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You can find the current article at its original source at https://www.theguardian.com/business/2018/oct/24/why-a-liverpool-tower-block-was-a-magnet-for-foreign-capital
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| Why a Liverpool tower block was a magnet for foreign capital | Why a Liverpool tower block was a magnet for foreign capital |
| (8 days later) | |
| Mill View tower is a grey, postwar, former council-owned block of flats which rises above Toxteth to the south of Liverpool city centre. At first sight it is unremarkable by the standards of many British cities. | Mill View tower is a grey, postwar, former council-owned block of flats which rises above Toxteth to the south of Liverpool city centre. At first sight it is unremarkable by the standards of many British cities. |
| The 16-storey building, containing 64 flats, is of a model that 1960s planners replicated across UK inner cities. | The 16-storey building, containing 64 flats, is of a model that 1960s planners replicated across UK inner cities. |
| But this tower has one big claim to notoriety: it was the most prosecuted building on Housing Act charges last year. | But this tower has one big claim to notoriety: it was the most prosecuted building on Housing Act charges last year. |
| Look a little deeper and Mill View tells another story too. It illustrates how housing once owned and managed by local councils to accommodate vulnerable and low-income tenants has become an international asset class attracting overseas investors seeking big returns. | Look a little deeper and Mill View tells another story too. It illustrates how housing once owned and managed by local councils to accommodate vulnerable and low-income tenants has become an international asset class attracting overseas investors seeking big returns. |
| Conditions in the block were poor in 2016 according to Liverpool city council, with temperatures inside judged to potentially be a risk to tenants’ health. Local managing agent Elite Property Management and Lettings Ltd was prosecuted on 13 separate licensing charges last year. | Conditions in the block were poor in 2016 according to Liverpool city council, with temperatures inside judged to potentially be a risk to tenants’ health. Local managing agent Elite Property Management and Lettings Ltd was prosecuted on 13 separate licensing charges last year. |
| Elite pleaded guilty, and the case left Mill View with more Housing Act prosecutions than any other building in England and Wales during 2017, according to data collected via freedom of information requests submitted by the Guardian and ITV News. | Elite pleaded guilty, and the case left Mill View with more Housing Act prosecutions than any other building in England and Wales during 2017, according to data collected via freedom of information requests submitted by the Guardian and ITV News. |
| But separately the tower block is also a bizarre tale of international property investment. | But separately the tower block is also a bizarre tale of international property investment. |
| Years before the city’s environmental health officers discovered the heating was so bad the flats could be a threat to health, Mill View was owned by Liverpool city council. | Years before the city’s environmental health officers discovered the heating was so bad the flats could be a threat to health, Mill View was owned by Liverpool city council. |
| In 2012, as austerity measures bit, the local authority sold the block to developers, who refurbished it and sold the flats on to a string of international investors the following year. | In 2012, as austerity measures bit, the local authority sold the block to developers, who refurbished it and sold the flats on to a string of international investors the following year. |
| The process resulted in overseas speculators from countries including Russia, Saudi Arabia, Australia and Kenya owning around 80% of the block. When the council’s inspectors called in 2016 only 12 flats were owned in the UK. | The process resulted in overseas speculators from countries including Russia, Saudi Arabia, Australia and Kenya owning around 80% of the block. When the council’s inspectors called in 2016 only 12 flats were owned in the UK. |
| Of the 13 Mill View flats that were the focus of the licensing prosecutions against Elite, only two were owned by UK-based investors (in London and Wolverhampton) at the start of the investigation. The remaining 11 were all held offshore, in jurisdictions ranging from the Isle of Man to Russia, Singapore, Malaysia, Hong Kong and Dubai. | Of the 13 Mill View flats that were the focus of the licensing prosecutions against Elite, only two were owned by UK-based investors (in London and Wolverhampton) at the start of the investigation. The remaining 11 were all held offshore, in jurisdictions ranging from the Isle of Man to Russia, Singapore, Malaysia, Hong Kong and Dubai. |
| The rent on all of the flats in the prosecutions came from housing benefit, which was being paid directly to Elite. The agent would take its cut before passing on the rent to its investor clients. | The rent on all of the flats in the prosecutions came from housing benefit, which was being paid directly to Elite. The agent would take its cut before passing on the rent to its investor clients. |
| One of the owners did not even bother to collect the rent. According to court documents, Elite’s owner, Darren Sharkey, claimed: “I believe [the previous agents] are still holding rent for all [of one landlord’s] properties since he purchased them … He obviously has bigger fish to fry.” | One of the owners did not even bother to collect the rent. According to court documents, Elite’s owner, Darren Sharkey, claimed: “I believe [the previous agents] are still holding rent for all [of one landlord’s] properties since he purchased them … He obviously has bigger fish to fry.” |
| It seems unlikely that many of the Mill View investors will have ever seen their assets – at least in any other way than via a line on a spreadsheet. | It seems unlikely that many of the Mill View investors will have ever seen their assets – at least in any other way than via a line on a spreadsheet. |
| Having paid around £60,000 for a two-bedroom flat, each investor would have made a yield of roughly 8% a year from the housing benefit-funded rent. | Having paid around £60,000 for a two-bedroom flat, each investor would have made a yield of roughly 8% a year from the housing benefit-funded rent. |
| In around 13 years, therefore, the rent received would cover the purchase price of each apartment. Such calculations make it easier to understand how international property players could view housing benefit tenants as an investment asset class. | In around 13 years, therefore, the rent received would cover the purchase price of each apartment. Such calculations make it easier to understand how international property players could view housing benefit tenants as an investment asset class. |
| These rough figures do not take into account management fees and also assume no maintenance spending on the properties – and there has been some investment since the prosecutions. | These rough figures do not take into account management fees and also assume no maintenance spending on the properties – and there has been some investment since the prosecutions. |
| Most of the apartments have been renovated since the environmental health officers intervened. More modern heaters have been installed to spare tenants from “hazards of excess cold”. But not all the flats have been updated. | Most of the apartments have been renovated since the environmental health officers intervened. More modern heaters have been installed to spare tenants from “hazards of excess cold”. But not all the flats have been updated. |
| Speaking to a Guardian journalist who was being shown around a revamped Saudi-owned apartment while posing as a prospective new tenant, more than a year after his firm’s licensing conviction in June, Sharkey admitted: “Some of the flats haven’t got [the new heaters] yet because some of the owners haven’t paid to have them done, because they are quite a cost – three and a half thousand pounds for those. Some of them have just got the old electric heaters, which are rubbish.” | Speaking to a Guardian journalist who was being shown around a revamped Saudi-owned apartment while posing as a prospective new tenant, more than a year after his firm’s licensing conviction in June, Sharkey admitted: “Some of the flats haven’t got [the new heaters] yet because some of the owners haven’t paid to have them done, because they are quite a cost – three and a half thousand pounds for those. Some of them have just got the old electric heaters, which are rubbish.” |
| The Saudi-owned flat did not form part of the licensing conviction. | The Saudi-owned flat did not form part of the licensing conviction. |
| Elite has now applied for – and been granted – licences to manage 41 Mill View flats on behalf of its clients. Meanwhile, several flats in the block have been purchased by more local investors over the past couple of years, including Sharkey himself. | Elite has now applied for – and been granted – licences to manage 41 Mill View flats on behalf of its clients. Meanwhile, several flats in the block have been purchased by more local investors over the past couple of years, including Sharkey himself. |
| He says he has been trying for years to improve conditions in the block, that already had a separate historical reputation for some criminality on the part of tenants. In 2013 police officers discovered a single floor where three out of the four flats were housing a cannabis farm. In one flat there was said to be product worth around six times the value of a single Mill View apartment. | He says he has been trying for years to improve conditions in the block, that already had a separate historical reputation for some criminality on the part of tenants. In 2013 police officers discovered a single floor where three out of the four flats were housing a cannabis farm. In one flat there was said to be product worth around six times the value of a single Mill View apartment. |
| Sharkey said: “We have worked tirelessly to improve the condition of the flats when they became available and have worked on a scope of works to install heating recommended by council. | Sharkey said: “We have worked tirelessly to improve the condition of the flats when they became available and have worked on a scope of works to install heating recommended by council. |
| “Out of the 41 we currently manage there are approximately 12 that still require the heating upgrade, all of which I believe will be completed by early next year. There has been a delay to progress we made this year on installations due to original heaters being discontinued and a new range of heaters needing to be sourced. | “Out of the 41 we currently manage there are approximately 12 that still require the heating upgrade, all of which I believe will be completed by early next year. There has been a delay to progress we made this year on installations due to original heaters being discontinued and a new range of heaters needing to be sourced. |
| “During the heating upgrade we faced significant challenges with access, as many of the tenants did not or would not allow us access.” | “During the heating upgrade we faced significant challenges with access, as many of the tenants did not or would not allow us access.” |
| He suggested that costs such as the ground rents paid by the landlords meant that owning a Mill View flat was not as profitable as it appeared. | He suggested that costs such as the ground rents paid by the landlords meant that owning a Mill View flat was not as profitable as it appeared. |
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