Tonight:
4°c
Raise your hat to Rafik Patel. The 27-year-old former City trader has created a buzz around the sale of 11 flats being built just off the Commercial Road by his family firm, MIA Developments. Patel has done this by organising a raffle of the entire block in Myrdle Street E1, a spot as Dickensian as the name suggests.
The announcement last month has reaped a fair amount of happy publicity for “Britain's largest property raffle”. Sadly, the column inches have only prompted 2240 punters to date.
Each has paid £60 for one of the 200,000 draw tickets. The single prize is all 11 flats, which MIA says are worth £8 million.
In the past week, not many more than 100 punters entered by paying their £60 for an MP4 player, according to the ticker on the winalondonpad.com Web site. At that rate of sale, it will be 2042 before all the tickets are sold. But there is just over 11 weeks left until the 2 March deadline.
The raffle date can be extended by three months to June. In the (highly likely) event of not enough tickets being sold, the winner gets what is in the pot.
This is how it is supposed to work. MIA would bank £12 million if all 200,000 tickets sold. Great Ormond Street Hospital gets £3 from each £60 ticket. After buying the MP4 players and giving £600,000 to the children's hospital, the developer would be left with £10 million. Patel says that will give the firm £1.5 million profit on the deal.
The Gambling Commission says there are about 20 property raffles under way at the moment. Most are being conducted by individual homeowners desperate to sell. But the 2005 Gambling Act forbids simply selling tickets for private gain. There has to be some element of skill involved.
In October, the Commission halted a draw in Devon in which a couple had raised £1.15 million in ticket sales because the question (how much is a fishing licence?) was too easy.
Homeowners “risk committing a criminal offence if they cross the boundary and stray into offering an illegal lottery”, the Commission warns.
MIA has been prevented from straying by Susanna FitzGerald QC, a leading expert on the Gambling Act. The law is being complied with by offering the MP4 player and making that donation to charity. This then allows the punter to be entered free into the prize draw after answering a few questions to pass the test that some skill must be involved.
Here you go: what is the date of the London Olympics? When was Great Ormond Street Hospital founded? Finally, what is the floor area of the Myrdle Street flats, given the block is 23 metres long by seven metres deep by four floors high?
Got those right? Well, pay your money: but just don't bank on the £500,000 a year in rent MIA says the winner will enjoy. That is about as likely as all 200,000 tickets being sold by 2 March.
Candys just need a wealth of buyers for luxury flats
A wander round the rising concrete superstructure of the 86 super-luxury flats being built next door to the Mandarin Hotel in Knightsbridge leaves three impressions: the views over Hyde Park are terrific, the ceiling heights are not terrific, and the basement to service the Mandarin is huge.
Not visible to the naked eye is the huge profit that might, repeat might, be made on this plot, bought by a terrifically rich Qatari in 2005 with the help of thirtysomething developers Nick and Christian Candy.
The precocious Nick Candy reckons they can get £5000 a square foot — say £20 million for a 4000 square foot flat. The number of square feet for sale is 384,500. So total income is a touch over £1.9 billion.
More like £4000 a square foot, if they are very lucky, reckon Knightsbridge estate agents. Still, that's £1.5 billion.
What used to be the headquarters of Bowater was bought from Land Securities for £150 million in 2005. Building the flats will cost no more than £350 million. Add £200 million for the giant basement and £100 million for financing costs and luck. So total outgoings won't be much more than £800 million. That leaves an awful lot of change.
Don't be jealous. It's not that easy. Half the flats have been sold, for £750 million. But there are still more than 40 to sell in a dreadful market where even oil sheikhs are feeling the pinch. And that is where all the profit lies.
Good results but low returns for the Harris toilers
How come the partners at Knight Frank earn a whacking £780,000 each and those at
EC Harris a piffling £172,000?
The posh property agent does have a higher global turnover than the not-so-posh construction consultant, £335 million against £267 million.
Knight Frank admittedly makes more profit — £53 million against £36 million. However, both have almost exactly the same number of staff scattered around the world, 3800.
The reason Knight Frank equity holders earn so much more is that there are so many fewer of them than at EC Harris. The accounts in the year to April for the pair have been published in the past two weeks. They show that Knight Frank divvies the spoils between 46 proprietary partners. EC Harris spreads its brass among 224 equity partners.
To be fair to Knight Frank the 3800 staff (average pay £46,000) did share a generous bonus pool of some £46 million — about £12,000 each. But this will not have impressed the 20 or so graduates who were made redundant last week. The truth is Knight Frank is facing as grim a time as the rest of the property sector.
Senior partner Nick Thomlinson admitted as much last week: “We are now seven months into our new financial year and the world is a different place. However, in the first half of our new financial year, we have traded profitably.” In other words, turnover is down and costs are being cut accordingly and the next six months look bloody awful.
By contrast, EC Harris is in expansive mood. It has bravely published a forecast that by 2011 turnover will be up from £267 million to
£400 million. If that happens, EC Harris may well enjoy higher revenues and profits than Knight Frank in three years.
But what's the betting they will never enjoy higher pay.
Peter Bill is editor of Estates Gazette www.estatesgazettegroup.com
