Libya’s sovereign wealth fund has been granted the right to try to recoup a £10.5 million ($14m) investment in a failed British hotel venture.
The Libyan Investment Authority in February ploughed the sum into what it believed was a 50 per cent share in a multimillion-pound venture for a 207-bedroom Crowne Plaza hotel in Maple Cross, Hertfordshire, near London.
The project was in partnership with Roger King, a millionaire businessman who owns Stoke Park, a five-star hotel and golf club set in 140 hectares in Stoke Poges, Buckinghamshire.
It featured in films including Goldfinger, starring Sean Connery as James Bond, and Bridget Jones's Diary.
In 2010, London’s High Court heard the LIA was told the complex, which was never built, would be worth £21m and to expect returns of up to £58m.
But the wealth fund’s survey of the land found it to be worth only £5.7m, the court heard.
Despite this valuation, its then UK chief Rajab Layas, a close ally of Libyan dictator Muammar Qaddafi, relied on the word of the other investors.
The LIA took the case back to the Court of Appeal to try to recoup the money and seek damages.
Property surveyors King Sturge had been appointed by Mr King’s firm to assess the value of the development and send a letter of that valuation to LIA.
But on Monday, judges rejected the respondents’ argument that the case should be dismissed because of the time elapsed, and allowed LIA’s appeal to resubmit its claim.
“On May 12, 2010 Mr Layas, the then executive director of LIA UK, wrote to Roger King confirming, subject to contract, that the LIA were proceeding with the purchase of a 50 per cent shareholding for £10.5m, with completion expected in June,” Lord Justice Nugee told the court.
“It appears that it was only then that thought turned to the LIA obtaining its own advice on value.
"Mr Layas initially instructed Savills to provide valuations of the hotel and retail sites, but on June 17, 2010 Mr Furze of Savills telephoned him to alert him to a major discrepancy between Savills' initial view [that the hotel site was worth £5.7m] and the price being paid.
“Mr Layas's reaction was apparently to dis-instruct Savills, and on June 18 to ask Mr King to assist.”
The court heard this resulted in the developers sending a letter, known as the King Sturge letter, from their surveyors repeating their claim that the venture was worth £21m.
“This was a lengthy letter which concluded that, based on the information King Sturge had been given, including Strutt and Parker's valuation, they supported the assumptions made and considered an enterprise value of £21m appropriate,” Mr Nugee said.
“Mr Layas forwarded the King Sturge letter to the LIA, and on June 27, 2010, the board of directors of the LIA approved the investment in the joint venture.
"The joint venture agreement was signed and the £10.5m paid on July 19, 2010.
"Over the next six months certain other sums, totalling £1.76m, were also invested by the LIA pursuant to requests for further funding.
“The development, however, did not proceed, nothing was built, and the joint venture companies went into liquidation.
"Relations between the LIA and Mr King broke down in or about 2013. The claimants claim to have lost all or most of their investment.”
Mr Layas was a co-director of a company called CP Maplecross with Mr King’s son, Hertford.
Before entering into the contract, the King family’s holding company, the International Group, had been awarded a five-year contract to manage Al Marg hospital, 95 kilometres north-east of Benghazi.
Mr Layas had earlier set up a business with Saif Al Islam Qaddafi, a son of the Libyan dictator, in Kensington, west London.
At the time of the LIA investment, the UK Treasury had frozen the assets of Mr Qaddafi and five of his children.
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UAE currency: the story behind the money in your pockets
Profile
Company: Justmop.com
Date started: December 2015
Founders: Kerem Kuyucu and Cagatay Ozcan
Sector: Technology and home services
Based: Jumeirah Lake Towers, Dubai
Size: 55 employees and 100,000 cleaning requests a month
Funding: The company’s investors include Collective Spark, Faith Capital Holding, Oak Capital, VentureFriends, and 500 Startups.
Company info
Company name: Entrupy
Co-founders: Vidyuth Srinivasan, co-founder/chief executive, Ashlesh Sharma, co-founder/chief technology officer, Lakshmi Subramanian, co-founder/chief scientist
Based: New York, New York
Sector/About: Entrupy is a hardware-enabled SaaS company whose mission is to protect businesses, borders and consumers from transactions involving counterfeit goods.
Initial investment/Investors: Entrupy secured a $2.6m Series A funding round in 2017. The round was led by Tokyo-based Digital Garage and Daiwa Securities Group's jointly established venture arm, DG Lab Fund I Investment Limited Partnership, along with Zach Coelius.
Total customers: Entrupy’s customers include hundreds of secondary resellers, marketplaces and other retail organisations around the world. They are also testing with shipping companies as well as customs agencies to stop fake items from reaching the market in the first place.
UAE currency: the story behind the money in your pockets
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
