The Great Bait and Switch - Part 2 - Investment Property Spin

Well, this is the second part of our "Great Bait and Switch" article, and for this instalment, we thought we would take a piece freely available press released by a certain party, and take a look with our "fact goggles".

To avoid confusion, the press release parts are in italics, and our interjection is in bold type.

MRI Overseas Property Has Been Able To Help Clients In These Troubled Times In A Noteworthy Way.

We are intrigued, first time for everything!

MRI Overseas Property has met with many of their clients and has been able to assist a number of them overcome the problems they've been experiencing with property purchases made before this current crisis started.

Sounds promising!

(1888Press Release) April 27, 2009 - The changes in the world economic market-place have had many varied effects, and many different consequences. One of the most notable is for people who bought property in the emerging real estate markets of the world just prior to the global downturn. Some countries, such as Spain, Portugal, France, Bulgaria and the United States, are in a position to just ride out the storm knowing that demand will return to these areas as soon the market starts to recover. But where does that leave clients who bought in the emerging markets where the infrastructure was planned for the coming few years, but is not actually in place? Places like Romania, Cape Verde, Morocco and a host of other such destinations. MRI assists clients in distress.

OK, sounds like a substantial claim. As to stating that Spain and Bulgaria are financially sound enough to "ride it out" could be called into question, but hey, let's read on!

“We knew it was a high risk strategy buying in an emerging market” conceded Matthew Edwards from London who invested in a 2 bedroom apartment in a complex in Cape Verde, “but we did not expect the downturn to come so quick, or to be so severe. At the time we bought in mid 2007, the market was buoyant and even though Cape Verde was fairly basic in terms of facilities, we expected it would take around 3 to 5 years to bring the infrastructure up to a standard to make it a world-class holiday destination. With what’s happened to the global economy, we know it will now take much longer, and may never happen”.

Hmm, the old testimonial trick. Often used in marketing, rarely believed in most cases, but here we see the onus of blame being left largely at the foot of the client. Now correct us if we are wrong, but was it not MRI selling the investment in the first place? recommending it as a high growth area, and no doubt suggesting the "Buy 3, flip 2 and pay for 1" trick used constantly in the rising market. What sadly was not used was the "Don't forget the exposure you are opening yourself to"

Having said that, perhaps we are not giving "client" Mr Edwards enough credit, could it be that he wandered into one of MRI's infamous exhibitions with all of his decisions made and research done and simply hand over a bunch of cash saying "want that one", without asking any questions or getting any sales pitch at all? Make your own judgement.

Many others like them are in the same position, and as more and more clients decide to pull out of their investments in these countries, the worse it becomes for those who are left in.

Well one would think so, I mean, 10,000 clients can't be wrong can they Mr Macanthony? (Note the "it gets worse for those who are left in")

Dominic Pickering, Chief Executive of MRI Overseas Property, confirms that he has personally been contacted by a large number of clients who are attempting to get out of these investments in emerging nations, many of them asking if they can be switched elsewhere.

We run a small blog. We have a few subscribers. Even WE get contacted by your clients about getting out of your recommended investments and how to go about it. If the forums are anything to go by, responding to them would be a new idea!

“The world market is a very different place to what it was 2 years ago. It’s bad enough if one or two developers are struggling to complete the projects they promised, but when it comes to whole areas, and even countries suffering a huge economic setback, clients are running a real risk of being left with properties that are worth only a fraction of what they paid, and furthermore have very little prospect of rentals due to the lack of facilities, or regular flights, or decent roads.”

Well spotted, with the economic market having changed, I suspect the office cat has noticed too, but more importantly, with MRI selling "investment property", and Mr Edwards having "invested" into a property sold by you, we have a couple of questions;

• Does this not mean you are investment advisors?

• As investment advisors, does this not make you responsible for doing some maths, due diligence and general checking before flogging people property?

Only a couple of years ago, Romania was quoted by Channel Four in the UK as being the best place on earth to invest in, with potential returns in excess of 400% over 10 years. Clearly this is now highly unlikely to be achieved. In fact, some real estate investments in Romania may be lucky to reach parity with their 2007 values in ten years time.

Ahhhh! So it's Channel 4's fault! That's ok then. Good old Channel 4, the pillars of salt in the investment property advice area.

Furthermore, many developers around the world are going bust. Many are hanging on by their finger-tips and are down-grading the development so that it does not now contain the facilities that clients originally expected. Legal cases in these countries are fraught with difficulties and rarely end up successful from the purchasers perspective. More often than not, clients throw good money after bad retaining lawyers to pursue developers in far off nations, and the result is no funds ever get paid back.

Developers are going bust? Bust like you claim Tecnicil are? The same Tecnicil that have publicly stated that no such thing is happening, and that certain promoters are spreading rumours in a bid to have people pull out of the development purely for yet more financial gain after they have been paid?

In a strange situation in Calabria, in Southern Italy, a developer has had their building license revoked. Rob Davies from Cardiff who invested in the development with his sister, said he could not believe the news when he heard it. “The developer is blaming the Town Hall. The Town Hall is blaming someone else, and the insurance company that was supposed to cover our deposit has not paid out.” In what is rapidly becoming a finger-pointing exercise, Rob says “it’s the purchasers who lose out at the end of the day, whilst the lawyers get rich”.

Now where do we think that "client" Mr Davies might have heard that? A developer that mysteriously has no name, in an area that was notorious for having no licences in the first place! One would think that it would be an idea to make that kind of corruption public, state it as a fact and link to it would it not? So much for all that due diligence and checking out the developer in the first place.

It would also seem that MRI like to play "pointy finger" doesn't it? Now it's the lawyers that are the bad guys. Naughty lawyers! Are these not the same as the lawyers who had expenses and offices funded by MRI in Bulgaria? Did the mafia not like the style?

That means clients are having to face the possibility of losing large sums of money, or otherwise, they must look for alternative ways to recoup the loss that they have incurred.

You think Mr Pickering? Well, no doubt you are going to tell us how!

“We are in a fortunate position at MRI in that we are a developer as well as being a Real Estate Agent” stated Pickering, the CEO.

Now isn't that convenient! But hold on a moment, MRI Overseas website is now MRI construction, and of course DCC International Property is a completely different company, which was stated in a press release to quash rumours that it wasn't. We seem to remember removing a post to that effect after most of the industry was harassed by you accusing all and sundry of writing it.

DCC International Property is apparently owned by MJ Liggan, or hold on a moment, Michael Liggan, or is it the new re branded Mike Liggan? We don't know, but google about and decide for yourself with the various press releases out there.

“That means, that in a few cases, we have been able to give our clients the opportunity to switch their investment into one of our own developments, particularly if the original developer in the emerging market has failed to live up to the terms of the contract such as not completing the full on-site facilities, or being late with the development.”

Well isn't that nice? Such a kind thing to do offering to help those clients out like that. No catch there I'm sure.

Pickering went on to say “It has been very well received, as we have helped clients to avoid losing 30, 40 or 50,000 euros.

Hold on a moment, you seem to have omitted the part where you are telling your clients that will switch that they have to pay the difference against the new property. Based on a property advertised as "price on application". You present a very shiny timeshare style pencil pitch designed to calculate how much liquidity the client has, adjust the price of your new "bargain property" offering that you conveniently build and control, take into account the amount the client has laid out already, and remove all their cash. Neat trick!

The real problem has been that we do not have enough properties to satisfy all the clients that would like to switch away from an emerging nation, and into one of our blue-chip regions. It’s a simple case of supply and demand, and sadly, far more people would like to move than we have properties available.”

Please do define "blue chip region" we really could do with a laugh. Especially given your investment advice so far. As for not having enough property, well I guess that means every single one will complete on or ahead of schedule, without delay, and every single one will be on or above specification won't it?

Matthew Edwards from London was one of the lucky ones. “We managed to get out of Cape Verde and into Portugal with MRI recognizing most of the deposit we had lost in the bad investment in Cape Verde. You never know what the future holds, but I feel much more confident that Portugal will recover much faster than Cape Verde. That means that I stand a much better chance of making money out of my investment, and getting many more rentals. I feel a bit sorry for those who are left in Cape Verde, but at a time like this, I have to think for myself, and protect my own families position.”

Well lucky Mr Edwards. Mr Edwards, were you told about the responsibilities regarding your Cape Verde contract? Are you aware there is a possibility that you could be pursued for the balance on completion, whether delayed or not?

It’s a sentiment that we can all relate to.

We'll let you the reader be the judge of that.

The original press release can be seen here

Part 1 of "The Great Bait and Switch" can be seen here.

We have posted links already to Cabo Verde 24 and the Tecnicil affair, but simple Google searches will highlight the distaste that "10,000 clients who aren't wrong" are expressing. Don't just take our word for it.

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