A COMPANY based in a Caribbean tax haven has bought £2.6 million of prime land on the Edinburgh waterfront from developers that went bust after it slumped in value by an astonishing 93%.
Sapphire Land, registered in the ultra-discreet British Virgin Islands (BVI), has bought the seven pieces of land at Granton Harbour and Western Harbour. They were previously owned by Applecross, FM Developments and Gregor Shore, all of which had borrowed heavily from the Bank of Scotland before being pulled under when the market turned.
Overlooking the Firth of Forth, the sites have planning permission for over 900 flats and other dwellings, and are thought to have been worth at least £40m before 2008, giving an indication of the losses suffered by the bank and the developers as a result.
They form a large part of the city’s shattered ambition to create an upmarket waterfront residential district along a large stretch of its northern boundary.
Sapphire is understood to involve certain investors from AB Leith, a vehicle which owns adjacent land at Western Harbour with permission to build around 250 homes.
Its backers include numerous Asia-based investors, London developer Ed Bellhouse of Bellhouse Joseph, corporate financier Keith Holman, Edinburgh merchant bank Noble Grossart, and Sir Robert McAlpine Enterprises.
AB Leith is still trading despite the fact that it has had to write down the value of its land by £11m to £1.8m. During this process it parted company with lender HSBC, and around half of its £13.5m debt is now owned by a company called Sharp Boom that is also registered in the BVI.
Sources close to the situation say that the investors are buying the land to dilute AB’s losses.
It has the advantage of preventing other developers from buying it to build low-grade dwellings nearby, which could further damage land prices, and it also maximises the firm’s influence with Edinburgh City Council. The council is considering how to amend a masterplan for the area that has been rendered economically unworkable by the current market.
Noble Grossart, Bellhouse Joseph and Bank of Scotland are also minority owners in Forth Property Developments, which sold the land to Applecross, FM Developments and Gregor Shore at high prices in the first place.
Sir Angus Grossart, chairman of Noble Grossart, is also chairman of the Scottish Futures Trust, the Scottish Government quango that helps maximise the financial value of public-sector assets and has been very active in Edinburgh in recent years.
It is understood that Sapphire intends to submit applications to build houses and low-rise flats on at least some of the sites in the coming months.
One of the main existing problems with the sites is that banks will not lend the money required to build enough flats to fulfil the current permissions. It is seen as more viable to build standalone properties in the current market.
One property industry source, who wanted to remain anonymous, said: “This deal means that these people are holding capacity for 1200 flats in the city of Edinburgh. That beats Quartermile, Fountainbridge and every other secondary site in the city. They are in a glorious position and they will eventually do very well out of the investment.”
John Reid of Deloitte, administrator for Gregor Shore, rejected suggestions that Sapphire bought the seven pieces of land together because the bank was insisting they were sold in that way.
“As far as we were concerned it was a straightforward sale of property. We got an offer that four years ago would not have been one that we would have been very interested in.
“But when you have had a property on the market for that length of time and you get a party that makes an offer, as far as we were concerned it was a good deal.”
Although he did not know who was behind Sapphire, he added: “The bank will be suffering a pretty significant shortfall from all three administrations.”
This will have been mitigated to some extent by the fact that it was part of the Forth Property Developments consortium that sold the land in the first place.
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