Australians needs to take notice.
by Damian Corless
the Irish Independent,
Ireland’s biggest daily newspaper.
With no let-up in the goldrush to buy property overseas, a number of British ‘land-bankers’ have begun targeting Irish investors with the prospect of making easy money on sums that Ray Burke might describe as “walking around money”.
One such firm, European Land Sales Partnership (ELSP), recently placed an insert in Irish newspapers inviting readers to have a punt on parcels of English land from as little as £5,000stg.
I followed-up the advert, sent away, and received a guide entitled Land Banking Made Easy. It told me that having sounded-out “informed opinion”, ELSP have formed a “vision” of where future developments may be built.
The blurb is upfront in saying that the land is cheap because it has no planning permission. But, thanks to ELSP’s “wealth of experience”, they’ve established that “there is a good chance that planning permission may result at some stage in the future”.
Days after the brochures arrived I got a late-evening phone call. The caller introduced herself as Emma from ELSP. I expressed some interest in investing, but told her the information she’d sent me contained no hard details. She apologised for leaving out the relevant documents and promised to put them in the post.
I asked her what I’d find in the second batch of literature. She said that ELSP has plots for sale in Milton Keynes, Aylesbury Bow and Devon. She also mentioned an opportunity in Cumbria which, she feared, might now be fully subscribed. If I’d been in, I’d have stood to “double your money” with a rapid “13-week turnaround” on my investment.
She recommended the Milton Keynes scheme which was going so well that the cheapest plots had sold out leaving “only a few” £16,000 parcels left. I might be “looking at 2-5 years” for the granting of planning permission to spring my windfall.
If £16,000 was out of my league, what about Devon where I could buy a plot for just £3,000? The Devon land is currently valued at £100K an acre, but “with high density planning permission it would be worth £1.5m-£2m an acre”, offering a possible twentyfold return. The reason the Devon prices are so low is that planning permission might take “five to eight years”. Then there was Aylesbury Bow in Buckinghamshire where £8,000 would buy me one-fifth of an acre.
The ELSP brochure says: “Some plots will be sufficient for the construction of a detached 4-bedroom house of approximately 2,000sq ft with garage and gardens.” In relation to Aylesbury Bow, Emma told me I could buy a plot suitable for “a 3-bedroom house with front and back gardens and a garage, but that’s not what they’ll be building there”.
Thinking this was an odd thing to say, I asked her to elaborate. She explained that, through the luck of the draw, the piece of land I ended up owning might have a house on it, “or it might be a footpath”. Either way, it wouldn’t matter because the whole land-bank would be sold to a developer as a single entity and each investor would take a proportional chunk of the profits.
Late last year one of ELSP’s senior consultants, Daniel Nuttall, attempted to explain how “historical precedence” and ELSP’s specialist “intellectual knowledge” favour the investor.
Nuttall explained: “If you understand what we do, land banking is all about buying land in advance of development, and getting on board, and getting it before it gets planning permission. So, until it gets planning permission nobody will know how we do, but all we have is historical precedence.
“For example, we have some land in Milton Keynes. All we can say is our land with its hope value is positioned at £100,000 per acre. Once it gets planning permission we know that land in the Milton Keynes area has sold for £1.5m an acre. So you do your sums from there, but obviously you can’t forecast and you can’t project, because we don’t know. We just don’t know is the answer.”
All of which might be interpreted as saying that ELSP is peddling a pig in a poke.
Not so, according to Nuttall, who continued: “Obviously you know what you are buying into, you are buying into the intellectual knowledge of the market, the kind of information that you wouldn’t be privy to as a layperson. But it’s not rocket science. It’s pretty easy to understand. Basically we’re investing in the land. In order to fund our investments we need to take on other investors.”
The trouble is, the intellectual knowledge Nuttall boasts of is hotly disputed.
Let’s take his own land-bank at Milton Keynes. The local preservation society insists there is no way it will be rezoned for housing anytime remotely soon. Spokesman Peter Lousada said: “The site has special area status as an area of attractive landscape. Milton Keynes is to be developed to the east and west. We’re to the south so any homes will be very long term.”
Councillor David Hopkins agreed, saying: “This is not an expansion area. Contrary to what is implied (in the ELSP blurb), Milton Keynes is not crying out for expansion land even though the population will increase. As a council, we have identified hundreds of acres on the fringes of the city and this will be more than enough for the next 20 years or more.”
Some critics insist that the subdividing of plots actually makes it lesslikely that planning permission will ever be granted. They point out that for local authorities, trying to trace scores or hundreds of plot owners in ten or 20 years time could add up to an administrative nightmare. So, even if local authorities do decide they need to build more houses in decades to come, the multiple ownership issue might drive the JCBs elsewhere.
Other land-banking operators routinely play down identical obstacles to their investors hitting the jackpot.
ELSP, though, has some credibility problems uniquely its own. For one, it is a business partnership rather than a limited company. The reason for this is that its leading light, Stephen Cleeve, is disqualified from being a UK company director until February 2008.
Two of Cleeve’s previous companies – which sold what turned out to be poor investments in vintage whiskey, champagne and port – were shut down by Britain’s Department of Trade & Industry in 1997.
Last July Milton Keynes MP Brian White called in the Commons for curbs on: “unscrupulous property developers … who divided up fields and offered plots for sale. A European land sales partnership is doing something similar in a lovely village called Bow Brickell. It is offering a field for future homes and taking money now with a promise of a home in the future. The person responsible has bought a field for £90,000 and stands to make £3 million. There is little chance of the field getting planning permission, but the developer’s information advances the growth of Milton Keynes as an inducement.”
He continued: “Someone who has been barred as a company director is running the scheme and gets round the law by forming a partnership. I ask my Hon Friend to take up with the Department of Trade & Industry not only closing the loophole that allow scams such as those in Bromsgrove and Milton Keynes to occur, but extending the bars on directorships to partnerships.”
The MP has confirmed that the barred company director he was referring to was Stephen Cleeve. The “scams” he referred to were land-banking schemes.
Two days after Emma’s phone call she rang again. She was looking for Martin, the alias I’d given her. I said Martin would be out all day and I had no contact number. She sounded crestfallen, explaining that an £8,000 plot had “just come back” from another investor and she thought it might be in Martin’s price range because she’d formed the impression that £16,000 might be beyond his pocket.
The next day her second package arrived. It contained none of the financial details I’d been expecting. Instead, it consisted of a series of newspaper articles with headlines such as Milton Keynes To Double In Size Over Next 20 Years. The only additional document was a map of the Cumbria land-bank dated October 2004, but with no indication as to whether this scheme was still open or closed.
I phoned ELSP’s London office and asked to speak to Stephen Cleeve. I was told he was away. I mailed my concerns to Stephen Cleeve’s personal email address. Hours later ELSP manager David Jackson phoned. I explained I had questions about the ethics of land-banking, about Cleeve’s brushes with the Department of Trade & Industry and about his denunciation in the Commons.
Without the slightest trace of surprise or hostility, he said that rather than address the issues right now, he’d read the email I’d sent to Stephen Cleeve.
ELSP did not respond, although Emma continued to phone looking for ‘Martin’ over the following days, up to three times daily.
Reprinted with the kind permission of Damian Corless, the Irish Independent.