Sark – bidding for the Barclay estate and going public

Sark – bidding for the Barclay estate and going public
24 November 2023

The moment has come: I am preparing a cash bid for the Sark estate currently owned by Alistair Barclay.

My company is also securing the support of an investment bank in London to launch the portfolio on the London Stock Exchange in spring 2025.

This is a truly unique investment case, both for the first-round investors who support us in securing the portfolio and the second-round investors in the IPO who will help fund a range of other measures. We aim to turn the self-governing jurisdiction of Sark into a spectacularly attractive place for visitors and residents alike, and one that can serve as a model for other islands to learn and take inspiration from.

The 1 September 2023 Weekly Dispatch "Sark – a small island with huge potential" already included a lot of background information.

Read on for exclusive information on how this ambitious endeavour is likely to continue during the next weeks and months.

Some of the Sark properties we are going to bid for (archive photos).

Next-level transparency

I am the first to admit that speaking publicly about a transaction that hasn't closed yet has its inherent dangers.

It may all come to nothing in the end – for any number of reasons, and at any point in time.

However, the Sark Property Company – a company set up by myself and Sark's feudal lord, Seigneur Christopher Beaumont – is now at a point where it has to speak to a number of stakeholders about the future of Sark in general, and more specifically about the future of the real estate it intends to purchase.

So far, for confidentiality reasons, we have never publicly mentioned any party on Sark that we are discussing a potential property purchase with. In the case of bidding for the estate that is now owned by an heir of the late Sir David Barclay, we have no other choice.

E.g., as part of the final steps of the due diligence ahead of submitting an offer, we will have to speak to some of the neighbours. We also need to seriously engage with a range of service providers in the Channel Islands, which we can't do without saying what it is that we need them for.

Telling everyone clearly what we are intending to do as a next step is part of our continued delivering on the Sark Property Company's transparency commitment. It also helps to make clear to our financial backers what it is that they are buying into – including any potential difficulties and hurdles.

Sark aerial

Sark is 1.5 times the size of Central Park in New York.

A portfolio with strategic value

At the end of the day, despite all the island romance and Sark's special history, any purchase of this magnitude needs to stack up from an investment perspective, especially in the current market environment.

The core portfolio that the Sark Property Company is looking to purchase consists of about 20% of the island's surface area, and a slightly higher percentage of the buildings:

  • Over 80 residential properties ranging from granite mansions to wooden cottages.
  • Five hotels in vastly varying condition (including one that has burned to the ground).
  • 19 commercial properties (some of which are used and others need knocking down).
  • A fair bit of land that ranges from building lots to parcels that will forever be agricultural.

In the first instance, such a portfolio needs to produce a financial return, and one that does not depend on any legislative changes or permits outside of Sark's existing regulation.

As anyone who has visited in recent years will know, the island has been stuck in a weird time warp. Sark offers a unique lifestyle and an equally unique legal framework, which would make you think the island would have long been a sought-after place in tip-top shape. However, much of Sark is currently in derelict state or totally outdated. One expert who visited the island used the term "shanty town" to describe its high street, which is tragic given Sark's incredible natural beauty.

Sark Avenue Stores

Blight is a real issue in Sark.

The island is struggling to attract sufficient visitor numbers. Tourist numbers have been in a steady decline ever since the onset of cheap flights to Spain, and they were down drastically this year. The bad season now results in even fewer facilities than usual being open this winter, which makes for significant economic challenges for many residents.

Despite its huge draw on potential new residents, Sark also struggles to retain its residents. A recent census revealed that 71% (!) of the island's population was not born locally, with 27% having arrived in the 28 months preceding the census. There is an unusually high turnover among the population, and even relatively committed residents get tired of the island's lack of facilities and services. The average age of the island's residents is over 51, compared to 44 in neighbouring Guernsey and 40 in the UK. And that's after an influx of new residents brought the average down – it used to be over 60 years!

These trends and figures make it clear that "something simply has to change", as one frustrated owner of a hospitality operation on Sark told me a while back.

The bad news is, no master plan that looks toward the next 10, 20 and 50 years is likely to emerge without one solvent party providing the impetus, and helping with the financial wherewithal needed to clear some of the blockages.

The good news is, Sark is a place where it's easy to achieve success. All that's needed is a relatively small amount of money, there are just a few decisionmakers to speak to, and you could literally talk to every single resident individually if you had to.

For investors, such an effort could all pay off nicely if set up and managed properly. If (or when) Sark gets its act together and creates a government-backed plan to overcome its issues, this island could thrive like few others. As one of the world's smallest self-governing entities, Sark has all it takes to become a shining model for the rest of the world to learn from, while delighting residents and visitors alike.

If that were to happen, having bought into distressed Sark property in 2023/24 could turn out a generational investment success.

The obvious question is, what are the obstacles?

Managing challenges – and keeping it all in perspective

The Seigneur of Sark and I have already spent the last 2.5 years developing, testing and finetuning our plan.

One of the questions that kept coming up in conversations with investors was: "Does anyone on Sark even want to see any change?"

From the start, we believed strongly that any plan would have to be based on a bottom-up exercise with the island's population.

In April 2023, the Sark Property Company funded a community engagement process to establish the baseline. Around 150-200 residents (possibly over 50% of the island's adult population) took part – try getting such a level of voter participation in any other jurisdiction!

Experts assessed what the community would like to see happen on Sark (or *not* see happen), and published their results in a report for everyone to see.

On the wish list are:

  • More housing, especially affordable housing.
  • Improved harbour facilities.
  • Better access to services, whether in hospitality or healthcare.

Sark's government, known as Chief Pleas, is elected by the island's people and has to work for the people. As everywhere, politics are difficult to predict and driven by the personalities of the people who happen to be in charge that moment.

Leaving short-term issues aside, it's difficult to imagine that Sark's government (Chief Pleas) will argue against the clearly communicated desires of its population – not the least since these preferences are also aligned with the island's economic realities. Who will speak out against having better and more affordable housing to ensure people of all income groups can reside on Sark, and who will object to the idea that the harbour that everyone on Sark relies on needs to be improved?

In the short term, the Sark Property Company – if successful with its bid – will relaunch the property portfolio utilising Sark's existing legal framework and building on the current demand situation. There are already more Brits wanting to move to the island than there is habitable real estate.

Medium to longer term, the Sark Property Company (as a company with access to large pools of capital) could help with:

  • Developing residential real estate, including affordable housing.
  • Improving the harbour facilities.
  • Creating facilities that boost tourism and make life more attractive for residents, e.g. by building a combined health, fitness and spa facility.

The government of Sark should be able to act on some of this by itself as soon as we have closed our transaction. Sark has a property transfer tax that for 2024 will be set at 7.5% of the real estate transfer value. The island's minimalist government has just passed a 2024 budget of GBP 1.9m, and no debt. A seven-digit windfall from the single-largest real estate transaction in the history of the island would put Sark's government into a position to carry out at least some of the overdue infrastructure investment.

If desired and feasible, the Sark Property Company could also come in and co-fund, invest and support – similar to our recent hiring of one of the world's leading experts for harbours and marinas, Simon Arrol of Arrol Marine Consultancy, who investigated the current situation of Sark's harbour facilities.

No rational investor would ever put money into hotels on a remote island that is (in)famous for its accessibility issues, without looking at this particular issue in detail. This past tourist season, a persistent northeasterly wind led to the cancellations of many boats, ruining an extended stretch of June for hospitality operators. Spending a bit of money on such investigations has made us knowledgeable about what's required to make investing in Sark work out beyond just the basics, and it now puts us into a strong position for judging how a plan needs to be structured to be convincing for investors but also entirely deliverable.

It also helped us learn about all the other obstacles we are going to face. Engaging with a large number of residents, stakeholders, service providers, and partners gave us valuable insight into soft factors, too – including just how many residents are currently still looking at our plans and proposals with "extreme suspicion".

Not that any of this would have surprised us.

E.g., you'd think that spreading information in a tiny community was easy. However, that ain't so. One of my favourite moments of this year was when one island resident came up to me after the public workshop to voice her consternation that (allegedly) she had not been given notice that a public event of such gravity was going to take place.

Ahead of the workshop, we had sent out a press release, reached out to all local media, sent emails to all residents that we had an email address of, and used the Sark postal service to deliver a hardcopy flyer to every single household. Never mind postings in Sark-related groups on Facebook and to the relevant people in government. You'd think on an island of 5.45 square kilometres with barely 500 residents, word would spread to everyone.

Instead, you get accused of working in secret.

Message from Seigneur

The flyer that went to all households in April 2023.

Similar challenges exist with the media. As one mainstream media journalist told me, it's currently a strange feature of Sark that residents who want to say something negative are keen to jump in front of a camera or microphone, but those who want to say something positive are reluctant to go on the record. It makes you wonder, has the decade-long period of living on an island in decline created a variation of Stockholm syndrome?

We may never know for sure, but what I do know is that such quirks are simply part of small island life. These things are par for the course when working in a place like Sark.

Suspicion about a new, highly sophisticated stakeholder such as the Sark Property Company will never fully go away. Luckily, there are also many Sark residents with a positive mindset and a can-do attitude.

The Sark Property Company will always happily work with even those that we don't agree with. We do what we can and then press on in the best possible way.

Which is what we've already done, by preparing to take the Sark Property Company public as soon as practicable.

The path towards #SarkIPO

Earlier today, Zeus Capital in London launched a podcast recording where we discuss, among other things, the future IPO of the Sark Property Company.

If you plan to do an IPO on London's Alternative Investment Market ("AIM"), Zeus Capital is the firm to speak to. Their deals accounted for over 35% of all funds raised on AIM IPOs, and they have been involved with five of the seven biggest IPOs on AIM when measured by funds raised – including AIM's largest IPO fundraise.

Nothing has been signed yet, but we are speaking to professional advisors about the IPO. Our goal is to have the Sark Property Company listed both in London and on the stock exchange of Guernsey, and to achieve such a listing within 18 months of acquiring the portfolio.

For investors who are eager to hear more about these plans, this is the podcast to listen to.

During the IPO process and later as a public company, the Sark Property Company will have to adhere to very high transparency standards – and certainly higher than any other organisation currently operating on Sark. Salaries and equity incentives of directors? Plans for the future? Names of large investors? Everything will have to be disclosed.

There is one thing we can disclose upfront, and which I am excited about.

To help deliver to investors in every single way, we've already enlisted a range of other partners – such as International Group Management (IGM), a fourth-generation, privately-owned British family business. IGM has broad experience in managing hotels, private clubs, entertainment venues, and other real estate – including Stoke Park Club, which will forever remain famous for its appearance in James Bond's "Goldfinger". IGM's purchase in 1988 came at a time when the club was going through a deep crisis. After 33 years of ownership, the club's souvenir shop had higher turnover than the club at the time of purchase.

We commissioned IGM to create an independent analysis of the Sark portfolio. As IGM's CEO, Chester King, who is also the former CEO of Stoke Park Club, summarised:

"There is enough capacity to create world class leisure facilities and services based on the current SEM portfolio. The new facilities will increase the number of visitors throughout the whole year, and … reinforce the qualities of Sark (nature, organic, healthy). This will increase the quality of life for everyone on the island. It will also attract new residents and put Sark on the map as a desirable place to live. An experienced team and potential partners have been identified to deliver this in a sustainable and professional manner. It is an exciting and achievable development."

With such prospects and endorsement, we will turn a publicly listed Sark Property Company into a proposition that we believe many investors will want to tuck away in their portfolio and simply keep for the long run.

And we'll make as high a percentage of Sark residents as we can a part of it. Delivering on our earlier promise (see the 1 September 2023 Weekly Dispatch), we will set aside free shares for every bona fideresident of Sark (i.e., anyone who spends at least 90 days a year on the island).

We could even contribute a chunky number of free shares to a resilience fund for Sark and create a de facto Sovereign Wealth Fund. Back in the 1990s, Sark's government held such large cash reserves that it had such a resilience fund. Today, these reserves are all but depleted. My company had a world-leading expert for Sovereign Wealth Funds work out how a new resilience fund could be created in such a way that it helps to protect Sark for future generations – and we could provide the seed funding for such a pot of money. For that to happen, though, we need to see Sark government develop and implement a suitable long-term plan for the island, as otherwise we cannot justify the measure vis-à-vis our investors.

Watch the Seigneur and yours truly speak about the plans for Sark (30 minutes).

A final sprint – and a decision either way

Following 2.5 years of preparatory work, we now focus on just a few remaining tasks:

  • Finalising commitments from investors and making a formal bid.
  • Provided the bid is successful, executing the transaction with a legal team.
  • Transitioning the existing operation of the portfolio, its team and the public services it provides to new ownership.

Just as much, we have prepared a scenario where our bid is not successful, or where we wind down our efforts for any other reason. If there is anything that dents our confidence in this transaction, we will walk away. I want our investors to have total confidence that once we ink our signatures under a purchase contract, we will deliver success.

A successful bid is not guaranteed. Naturally, the owner will want to achieve as good a price as he can get, and his estate inevitably also attracts other potential buyers. Islands have a fascination of their own, and an island with self-governing rights is an asset that is always bound to attract attention of all kinds – including the wrong kind!

Famous is the case of the Caribbean island of Aruba, which in the late 1980s fell under the influence of the Sicilian mafia and Colombia's Medellin cartel. As one Sark resident pointed out to me, this instance of an island getting the totally wrong type of investor was immortalised in the 1994 book "Crime Without Frontiers" by Claire Sterling.

Sark falls under the purview of the Guernsey Financial Services Commission, and the jurisdiction is famous for its strict due diligence standards. While an investor named "Escobar" or "Capone" would immediately be noted, not every oligarch is sanctioned, and some religious sects operate entirely legally.

This is a terrifically complex portfolio for anyone to manage, and I doubt anyone who is not on the island already could successfully manage its ins and outs. One highly experienced US investor toured the estate with me recently and concluded that anyone but our group would put Sark into the "too hard" bucket. Still, this portfolio could attract all sorts of characters, and the sum required to purchase it is barely the equivalent of a single building in London's Mayfair district. Someone could buy the estate just for a laugh, literally. Their motives for investing in Sark may well be different than those of a company that has committed to the steps which the Sark Property Company has outlined.

Which is why we are now fast-tracking a competitive cash offer to Alistair Barclay, and why we have now gone public with information about our next steps (including a company press release).

If anything, we have given this our best shot already.

Where the chips are going to fall will probably be known in early 2024.

Ideally, you'll hear about the Sark Property Company's upcoming IPO before too long – and first on Undervalued-Shares.com.

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