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At one point in the prospectus trying to entice investors to back a project to buy 20% of Sark, it outlines some of the risks.
Confusing land ownership, political divides, no real planning strategy, lack of facilities, a housing market still entangled with an outdated leasehold system and electrocution.
That’s right, electrocution.
“A serious case of electrocution in 2023 in the harbour, due to outdated and faulty systems, demonstrates vividly the poor general state of the built environment on the island, which is visible at first sight to anyone visiting,” it says.
The Sark Property Company is nothing but open with this at least, and its plans to mitigate these risks.
None of this seems to be putting people off as it moves to initially buy the Sark portfolio owned by a trust of the late Sir David Barclay, but with a vision that could eventually see it own 40% of the island.
It says it has received pledges from more than 100 investors ranging from £25,000 to £4m. interested in the project.
In an investment prospectus issued on 24th September, the Company outlined how it wanted by 29 November, or sooner if it had the necessary amount guaranteed, to bring in equity investment of at least £20m., potentially borrowing another £8m from an unnamed local lender.
Today it says it had submitted its bid, so that interest has materialised quickly.
It is a project has been years in the making.
Non-binding Heads of Terms were signed between the company, then called Island Finance Limited, and one of David’s sons, Alistair Barclay, in February 2022.
These terms “also make provision for a future constructive relationship with the owners of castle Breqhou.”
The Company has four directors:
Christopher Beaumont: The 23rd Hereditary Seigneur of Sark, and as such the contractual counterpart of the Crown for the fief of Sark. A former Major in the British Army and engineer at Rolls Royce, he inherited his title in 2016 from his father Michael. His son (and eventual heir) Hugh, 28, has been a part of the project since inception.
Pictured: Christopher Beaumont (l) and Swen Lorenz.
Swen Lorenz: A German-born entrepreneur with a 25-year track record in fund management, including being a director of what was the first London-listed residential property fund for Macau with a $300m portfolio. He spent four years helping to modernise science and conservation in the Galapagos Islands. Mr Lorenz has been a resident of Sark since 2017. He will lead the company as CEO until it is ready to IPO on a recognised market.
Richard A. Johnson: A global real estate and private markets professional with more than 35 years of experience across APAC, EMEA and North America. His transaction experience includes capital raising of debt and equity, development, financing and structuring. Based out of Switzerland, he is a commentator and presenter at major industry events globally.
Harris “Kuppy” Kupperman: Founder of Praetorian Capital Management LLC, an investment manager focused on using inflecting trends to guide stock selection and event-driven strategies. He is also the author of Praetorian Capital’s public blog, Kuppy’s Korner, where he discusses his investment process and comments on hedge fund industry trends. He the Chairman and CEO of publicly traded Mongolia Growth Group. Praetorian Capital is an anchor investor.
The board of Directors will eventually consist of six members.
It is clear from their public announcements that Mr Beaumont and Mr Lorenz are passionate about Sark and creating a future for their island home.
There is also the financial side. This is an investment deal after all.
If successful, Mr Beaumont, Mr Johson and Mr Lorenz are in line to receive a directors free of £25,000 a year in 2025 and 2026, at which points in time that fee will be reviewed.
None have received any fees or salaries during the setting up period.
The Sark Property Company currently owes Mr Lorenz’s Sarnia Asset Management more than £400,000 in set up costs, and those will be repaid up to £500,000, from the money raised.
And then there is the continued shareholding.
The Company will issue up to 30,000,000 new shares at a price of £1 each, to raise up to £30m of equity. Then an amount of additional shares will be issued to Sarnia Asset Management so that it retains a 5% equity interest. Sarnia Asset Management Limited will then transfer 50% of its holdings to Mr Beaumont and Mr Johnson, in equal tranches.
There are no plans to make any distributions to shareholders within the first three years of operation.
In a word, potential.
Pictured: A view familiar to many arriving in Sark.
In reality, four hotels, 20 commercial properties, 80 homes, and some development sites. There is also agricultural land, some of which is earmarked for a potential golf course.
But it is a portfolio in various states of repair that needs work.
What it is not getting is Brecqhou and the castle. They are both excluded from the deal.
There are a few factors at play.
The opportunity to purchase the portfolio from the outside looks related to events around the Barclay family. The death of Sir David, some well documented financial problems, a falling out between different sides of the family, are all there in the background.
Since Sir David and Sir Frederick’s investment in the island so many years ago there have been a series of clashes with the Sark government over reforms, from bringing in democracy to the need for things like a customs post to help maximise the tourist market. Sir David and Sir Frederick drove change, but the shutters came down on their interest in ploughing in any more money - the Dixcart Bay, Petit Champ, La Moinerie and Aval du Creux hotels and their restaurants were all closed in 2015 for instance.
There are also legal changes that have opened up the property market that for 400 years had been firmly rooted in feudalism.
Since February 2021 the 40 tenements, or parcels of land, that make up Sark can be broken up into pieces of land which can then be sold, inherited and/or mortgaged. Those who have had a lease on a property on a tenement for 20 years or more can also get a mortgage.
That's the theory anyway. The market is still too small and complex for anyone offering mortgages to get involved - and that is another issue the investment hopes to fix.
There are no official statistics on the real estate market in Sark, but the company believes property values are about 30-50% of those in Guernsey, so there is room to grow.
It would embark on a £15m. investment phased over 2.5 years to improve the portfolio, completing development projects some of which are already partially built which can be sold or rented. Vacant freehold properties can be upgraded and then rented out. It would try to fill the empty commercial properties through active management. It aims to reduce seasonality in tourism. In all it wants to provide housing for 200 plus and more than 50 permanent jobs in this time.
It projects property rental income growing from £1m. in 2025 to £1.925m. in 2028 and income from the hotels growing from £429,657 to £1.36m. in that time.
Real estate prices in Sark are said to be low relative to comparable jurisdictions, with quality residential real estate changing hands at £4,000/m2.
“In international terms reaching residential real estate values of even £10-15,000/m2 for real estate that is in the open market would still represent value for money, particularly given the attractive tax position. It can be argued that there is no real upper limit to the value of a small number of special houses,” the prospectus said.
Its base case is for the portfolio to double in value in three to four years on an unleveraged basis.
It’s best case? Further investment, including into ancillary areas like Sark Electricity, a booming private members club, growth in the digital economy, and a portfolio that has some assets with three to five times what they were.
“Over the next 12-20 years, the Company could then turn into a “Blue-Sky Potential” investment.”
There will be a tidy amount of money going into the Sark government’s coffers.
Pictured: Sark's government is Chief Pleas.
The island has a property transfer tax that this year was 7.5% of the real estate transfer value so it is looking at a seven figure bonus.
Keep in mind that Chief Pleas entire 2024 Budget brought in £1.8m.
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