1.5 million Br. She has spent the ensuing four years in rented housing. Prices, however, are sending her farther and farther from the city centre. Her current address, south-east of the Ayat Roundabout, costs a 40 Br bajaj ride from her home to the roundabout from where one can get a taxi.

“I have worked for 40 years, and have enough to live on,” she said, but conceded that she could not keep paying rent.

The 5,000 Br to 6,000 Br rent she has been paying monthly has amounted to a quarter of a million Br, taking a sizeable chunk of what she had gained from the proceeds of selling her house.

“I want something to leave for my children,” she said, “but Ermias is not my child, I do not want to leave it to him.”

That was why, when the promised two-year delivery period came and went, she went to Ermias himself to inquire, and eventually asked for her money back. The first cheque for 400,000 Br cleared, she recalled, but the second bounced.

She then started going back to the Access office, sometimes even two to three times daily, and tried to impart to Ermias some of her 40-years of experience in management, including management of human resources.

“He was polite, understanding, and full of excuses for the delays.”

After many a back-and-forth exchange with the staff, she was finally able to broker a deal. She was offered in exchange for all three of her ARE units, a single unit at the Nyala Motors site, one of only two sites on which Access has built structures to date. She took it.

Not long after, at the start of 2013, Ermias was arrested because of a cheque that bounced. The flood of homebuyers who were not appeased by the refund installments Access paid by bad cheques, resorted to the courts. Before year’s end, Access Real Estate had 18 suits filed against it at the Federal High Court alone. Another 29 petitioners sued Ermias’ other company Access Capital Services S.C., a recipient of funds collected from ARE homebuyers. Various other suits were filed against subsidiary companies in which Access owned controlling shares.

That was not a surprising development considering the annual report external auditors had prepared for shareholders concerning the fiscal year that ended in June 2012. In what became the real estate company’s final externally audited report, auditors stated that, “the company is [in] huge difficulty to continue in business.”

Having amassed 31.8 million Br in equity from over 600 shareholders, the company quickly incurred liabilities 39 times larger than its capital. Even before the firm started operations, ARE’s management had spent 64.5 million Br in commissions and other administrative expenses.

On the other hand, despite collecting almost a billion Birr from homebuyers in the 2011/2012 fiscal year, only 158.3 million Br was advanced to suppliers and contractors. A consultant who worked with one of the companies that participated in construction of the foundation on one site described to Fortune, the effect of such under-funding.

“From the beginning, the promises were unrealistic,” he attested, requesting anonymity. “The flow of work, the supply of materials, and payment for labour services were slow and sluggish. I knew they wouldn’t make it, so I terminated our contract.”

This had direct implications on the homebuyers. One senior couple had jumped at the chance to buy homes adjacent to Bole Medhanialem Church. They sold their home in Addisu Gebeya for three million Birr, and bought two units for a combined 2.7 million Br. The retirees, 70 and 79, made the purchase together. But the wife, whose name is being withheld on request, is the only one attending committee meetings now.

“My husband is very sick. He has been hospitalized for years, and is in and out of the ICU all the time,” she said.

Due to their children’s US residency, they have been able to take him there and have his medical costs covered by their insurance and other provision. Her children cover their living costs now.

“I can’t even help with my husband’s care,” she said in despair.

Delayed payments are also what instigated one of the biggest suits filed against ARE.

But not everyone filed a lawsuit. Angry homebuyers formed a series of committees in order to organise their efforts. These were able to apply enough pressure to warrant the creation of two special government in July 2014, empowered by Prime Minister Hailemariam Desalegn to take legal, administrative and political measures to resolve the problems faced by both homebuyers and shareholders.

“While they did not work as fast as we would have wished,” Aklog said of the government committees, “they helped negotiate Ermias’s return to the country, and effect injunctions on the existing holdings so we won’t lose anymore.”

The unprecedented legal compromises continued when Ermias, a fugitive at the time, was brought back after a total of 81 criminal charges lodged against him and his firm were suspended for one year; he was also given a one-year legal guarantee and protection until he agreed to settle shareholders’ woes and homebuyers despair.

Contractors too had resorted to the courts.

After a year and a half in the courts, Gabby Investment, the contractor hired for the Nyala Motors site, was awarded 47 million Br in February 2015, although it has yet to receive actual payments.

Gabby’s Manager, Biniam Mebrhatu told Fortune, “dead men pay no debts,” in reference to ARE’s lack of financial resources.

While the three and a half year old annual report puts the company’s bank balances at 6.3 million, Aklog Seyoum, Central Homebuyers’ Committee chairperson, representing an amalgamation of homebuyers and their committees said it now stands at just 129 Br.

In the 11 months that he has been back, however, Ermias has not been able to change things. He had claimed to sign a Memorandum of Understanding with the Chinese company, Hebei Pingle Real Estate Development Co. Ltd, before returning to Addis. The deal was to let the company bring 1.2 billion Br to build a 650-unit apartment on 14٫250 sqm of land, and in return, let it have 160 of those. In effect, had the deal gone through, Hebei would have acquired 490 apartments for 2.5 million Br a unit.

The second deal he had claimed he was on the brink of signing was with CCECC. This deal would have had CCECC inject 2.1 billion Br into ARE in the form of capital contributions, giving it 90pc of the company. The money would have supposedly gone to the construction of 5,721 housing units. This comes down to less than 400,000 Br a unit.

All of that was part of a grand scheme Ermias had developed in 2013. In a letter he had sent to the shareholder’s meeting from his self-imposed exile, Ermias had expressed plans to raise three billion Birr from homebuyers themselves, selling new units, as well as from third parties, such as the contractors from China, and companies in which Access had invested.

“That is absurd,” said Abdulmenan Mohammed Hamza, accounts manager at the London-based Portobello Group, who examined the Access report for 2011/2012. “Ermias must be naive in believing that a real estate firm, its name tarnished by non-delivery of single home over the years, its customers’ trust shaken to the core, its financial report disclaimed, and is suffering from huge financial difficulties would able to sell the remaining units and collect more from existing customers,” he had said at the time.

None of those promises transpired, and Ermias found himself behind bars again.

“I used to be an ardent supporter of his,” said Fantaye, the widow cited above, “but a year after being back, if he’s still messing around, then he is playing us like Bernie Madoff played America.”

Bernard Lawrence “Bernie” Madoff is the American fraudster, investment adviser,  financier and former non-executive chairman of the NASDAQ stock market, who operated a Ponzi scheme considered to be the largest financial fraud in US history.  He is now behind bars.

Other homebuyers actually accuse Ermias of following the Donald Trump school of thought when it comes to bankruptcy. Trump, who brags about it even during current presidential debates, has filed for bankruptcy four times – more times than any other major business. Dubbed Chapter 11 (of the US Bankruptcy Code), a company is allowed to restructure and reduce its debt while continuing to work, and therefore generate income.

Conspiracy theories aside, however, come Monday, if the Ethiopian Federal Police find something substantial on which to hold Ermias, his visit to the dark, dilapidated little room in Arada Kifle Ketema’s First Instance Court, will certainly not be his last.

Shareholders had called a meeting on Saturday, 30 January, to decide on and propose a way forward. However, the extraordinary meeting, could not follow through as the number of shareholders present did not represent the adequate number of shares the law requires (50pc). Of the 37,645 shares Access Real Estate has, only 7,651 were represented on Saturday. The meeting, now postponed by two weeks, intends to come up with and propose solutions on which the government’s special committee can decide upon in the coming weeks.

Sadly, all this is just another chapter in a sector riddled with late delivery, lawsuits and financial ruin. The fiasco caused by Jackross homes, the Cassation Court’s ruling on May Real estate that could not be executed, Habitat’s repeated back and forth with the courts are but the tip of the iceberg.

The one saving grace that homebuyers, contractors, as well as developers agree on, is the Real Estate Bill that has been in the pipeline for over four years. After a series of stakeholder meetings and adjustments, the eleventh draft was submitted to the Ministry of Urban Development & Housing (MoUDH) by the Ministry of Justice (MoJ) in October. The former was supposed to have passed it on to the Council of Ministers.

While the huge sectoral hurdle is strong, the focus has been on the one individual, under arrest since the second week of January. Ermias will appear in court for the second time on February 1. He will be hearing the charges brought against him but if the police require more time to investigate he will remain under police custody for a maximum of 10 days.


Published on Feb 01,2016 [ Vol 16 ,No 822]



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