TheChek News Flow

Tax haven buyers set off property alarm

At least £122bn of property in England and Wales is held through companies in offshore tax havens where ownership is difficult to trace, a Financial Times analysis of Land Registry data has found. The figure – more than the total value of all housing stock in Westminster and the City of London – reveals for the first time the detail of the scale of offshore property ownership in the UK. It raises concern that London property in particular has become a haven for dirty money from around the world. "Property is a key risk area for the UK," says Robert Barrington, executive director of Transparency International UK. "From Abacha to Marcos and the Gaddafis, corrupt leaders have used shell companies and trusts to hide their identities and safeguard stolen fortunes, often in property." Nearly two out of three of the 91,248 foreign-company owned properties in England and Wales are held via the British Virgin Islands and Channel Island structures. Just under two-thirds of the offshore-owned property by value is in Greater London, with 27 per cent in the City of Westminster. The Land Registry data do not allow a breakdown between residential and commercial property. When Prime Minister David Cameron last year announced that details of who owned UK-based companies would be made publicly accessible, the government highlighted the need for transparency to tackle tax evasion, money laundering and other crimes. Yet Land Registry records show only the owner or entity holding a property, not the ultimate owner of the company through which the asset is held. Transparency International has called for the introduction of a list of beneficial ownership of property to mirror the UK government’s push to reveal the owners behind British companies. Anti-money laundering regulations require estate agents and lawyers to carry out due diligence on those involved in property transactions, which includes making checks on beneficial ownership. But doing so can be difficult. "When you have a company hidden offshore, it is I think almost impossible for your average estate agent to find out what on earth is going on," says Peter Bolton King, global residential director at Rics. "You have to make a professional judgment whether you are satisfied with the information that you are provided with." During the 2011 Libyan revolution, it emerged that the late Libyan dictator Muammer Gaddafi’s son Saadi owned a £10m London mansion through an offshore vehicle. Many of London’s "trophy houses", including Witanhurst, a 65-room mansion overlooking Hampstead Heath, are owned by offshore companies whose ultimate owners are hidden. Witanhurst is registered to Safran Holdings, an offshore company registered in the British Virgin Islands. Besides offering privacy to individuals and companies, BVI and the Channel Islands are attractive because of their tax regimes, and because of their strong ties with London’s banking and business community and their robust judicial systems. The 128 jurisdictions of choice for property investors include more unusual ones such as Iran and Niue, the tiny South Pacific island nation. A Land Registry official said there were no plans to introduce a register of beneficial ownership of property and that it would be "misleading to suggest that registering land or property in a company name amounts to allowing individuals to conceal information on the register for illicit purpose". The total value of offshore ownership of property is likely to be considerably higher than £122bn. Limitations on how the Land Registry holds the data mean the true picture is difficult to ascertain. More than a third of the data provided by the Land Registry do not contain a purchase price. The Land Registry does not capture price information when properties change hands through the purchase of an offshore corporate vehicle for example.

Iliad: the siege of T-Mobile   Xavier Niel always said that Iliad, the French mobile carrier he founded, would one day have to invest in network infrastructure. He didn’t say that the infrastructure would be on the other side of the Atlantic. Yet Iliad on Thursday confirmed its offer for a 57 per cent stake in the US carrier T-Mobile.

The offer, at $33 a share, looks low. Wednesday’s price was $31. But it is well over December’s $25 price, which Iliad calls "unaffected" because it predates talk of a bid from Sprint. Much has happened since then. This interpretation of "unaffected" will be roundly rejected.

Iliad argues that the bid is, in total, worth $36, a 43 per cent premium to the putative unaffected price. It sees $10bn worth of synergies from the deal, which will make the value of the shares it doesn’t buy $40.50 (the market may disagree, of course – the shares will continue to trade). How might that value estimate work? Say $1.5bn in pre-tax savings can be found at T-Mobile after the deal; tax the savings at 35 per cent; capitalise them at the usual 10 times. There’s the $10bn. But if you spread that value over T-Mobile’s 813m shares, it comes to $12 a share, which does not quite close the gap between $25 and $40.50. So just how the figures work is unclear.

Then there is the question of where $1.5bn in savings – or anything near it – can be found at a company with a $26bn operating cost base. If this were a merger on a single country, perhaps. But this is a cross-border stake sale. And the lack of overlap means T-Mobile will always be worth more to Sprint.

Perhaps, though, Mr Neil’s thought process is simple. There is more profit in the US than in Europe; he knows how to run a lean operation to undercut rivals gone fat; and T-Mobile is the vehicle he needs to do it. The rest is detail. Fair enough, but to get what he wants he will have to fight much harder than this.