UK Property

Pension funds extended their gains to nine consecutive months in the second quarter of 2005, the longest unbroken period of gains since the mid-1990s, according to research company Russell/Mellon on Friday.

Funds classed in the pooled balanced category achieved a median positive return of 4.7 percent, led by strong performance in stock markets, it said.

Pooled pension funds hold assets on behalf of several pension portfolios and run them as a single pot.

“This recent run of positive performance also brings pension funds that bit closer to where they were before the bear run at the start of the decade,” Daniel Hall, Russell/Mellon’s publications and statistics manager, said in a note.

On one measure, a typical balanced fund — holding a mix of bonds, stocks, cash and other assets — would be worth about 98 percent of its asset value at the end of 1999, he said.

Positive returns were achieved across all major asset classes, with UK equities returning 5.0 percent and overseas stocks logging 6.7 percent gains. UK bonds recorded a return of 4.7 percent, and property returned. 4.5 percent.

Pension fund managers shifted out of domestic UK equities and bonds over the quarter, continuing a trend seen in recent years. UK equity weightings fell by 0.6 percent to 50.6 percent.

-Reuters

HUNDREDS of investors have lost millions of pounds after being duped by a string of property companies that promised to make them rich. In the first of a special two-part investigation, Financial Mail unravels the web and examines the companies that conned the public.

Kieran Connolly has done well out of misusing other people’s money. He drives a Jaguar and the house he rents is a grand affair. The Department of Trade & Industry has linked Connolly, 48, to several companies involved in bogus property deals. His wife Elizabeth, 31, has been linked to three companies.

The bungalow next to Connolly’s in the Leicestershire hamlet of John O’Gaunt, near Melton Mowbray, is home to Philip and Tina Waterfall, who have connections with five of the eight companies investigated by the DTI.

In three years, hundreds of investors handed over thousands of pounds in membership fees and deposits, expecting to receive a portfolio of buy-to-let properties. Most ended up with nothing.

Financial Mail this week focuses on the four companies most closely connected to Connolly.

Quicksell

QUICKSELL Estates was founded in 2002 in Peterborough, Cambridgeshire, with Connolly and his wife as its two directors. For £46.94 a month, investors were offered options to buy investment properties. Reservation fees were charged on each deal.

Quicksell advertised for investors and recruited those who attended courses run by Turningpoint Seminars and Portfolios of Distinction. Philip Waterfall, 41, was a founding director of Portfolios. His wife Tina, 38, was company secretary.

Glen Lawrence paid £4,000 to attend a Turningpoint course in 2002. Glen, 53, from Castle Bromwich, West Midlands, is married to Yvonne, who has multiple sclerosis. ‘I wanted a job at home to spend time with her,’ he says.

Glen and Yvonne, 48, paid seven £1,000 deposits on different properties. Glen says: ‘Not one of the deals was completed and we found the developers had not heard of us.’ The Lawrences have not had a penny of their £7,000 back.

In spring 2003, Quicksell was put into liquidation and Connolly was declared bankrupt.

Mansion Investments

CONNOLLY was soon promoting opportunities through Mansion Investments with Ian Jamieson, pictured below, a financial adviser in Newcastle-under-Lyme, Staffordshire.

David and Louise Wilson were among the investors. David, who runs a car repair business, and Louise, 27, a financial controller, wanted to create a letting portfolio. David, 39, from Stoke-on-Trent, Staffordshire, says: ‘Connolly promised to get me £1m worth of property.’ To help the Wilsons raise a £31,725 membership fee, Jamieson arranged a remortgage of their home, releasing £50,000 of equity.

The couple paid £3,160 in deposits to reserve properties in Manchester and Swindon and two in Northern Ireland. But the deals fell through or were delayed. They completed on a flat in Hampshire for £229,000, only to discover that the developer was selling them for £15,000 less.

Mansion Investments was formed in 2002 with engineer Barry Frost, 68, as sole director. In August 2003, Richard Smith took over. Both Smith and Frost were registered as directors from an address in Streatham, south London. This property was sold three months ago and Financial Mail has been unable to trace them.

Sterling Mansion (UK)

CONNOLLY and Jamieson, meanwhile, were expanding through the similar-sounding Mansion Investments-UK), founded in July 2003 with Jamieson as sole director. Customers of Mansion Investments were not told of the switch.

Mansion Investments (UK) and Mansion Investments had virtually identical stationery, shared premises, staff and customers, and marketed the same properties. Yet when investor David Wilson asked for his money back, Jamieson claimed the two firms were not linked.

Mansion Investments (UK) changed its name to Sterling Mansion (UK). It claimed falsely to be regulated by the Financial Services Authority and to be a member of independent financial adviser trade association IFAP.

Jamieson paid himself £200,000 in just 18 months at Sterling Mansion. As a bankrupt, Connolly could not take a big salary, but unconventional payments and ‘loans’ benefited Connolly and his associates.

Sterling Mansion went into liquidation in March. At a meeting, the liquidator stunned creditors by detailing payments such as school fees for Connolly’s children and £40,000 to cover credit card bills. Regular payments were made to Seal Properties, run by Tina Waterfall. These ‘loans’ totalled £651,000. The company completed on only 14 property sales.

SMI (Overseas)

LATE last year, Connolly moved to Sterling Mansion International, trading from Stamford, Lincolnshire. The founding directors were Tina and Philip Waterfall and within weeks the company’s name had changed, first to SMI Limited and then to SMI (Overseas) Ltd. Investors who inquired about Sterling Mansion were sold into SMI. Though his name was not on the paperwork, Connolly was in charge.

A former employee said: ‘Kieran and Liz Connolly did the hiring and approved letters sent out. Tina Waterfall was Kieran’s PA.’

The Waterfalls quit in November, and two months later Tony Nunn emerged as a director. Nunn was connected to Sterling Mansion, arranging international mortgages. He argues that SMI, backed by a mystery company in Belize, should continue trading. But questions have been raised about the company’s deals in Turkey and Spain. The DTI wants the business closed.

Connolly: ‘I’ve not got much to say’

FINANCIAL Mail caught up with Kieran Connolly as he arrived home in his Jaguar saloon. He denies wrongdoing. ‘I’ve not got much to say,’ he told us. ‘I don’t want to go into details until I lay documents before the court that will clear my name.’

Financial Mail hand-delivered a list of questions to Tina and Philip Waterfall and to Tony Nunn at SMI’s offices. They did not respond. Ian Jamieson claimed to be ‘liaising with the DTI’, but refused to discuss his role or answer questions.

The High Court wound up Sterling Mansion and Mansion Investments this month. Three related companies were also wound up. Portfolios of Distinction, Turningpoint Seminars and SMI (Overseas) are contesting winding-up orders. Hearings are due next month.

Source: thisismoney

BUY-TO-LET is back in the news, but for all the wrong reasons. This month, the Department of Trade and Industry shut down several schemes that promised “and failed” to make millionaires out of investors.

Rivals quickly moved to condemn the cowboys in their industry. Inside Track, one of the biggest companies in the business, went so far as to put forward its own four-point plan for regulating the property investment sector.

But against the background of a stagnating UK housing market, some property professionals are questioning the way that many of the remaining schemes operate.

Marketing material tends to be long on the potential to make money and short on the pitfalls. An Inside Track marketing leaflet tells you “how to make a million in property investment – even in a falling market”. The website of PropertySecrets.net, an agent for overseas property aimed at UK investors, proclaims: “Buy-to-let and property investment. Maximum profit “minimum risk”

At the moment, such claims do not have to be substantiated, as they would if made by firms which came under the aegis of the Financial Services Authority. In fact, the Inside Track promotion’s boast that “last year we created over 200 property millionaires’ relates to the gross value of its investors’ property.” The company admits that the net value, after deducting the debt taken on to acquire the assets, would make their clients’ wealth look far more modest.

Ray Boulger, of John Charcol, the mortgage adviser, says that such claims are misleading. He says: “To be a property millionaire properly, you need to have net assets of £1 million. In the boom markets of three to four years ago, that was possible. In today’s quieter market, that is much harder.”

But the criticisms go much deeper than the promotional material. These buy-to-let companies typically aim to negotiate special deals with developers of flats or houses. In return for tying up the sale of a large chunk of a new development in advance, the agent will obtain a “discount” on the purchase price. This sum, often from 10 per cent to 20 per cent, should then be passed on to the buy-to-let investor.

Someone who has lined up a mortgage to cover 85 per cent of the value will then own a property with minimal outlay of their own. In a rising market, with a tenant covering the costs of a loan, this so-called off-plan buying is a licence to print money.

Lee Grandin, of Landlord Mortgages, a specialist buy-to-let broker, describes it as “a high-risk, high-reward, high-loss strategy”.

He points out that new properties tend to be sold at a premium anyway, while a valuer’s figure can be out by as much as 10 per cent. Taking account of either of those factors could wipe out your discount. Not only that, but when the property is eventually built, an investor’s flat will be coming on to the letting market along with all the others in the development. This “investor flooding” could make it harder to find tenants.

John Heron, managing director of Paragon Mortgages, the third largest lender to the market, is much more blunt. He says that such schemes are “fundamentally about property speculation and not about long-term investment in private rented property”.

Less than 5 per cent of the property his firm lends against is new because professional landlords find it difficult to let. “Much of the new property is higher value, whereas much of the demand is affordable,” he says.

Not surprisingly, such criticisms are rebutted by operators of buy-to-let schemes. Tony McKay, chief operating officer of Inside Track, says: “Our activity is completely transparent. We negotiate a discount with a developer and pass the whole of that discount to the investor.”

Such discounts are genuine, he says, because the developer saves on certain marketing costs by selling to an investment club, while a pre-sale reduces his risks. A valuation 12 months ago of 2,600 properties bought by Inside Track investors showed an uplift of £80 million on an original cost of £395 million, according to Mr McKay.

He admits that the subsequent flattening of the market may have left some property below the pre-discounted price, but he says that the discount provides insurance against falls in values.

Source: Times Online

Instant Access Properties – the UK’s largest provider of discounted property to individual investors – has announced today that the market value of all UK and overseas properties purchased by its 4,500 members has now exceeded GBP1 billion.

The announcement comes following an internal evaluation which found that overseas property purchased by members has reached a market value of over GBP299 million, whilst UK property values exceeded GBP629 million. Combined sales added to the capital appreciation of all properties has produced a total value well over GBP1 billion.

Jim Moore, Chairman of Instant Access Properties said: “We are delighted to have reached this very prestigious milestone. For any company to have produced sales figures in excess of GBP1 billion is a real achievement but it is even more impressive when you consider that we have only been in operations since 2002. Instant Access Properties has challenged the conventional way of investing in property and our members have made over GBP150 million of paper profit as a result.”

Instant Access Properties currently facilitates sales of nearly eight per cent of all new build apartments in England alone and is the largest facilitator of investment opportunities in the UK and internationally for private investors.

Commenting on the landmark achievement, Anthony McKay, Chief Operating Officer and former Managing Director of Chestertons said: “This great achievement confirms our position at the very forefront of the property investment market and reaffirms that there really is no better time to be investing in off-plan residential property.

“The changes in pension laws in April 2006 – which will allow people to invest in residential property through their pension fund – will also have a significant impact on the market next year and allow our members to benefit further from the unique access to discounted deals that we source for them.”

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