Thursday, 11 November 2010
Quickly & Quietly...
To engineer a default is not easy under normal circumstances however, in the midst of a global economic crisis, it's not hard. I will write about how it's done soon but today I thought I should demonstrate how Barclays Bank went about selling our portfolio within 24hours.
In October 2009 we tried to withdraw £150,000 of our own cash to fund an extension of a vacant unit in central Bristol. According to Knight Frank Commercial Valuers, this would increase the value of the property from £560,000 to £1,240,000 - quite a jump. A tenant was in place, ready to sign a contract once the extension had been agreed.
£420,000 of our own money was sitting in our portfolio account but the bank refused to allow us access, they had no legal right to do this, our contract terms had been fulfilled. This was our surplus cash, overspill from rent after the loan repayments had been met.
Within three weeks there was a turnaround and the bank sent a team of surveyors to visit the whole portfolio on the pretext of 'finding ways to increase the rental income even further'. Unbeknown to us, these surveyors were actually viewing the portfolio and carrying out Due Diligence on behalf of the new purchasers who had been given £330 million by Barclays to purchase property on its behalf. Small world isn't it?
Had our portfolio not been so profitable, it would not have been so appealing to the bank. They would have left it to struggle on as there was no reason to sell; ours was strong, profitable and had a healthy yield, having lost only 6% of its value in the past year compared to an average of -19.3%, so was very tempting to any potential purchaser, especially one with such close links with the bank and all the cash and contacts it needed to purchase quickly and quietly. Easy.
Sound like a stitch up to you?