Housing Crisis: Huge property deals facilitated by tax havens and politicians

This is the story of UK property profiteering. It is the story of how the old British elites meet new global investors, united through a complex web of letterbox companies registered in offshore tax havens, while their deals are eagerly facilitated by politicians from all parties.

 

Delancey is a property developer involved in some of London’s highest-profile gentrification schemes, including Elephant and Castle shopping centre and Stratford’s former Olympic Village. And now it’s spreading across the UK, with big developments planned in Leeds, Manchester, Portsmouth and Glasgow.

Delancey is run by old-Etonian Jamie Ritblat, son of a powerful family of property tycoons who are also major funders of the Conservative Party and other right-wing causes. It has financial backing from billionaires including George Soros and the dictatorship of Qatar.

 

A few key points about the company:

• Olympic Village. Delancey is best known for its partnership with the Qatari royal family to buy East London’s former Olympic Village and turn it into private rental flats. The land was sold at a loss by the UK government. At the time of sale, Sir John Ritblat (Jamie’s father) was a member of the government’s Olympics “oversight” committee.
• Elephant One. In its earlier Elephant & Castle tower blocks development, Delancey managed to get out of all affordable housing commitments for a payment of just £1 million.
• Most Delancey schemes are partnerships with other investors, whose identities are often hidden behind offshore funds. But a few regular partners have come to light, including: billionaire speculator George Soros, the ruling family of the dictatorship of Qatar, Royal Bank of Scotland, and pension funds from Canada and the Netherlands.
• Delancey and Jamie Ritblat have funded the Conservative party to the tune of at least £345,000. The Ritblat family also support a range of right-wing “neo-conservative” think tanks.
• The Ritblats have a powerful network of connections in the UK’s political and cultural elites. They sponsor and sit on the boards of institutions including Kings College, the Tate Gallery, and the Royal Albert Hall.
• Recent Delancey’s schemes involve its joint venture company “Get Living”, a “build to rent” corporate landlord. Beyond London, Get Living is planning massive new rental apartment developments in Leeds, Glasgow and Manchester.

 

How Delancy works

Delancey was founded in 1995 by Jamie Ritblat, an Eton-educated Conservative donor, born to wealth and power. Jamie is the son of Sir John Ritblat, a well-known property tycoon worth an estimated £234m, who for decades ran Britain’s second-biggest property company, British Land. Jamie learnt the ropes at his father’s company before striking out on his own with Delancey.

Delancey describes itself as a property investment “advisor”. That is, its developments don’t just use the company’s own capital, but bring in other investors from across the world.

In the last two decades, Delancey “has acquired, developed, managed and sold over £20bn of property” through its various funds and companies. It bulked up during the 2008 financial crisis – taking advantage of the dip in property prices to buy up ‘distressed’ assets from the Royal Bank of Scotland, and to take over another major London development company, Minerva.

The funds Delancey “advises” own buildings across London and the UK. Its investments reflect the big trends in UK property speculation: from corporate office developments in the 1990s and early 2000s, to today’s focus on “Build to Rent” housing. Delancey’s latest major venture is its Get Living rented apartment complexes (see below).

 

Company structure: A network of offshore letterboxes …

Delancey’s plush London headquarters are in Mayfair’s Berkeley Square. But the money is moved around a complex web of companies, many of them registered offshore in the British Virgin Islands tax haven.

In the early days, Delancey was a public company (PLC) listed on the stock exchange. But in 2001 Jamie Ritblat bought out the shares to turn it private – with the backing of his major investors George Soros, John Ritblat, and the Royal Bank of Scotland (which reportedly helped out with a £170 million loan).

As a private firm, the parent company for many years was Delancey Real Estate Partners (DREP), which is registered in the British Virgin Islands (BVI) tax haven. But in 2018, Delancey was restructured. DREP is now legally a subsidiary of another company called Cortx Holdings Limited (CHL), which until 8 May 2019 was called Cortx 1. Unlike DREP, Cortx is registered in the UK. Cortx has one controlling shareholder: Jamie Ritblat.

But Cortx’s latest accounts show assets of just £35 million, while the Delancey property empire is worth billions. How does this work?

 

Investment funds

First of all, Delancey sets up and manages investment funds into which different investors pool their money. These often have bland names – such as DV3, DV4, etc. As well as the initial investments, these funds can be ‘geared up’ by borrowing more money from banks and other lenders. Delancey then gets paid management fees for running these funds and “advising” them on property deals.

It’s not easy to find out who are the investors in Delancey’s funds. They are typically registered in offshore locations with minimal accounting transparency, allowing investors to remain anonymous.

Back in 2009, the Information Commissioner ruled on a “freedom of information” request from a campaigner asking for information on Delancey’s involvement in developments in Bury St Edmunds. After a battle, the local council finally released a letter from Ritblat naming some of the investors in the DV3 fund. As Private Eye has reported, these included Soros, the Royal Bank of Scotland, and various insurers and pension funds. Separately, it emerged that another investor was Conservative minister Andrew Mitchell.

It is not clear which funds remain active. The DV4 fund certainly is: it is described as an “open-ended” fund without a fixed lifespan and continues to make new investments after more than a decade in operation. But there is no public information on who its current investors are.

 

Development companies

When Delancey has secured a site for development, it will often set up a specific company with its partners to manage this deal. These may be structured as “Limited Liability Partnerships” (LLPs) and, again, may involve offshore tax havens.

For example, for its Elephant and Castle shopping centre development Delancey has set up an offshore company called Elephant and Castle Properties Co Limited, based in the British Virgin Islands. This, in turn, is owned by Elephant and Castle LLP, a limited liability partnership registered in the UK. And this has a number of partners:

• DOOR S.L.P – a Jersey registered collaboration between Delancey’s DV4 fund and Oxford Properties, part of Canadian pension fund OMERS.
• Stichting Depository APG Strategic Real Estate Pool – a vehicle of the Dutch pension fund APG, registered in the Netherlands.
• Qatari Diar Real Estate Holding Company – a fund owned by the government of Qatar.
• QD UK Holdings Limited Partnership – a Scottish Limited Partnership vehicle also owned by Qatar Diar Real Estate Investment Company Q.S.C
• Kintyre Corp – a property investment vehicle registered in Panama, named in the leaked Panama Papers. (NB: it is not clear whether this vehicle is connected to the German developer Kintyre, which opened a London office in 2016.)

 

‘Get Living’

Delancey’s newest business focus is the booming “build to rent” property sector. Build-to-rent schemes are typically big developments with hundreds of flats in shiny tower blocks – but rather than selling them on to private buyers, the developer rents them out, becoming a corporate landlord. (See our recent profile of Grainger PLC for much more on this trend.)

Delancey first set up Get Living to rent flats in its East Village development on the former Stratford Olympics site (see below). It was then expanded to incorporate rental units at Elephant One (see below), and is now lined up for the Elephant and Castle shopping centre scheme too.

But these London developments are just the start of Get Living’s ambitions. The company says it has a current “development pipeline” of around 4,400 homes, and aims to build a portfolio of 12,500 properties. Outside London, it has acquired 800 homes in Middlewood Locks in Manchester, and lined up big sites at Globe Road in Leeds and in the centre of Glasgow.

The latter is a £200 million development with 727 flats for rent that will be “Scotland’s largest build to rent scheme to date” which will “completely overhaul a key area of Glasgow”. Work on the first phase of the development is expected to start in 2019, subject to building warrant.

The rent charged by Get Living does not come cheap. In Delancey’s Elephant One development, student rooms In Porchester House start at £279 per week for a ‘Classic’ room, or £349 for a ‘Supreme’. Private rented units are being advertised starting at £1,841 per month for a 1-bed flat.

Like other Delancey schemes, Get Living is a joint venture involving a number of regular investors. Again, the initial partners were Qatari Diar, and the Dutch pension fund APG. In 2018, Delancey also brought in another big investor – Oxford Properties, the property investment business of Canada’s Ontario pension fund (OMERS). They set up a new joint venture company called Delancey Oxford Residential (DOOR), owned jointly by Delancey’s DV4 fund and Oxford Properties, with stated plans to invest £600 million in UK residential property.

After Oxford Properties got involved, Delancey registered a new company called Get Living Limited. Its partners were:

• DOOR (Delancey DV4 and Oxford Properties): 39%
• APG: 39%
• Qatari Diar: 22%

And in another classic tax avoidance move, Get Living is now converting to become a “Real Estate Investment Trust” or REIT. This is a fully legal tax-dodging structure introduced into the UK in 2007, after concerted lobbying by the property industry. Unlike other companies, REITs are exempt from paying corporation tax.

The requirements for a company to register as a REIT are that they focus on property investment, distribute 90% of their profits to investors every year, and are listed on a recognised stock exchange. To meet this last requirement, in November 2018 Get Living re-registered as Get Living PLC, and was listed to sell shares on the Guernsey Stock Exchange.

 

Who profits?

Because of the complex and secretive corporate structure outlined above, it is hard to trace how much profit Delancey’s developments make – or whose hands those profits end up in.

Cortx, Delancey’s new legal parent company, reported a turnover of £18.6m in 2018 – “advisory fees” from its funds and investment vehicles. However, the company’s accounts claim it made a loss of £4.6m, after paying out £22 million in “administrative expenses”.

These administrative expenses include: £1.2 million in interest and finance costs; £14.5 million in salaries to 55 staff; and £4.6 million in payments to its directors. Cortx has just two directors: Jamie Ritblat and Paul Goswell. So although we don’t know who was paid what, we know that between them they pocketed £4.6 million in 2018.

As the company registered a loss in 2018, it didn’t pay out any dividend to its owner – also Jamie Ritblat. But with his share of the £4.6 million directors’ pay, that shouldn’t have bothered him much.

However, we shouldn’t get too fixated on Cortx’s figures. They don’t begin to capture the vast amounts of capital flowing in and out of Delancey’s multi-billion pound property deals, through a misty archipelago of funds and offshore vehicles.

For example, a business media article in August 2018 reported that Delancey’s DV4 fund had sold £1.2 billion worth of property in the previous 12 months. There is no way of knowing how much profit Delancey’s investors made on those sales.

 

Who runs it? The Ritblats and their cultural power

All Delancey’s network of companies trace back to one man: Jamie Ritblat. And Jamie got where he is today thanks to the support of his property tycoon father Sir John Ritblat, who continues to pull strings for his son’s business.

But the Ritblats and the other directors around them aren’t just businessmen. They are also heavyweight players in Britain’s elite cultural scene, sponsoring and sitting as directors on numerous national institutions. Of course, this helps them keep up an impressive network of powerful connections which are great for business too.

 

The boss: Jamie Ritblat

Jamie Ritblat is Delancey’s founder and CEO. He has a London address at 24 St Petersburgh Place in Bayswater. He also built and owns a fake 18th Century stately home in Winchcombe in the Gloucestershire Cotswolds.

When he’s not busy donating to the Tories, stashing millions out of sight of the taxman, or getting plebs to serve him in his mansion, Jamie lends his name and elitist credentials to prestigious London art institutions and universities. In the past, he’s been a member of Kings College London’s College Council and member of the Southbank Centre’s Board of Governors. He also helps out other property financiers: he is non-executive chairperson of private equity real estate firm Mitheridge Capital Management.

But, according to his bio on the Mitheridge website, he has now stepped down from his voluntary roles except for one: he remains an “active Trustee” of the Bathurst Estate – an 8,000-acre estate in Gloucestershire where he helps out the Earl Bathurst and the rest of his ‘barmy’, hunting enthusiast family.

 

Right-wing politicking

The Ritblat family don’t just have the power to shape our built environment and our cultural life, they also dabble in political influencing. Delancey is a major funder of the Conservative party. Sir John Ritblat uses his “family foundation” and other charitable trusts to back think-tanks spreading neo-conservative, war-mongering ideas, and an arch capitalist pro-Brexit lobby group.

• Conservative Party. Delancey as a company makes regular donations to the Conservative party. Since 2011, the company has donated £335,000 – according to declarations in annual accounts.ⁱⁱJamie Ritblat also made a personal donation of £10,000 in 2015. Sir John Ritblat has not reported any cash donations to the party, but he was widely reported sitting with former prime minister David Cameron at a Tory party fundraiser.
• Henry Jackson Society. This right-wing think tank is described in a study by Spinwatch as a leading exponent of neoconservatism in the UK today: “grounded in a transatlantic tradition deeply influenced by Islamophobia and an open embrace of the ‘War on Terror’.” It is one of the main regular beneficiaries of the Sir John Ritblat Family Foundation. One recent Henry Jackson Society project is an organisation called Student Rights, which presents itself as “against extremism” and promoting “free speech” on campuses – but is accused by the National Union of Students of “fuelling Islamophobia”. Its director Raheem Kassam went on to become editor of “alt right” news portal Breitbart London.
• Weizmann UK. Sir John Ritblat is vice president of this UK foundation and supports it through his charitable trusts. Set up to support the Weizmann Institute of Science in Israel, in recent years Weizmann UK has taken a political stance in trying to fight boycotts against Israeli academic and cultural institutions.
• Open Europe. Right wing think tank, linked to neoconservative movements, that pushes for “economic liberalisation” in Europe. Described by the Economist as “the Eurosceptic group that controls British coverage of the EU”. Sir John has donated through his Family Foundation, and is listed as a “supporter” on Open Europe’s website.

 

Read more about this story at Corporate Watch

 

 

 

 

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