The property scam you must not fall for

Tony Levene was given an amazing opportunity this week - to buy land at almost 60 times its market value....

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When a company claiming expertise in land and property matters cannot even correctly locate its own office, you have to worry.

In its brochure, CityShore, a land sales company, says its headquarters is “based and established in the City of London.” I'll deal with the “established” bit later, but the firm's one and only address is at London's Centre Point, near Tottenham Court Road station and some two miles west of the Bank of England.

Harrison Lodge from CityShore phoned me earlier this month with the usual “your details came from a marketing survey”.

Lodge told me the firm “worked alongside the government” to provide land for housing. “We purchase land and sell it to developers,” he added, before telling me that a “low risk investment of £10,000 to £25,000” could produce big dividends over the “next 12 to 14 months”.

The following morning, the corporate brochure arrived with no reference or evidence of government work.

It said: “Being one of the largest and most experienced commodity firms, we offer a range of dedicated services from our highly skilled and practiced (sic- it should be practised – spelling and grammar are both tortured) acquisitions team.”

Now examine that sentence. Is it one of the largest commodity firms? As land is not traded as a commodity like copper, coffee, corn, zinc or sugar, and CityShore is not regulated by the FSA – which commodity brokers have to be – then this is hard to stand up. As for size, the company has yet to file accounts (it has not had to) so that is impossible to judge.

Is it one of the most experienced? The Companies House number CityShore gives dates back to 1999. But it was then SCM Software, a Shropshire based IT firm with two Oswestry men as directors.

SCM, for totally innocent reasons, never traded and joined the ranks of dormant companies. Most disappear but some are sold.

In May 2010, SCM Software was transferred to new owners and re-badged CityShore Commodities. Its sole director, Aaron Walker, whose stated address is a London maildrop, is 29 years old. So the firm's experience dates back six months.

A project in Grantham

This week, Chris Carter, describing himself as a “senior allocation adviser” at CityShore called.

He told me CityShore was “involved with Taylor Wimpey” in a project in Grantham, Lincolnshire. Taylor Wimpey is the UK's biggest housebuilder and is constructing homes for sale in Grantham.

Carter told me Taylor Wimpey had been “under a stock exchange embargo” and “had not been allowed to buy more land until May this year”. The clear implication was that the housebuilder was using CityShore to buy land for it.

Taylor Wimpey has had a torrid time on the stock market the last few years. Its shares have crashed from 225p three years ago to 25p, a victim of the US sub-prime crash and the UK's stagnant housing market. But whatever its travails, it has plenty of land to build on. A recent “Investors' Chronicle” report says it has enough for six years.

Pressed, Carter then admitted Taylor Wimpey had no involvement but it was “looking to come on board ”. Carter also told me the firm dealt in gold, silver and tungsten, a claim with no obvious foundation. Taylor Wimpey had never heard of CityShore until I contacted it and it has no arrangements with it.

£400,000 an acre

Carter added he was “99% sure” that the land he was selling in Grantham would gain planning permission and my investment would double at least in a year.

“So why don't you just hold on the land yourself and wait for the big gains rather than spend effort phoning people ?” A reasonable question from me.

“This is our business model. I can't tell you more,” he replied.

Now, look at CityShore's legal disclaimers.

Your land may not be re-zoned for future development in the predicted timescale or at all.
Future returns predicted by CityShore are based on our own forecasts from the extended research by our acquisitions team, but should not be relied upon as indicating any guarantee of return.
CityShore is prevented [by FSA rules] from applying for planning permission collectively [so all investors will have to deal with the local council separately]

As for the land going up in value even if planning permission is not granted, as CityShore claims, would you be willing to pay the equivalent of more than £400,000 an acre (based on CityShore selling prices) for an unusable tiny parcel of land?

Bear in mind that the current price of good farmland where you can swing a tractor in Lincolnshire is around £6,700 an acre (source: Lincoln estate agents).

Interested? I didn’t think so....

Award-winning scams expert Tony Levene explains why he's writing a blog about scams and why he is The Scam Magnet!