Thursday, June 11, 2009

Question marks over Newcastle United’s Profitable suitor

After much confusion over the last few days, Singapore-based Profitable Group has finally confirmed its interest in acquiring Newcastle United.

But, despite Profitable’s ambition to be “internationally recognised as a premier provider of Strategic Global Investment”, the group is arguably a long way off that goal.

Profitable is heavily involved in controversial real estate investment schemes that critics describe as “land-banking” and its Malaysian subsidiary (Profitable Plots Sdn Bhd) is currently under investigation by the Malaysian Companies Commission following a raid on its offices in October.

A UK subsidiary, The Profitable Plot Company, was voluntarily liquidated in 2007 after failing to “turn a penny”, according to the group’s chief executive John Gaunt.

However, he insisted that Profitable’s investment schemes do not amount to land-banking and denied any wrongdoing.

Land-banking schemes involve companies buying up greenfield sites in the UK, splitting up the land into small parcels and then selling them on to investors at a premium based on the hope that they can obtain planning permission for large-scale developments and eventually flog the land to developers for a substantial profit.

But councils very rarely grant planning permission for developments on Green Belt land and without this, it is very difficult for investors to recoup their initial outlay.

While Profitable’s approach appears very similar, Gaunt insisted that it was “not fair” to describe Profitable’s investment schemes as land-banking because their investors own the title to their real estate outright.

Land-banking is not illegal in the UK but the Financial Services Authority has warned that "there is a risk that many of these schemes are in breach of the financial regulation regime" and it launched a crackdown in 2007.

Like other such companies, Profitable targets investors in Singapore and Malaysia, many of whom view UK land as a prized asset, and often promises spectacular rates of return. An advert run by the Profitable Group on national TV in Singapore last October claimed that it could generate "estimated returns" of 250% over three years for investors who put in £8,000.

Regulators around the world have grown increasingly concerned about land-banking in recent years and Profitable Plots’ Kuala Lumpur office was raided by the Malaysia Companies Commission in October as part of a wider investigation into possible breaches of Malaysian corporate law by real estate investment companies.

An official from the Malaysian Companies Commission confirmed to me yesterday that Profitable is still under investigation following the raid. However, Gaunt told me last night that he had taken the Commission to court over its behaviour toward the company.

“They were of the opinion that we were a collective scheme – but we aren’t because we sold freehold title,” he claimed. “If you buy land from us, you get the title. We’ve had a court hearing and we’re awaiting judgement. We’ve had no contact with them for a sustained period of time.”

Although many of its land investment schemes are based in the UK – in places such as Hounslow and Colchester – Gaunt says that Profitable no longer takes on British investors after its UK subsidiary was voluntarily wound up.

“We don’t take UK business,” he said. “The business regulations in the UK and the manner in which the UK is structured are not conducive to doing business – it’s easier to do business elsewhere.”

A number of consumer websites (and The Guardian’s consumer champion Tony Levene) have warned investors against putting their money into schemes run by Profitable, but Gaunt claimed that “complaints are invariably made by some anonymous person writing under a nom de plume”.

“Show me one person that has lost money with us,” he added. “No-one has lost money. If there was anything illegal about our schemes, one of the most regulated societies in world, Singapore, would have closed us down long ago.”


  1. The Land Banking issue is one of comparison of values and nothing to do with whether they are freehold.

    We all agree I hope that English green belt freehold land is worth almost nothing - perhaps a few hundred pounds per plot - less if you can't farm it.

    Freehold English building land is worth a fortune especially if near to a big city.

    If you have a method to turn useless but pretty green belt into building land near a city you can get rich.

    In the sales process these companies typically sell small plots of greenbelt or very restricted land near cities. But when setting the sales price they typically compare the value with the price of freehold building land.

    Investors end up paying many thousands of pounds for a restricted use plot worth only a few hundred pounds. That would not matter if any of these plots actually got planning permission and then could be sold at the higher prices.

    None of the four Profitable UK sites have achieved planning permission yet.

    “Show me one person that has lost money with us,”

    Profitable offer estimated returns of 250% on 8000 UKP plots in 3 years in this Singapore TV advert.

    How do they expect to get that when the local authority has stated here with a high level of certainty that the land will not get planning permission?

    If I bought stock at $80 which is now worth $3. I haven't lost money yet because i havent sold it yet. But at least I can sell it which raises the other key issue of Land Banking. There is almost zero liquidity unless you can find someone with the same mindset and cash you had when you bought it.

  2. Twice in a year its been leaked that Profitable Group will buy Newcastle and twice in a year they haven't come up with any money.Perhaps as a journalist you can explain how everyone ran with this story when a couple of phone calls and a little digging would have confirmed that they really have no credibility as purchasers.

  3. You're preaching to the converted, Nom de Plume. While I'm not regulated to give investment advice, I certainly wouldn't consider putting any of my own cash into Profitable's schemes.

    Anonymous - I can tell you why the footie hacks all ran with it. They are under immense pressure to break stories with little time to check out the background.

    They are not credulous by nature but just desperate for a scoop so when "sources close to Profitable" told them that they were eyeing up Newcastle, they jumped on it.

    I know for a fact that some national paper hacks feel that they got their fingers burnt on this one. More fool them.

  4. This article seems to have some relevance to the comments made above. I dont know what a compound notice is in Malysia but it seems to be some kind of business slap on the wrist. I dont think the concern was title the real concern is the hugely exaggerated claims of both chance and amount of possible gains.

    KUALA LUMPUR, June 19 (Bernama) -- The Companies Commission of Malaysia (SSM - Suruhanjaya Syarikat Malaysia) has issued compound notices to Profitable Plots Sdn Bhd, Edgeworth Properties (M) Sdn Bhd and UK Land International (M) Sdn Bhd for contravening section 91(1) of the Companies Act 1965.

    According to SSM section 91(1) of the act, a person shall not issue or offer to the public for subscription or purchase any interest unless at the time of the issue of the interest there is in force an approved deed.

    The three companies were raided on Oct 24 last year following queries received from members of the public that the companies were offering illegal investment schemes to members of the public, SSM said in a statement here today.

    The raids were conducted simultaneously in the respective offices located here and assets such as information, communication and technology (ICT) equipment and documents of the companies were seized to assist the commission in its investigations.

    "The focus of the investigations is to ascertain if the offering of plots of land and the expected future gains expressed to the investors, fall within the ambit of an interest scheme defined under Division V of the Companies Act 1965," the statement said.

    In order to protect the investing public, SSM had to ensure that the three companies were providing genuine titles of ownership to the plots of land sold.

    Prior to the raids SSM said, it had conducted surveillance and monitored the activities of the three companies closely.

    The companies were found to offer plots of land located in the United Kingdom and Canada where investors were promised high returns upon the successful rezoning of the land for development purposes, SSM said.

    "They had used attractive and elaborate marketing strategies which targeted individuals in the upper and middle income bracket because financing was not provided.

    "Investment value ranges from RM30,000 to RM140,000, and in total the investments were in excess of RM150 million," it added.

    Based on SSM's verification with the land authorities in the United Kingdom and Canada, the titles issued to purchasers were found to be genuine.

    UKLI was also shut down in the UK last year by the FSA with huge losses for investors.

  5. Are the clouds gathering for Profitable Group?

    A DEVELOPER is pressing ahead with the consultation for its scheme for the Lower Feltham Lakes site, despite Hounslow Council saying it is 'extremely unlikely' to go ahead.

    On Monday DLP Planning unveiled changes to plans for the 122-acre site off Chertsey Road in response to residents' concerns.

    But the land is in the Green Belt and Hounslow Council has said it will not allow it to be developed.

    Concerns were raised in the Chronicle last week that the proposed plans might be the front for an 'international property scam'.

    Local people have accused landowner Profitable Group of holding a phoney consultation, a claim DLP director Neil Osborn strongly denies.

    He said: "The consultation process will continue. We're not just going through the motions, paying lip service to community engagement. It's a genuine opportunity to influence how a largely unused eye-sore, Green Belt in name only, can be transformed."

    The land, the former Feltham gravel pits, was bought for £3.15million in 2006 and has been sold in plots to investors in Singapore, Brunei and Canada with a promise of 250 per cent returns when it is developed.

    Despite withdrawing its "bid" to take over Newcastle United yesterday, Profitable Group, a Singapore-based investment firm, has another plan to break into English football. Its scheme, Project Hero, is looking to invest in the development of footballers and "would look to sell to interested clubs and keep a significant share in the player by way of a percentage of the sell-on fee".

    That manifesto has attracted the attention of the very similarly named Hero Global Football Fund, which has been attempting to establish itself on very similar terms. Working behind the Hero fund is the former Liverpool captain Alan Hansen. Working behind Project Hero is the former Liverpool captain Steve McMahon.

    Some of Project Hero's other financial backers do not have an enviable business record. In 2007 three of the directors of Profitable Group – Tim Goldring, Nigel Blanchard and Neil Osborn – were behind the Profitable Plot Company that was the subject of a winding-up petition from the Department of Trade and Industry which was avoided when the company went into voluntary liquidation.

    One of the Profitable Group's core businesses in Singapore is Profitable Plots, which purchases UK land and sells shares in it on the promise of enhanced value once planning permission is achieved. After repeated planning-application failures the validity of the scheme has been questioned, upsetting investors in Asia and Canada. Its Canadian client-services manager, Dan Strumos, insists there is nothing untoward since, he says, the Singapore government puts to death anyone guilty of "corporate shenanigans" (although Nick Leeson seems to have survived).