Edgeworth Properties : Land Banking In Canada Gone Wrong

Posted by Kris | Thursday, February 23, 2012 | | 5 comments »

One of my favorite game: SimCity. Building and zoning your city

When I saw this story at TheStar, it is really saddening to hear about Malaysian investors that were trapped in this scheme. I heard a lot about foreign land banking investments and have been asked to invest in this type of investment schemes. I doubt the local investors will get much of their money back since the creditors are getting court orders to sell the investor's "land". Here are my thoughts.

Here are some of the common "promises/attractions" being advertised:

1. Trying to sell plots of "undeveloped" land (usually farm/agricultural land) that is sitting just by the edge of the city limits where its value is still low and yet to be "unlocked". "Unlocking" the value comes by rezoning the land into commercial or housing/residential zones as the city limit grows outwards. Some of the agents explains to me that countries like Canada or England limits new property development in their major cities within a certain radius. And the radius grow outwards slowly, so in a way, you need to wait a certain time until the radius hits your undeveloped land, and only then you can rezone it to a more profitable land type.  So buy low and sell high is the name of the game.

Well, I am not an expert on this matter especially involving foreign domestic laws, so i am not sure whether it is factual or not.

2. Returns can be very very lucrative :60% to 100% return within 5 to 7 years once the zoning is done and some developer intends to buy off the land at a premium to develop it. The sale of the land will go back as profit for the investors. Throw in currency gains after the sale, this really can hook in the investors.


3. Foreign investors are protected as they will get land titles for the plots that they invested.


The problem here for me to invest in this type of scheme is....

1. I don't know about the foreign laws especially regarding land ownership. Hell, i don't even know if the advertised land is there in the first place since I am thousand of miles away residing in Malaysia.

2. I don't even know whether the land title issued by a foreign government is a valid one or just a duplicated fake even if you wave it in-front of my face. I don't know where to verify whether my land title is genuine or not. Perhaps the embassy?? (probably just ignore me, lol)

3. I don't like to invest in things that are some many unknowns.

A easier way to invest if you have like few hundred thousand ringgit will be buying property or even land in our own Bolehland. Buy made in Malaysia mah...lol.  But might not get 60% - 100% returns unless some big developers suddenly comes into the picture in a rush to buy your property. But at least it is more secure and less risk than buying an invisible "land/property" in a foreign land.

Or just buy REITs : See here for 2011 dividend yield for our local REITs. The returns are better than fixed deposit rates.


At least you can see your physical property/land and can easily seek legal help through your connections, friends, etc and a local lawyer.



Note that this type of investment is considered ILLEGAL in Malaysia as pointed out in the article below.


A google search on Edgeworth Properties shows that this international company is in deep trouble since last year. But it is only now that the news starts to be highlighted in Malaysian & Singaporean news because the local investors goes to the politician's & BNM for legal help.


http://www.grantthornton.ca/resources/creditor_updates/documents/Edgeworth%20Properties/Draft%20Initial%20Order.pdf

http://www.scaminformer.com/scam-report/edgeworth-properties-edgeworth-properties-investment-fraud-burlington-ontario-c40366.html



PETALING JAYA: Malaysians and other Asians who invested in a Canadian land scheme through a property company are in limbo after it went into liquidation.
According to Chin Yoke Ling, who invested RM75,000, people from all over Asia had invested to buy 12 plots of land in Alberta from Edge-worth Properties Inc from 2007 to 2011.
“According to the sale and purchase agreement, the company would buy back the land from us with a return of 60%, 80% or 100% within two to five years,'' Chin told a press conference at the Selangor MCA Public Service and Complaints Department yesterday.
Chin, who had lodged a police report at the Jalan Travers police station on Monday, alleged that the company had failed to transfer the titles to the purchasers' names as agreed upon in the sale and purchase agreement.
She claimed in the police report that Edgeworth had taken out mortgages on the land without informing the investors who had already paid for the land.
“The land is now encumbered by mortgages which has resulted in Edgeworth not being able to repay our investment capital,'' said Chin who was among about 60 people who brought their grouses to the department.
Malaysian investors are said to have paid the Canadian company, through its local chapter Edgeworth Properties (M) Sdn Bhd, investments totalling RM76.5mil.
Edgeworth Properties Inc's headquarters was in Ontario, Canada, while its Malaysian branch's office was in Menara UOA Bangsar up to its closure last December.
The Malaysian branch's former country manager Lee Kim Haw said the Canadian High Court had ordered all the company's branches in Canada and Asia to be closed.
He said the court had also appointed a restructuring lawyer, an auditing firm and a developer to look into the matter to maximise recovery and save cost.
Lee, who resigned from the company in June last year, said the court had also ordered the interests of all the Asian investors to be protected.
Selangor MCA Public Service and Complaints Department chief Datuk Theng Book said that such an investment scheme was illegal in Malaysia.
However, he noted that Edgeworth Properties had engaged a reputable legal firm here to process the investment documents.
He urged the investors to complain to Bank Negara about the investment scheme and to the Bar Council about the Malaysian legal firm that had represented the company.
“The Malaysian directors of the company must also be answerable to the investors here,” said Theng.
He added that the department would bring the matter up with Selangor MCA chairman Datuk Donald Lim who is Deputy Finance Minister.
“We will ask Lim to take up the matter with Bank Negara,'' he said

Some related news:

According to Mr Hurst, Edgeworth raised C$64 million from the Asian and Canadian investors under the UDI programmes. After paying sales agents' commissions and the marketing expenses of its sales offices in Singapore, Malaysia and the Philippines, which amounted to C$22 million, the remaining C$42 million was transferred to Canada.  Of this amount, Edgeworth refunded C$5.3 million to several UDI investors for various reasons, he said. 

Of the remaining C$36.7 million, C$29.5 million went to property acquisition, C$3.7 million was used to pay down mortgages, C$2.8 million was used to cover 'additional Asian remuneration and selling expenses' and the remaining C$700,000 covered head office administrative expenses --> Wow, so much money paid as commissions. No wonder that the agents are very motivated!!!


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5 comments

  1. kampunginvestor // 12:38 PM  

    Moral of the story: Do not invest on something that you can't see especially properties!

  2. Kris // 5:49 PM  

    You are right, KampungInvestor.

    Those that have money should invest in Malaysia itself, at least you can see the property or land yourself. And familiar with the laws..

    Knowledge is Power!!

    But i think greed with high returns some like 100% within a few years is prompting people to invest in such schemes.

  3. Anonymous // 6:11 PM  

    You have not been presented with the whole picture of the investment. Some of your assumptions are untrue. The victims had made various reports to authorities but as malaysia boleh apa saja, authorities prefer to wait and see, even when the authorities in singapore have already stepped in to investigate.

    moral of the story...do not make assumptions until you research the whole investment, including the one you are promoting now, whichever you are representing. moral of this scenario...do not assume you know this case by just reading a few news articles!

  4. Kris // 9:35 PM  

    Anonymous,

    For the benefit of the readers, which assumption is not true?

    I did not say that this scheme is a scam. But I want to highlight the risks of such investments.

    I assume your are NOT one of the victims?

  5. kampunginvestor // 9:02 AM  

    Even in Malaysia, we also can get cheated. What else you want to say about Canada?

    I used to listen many of all this talks in property fair.

    Just listen only lor.. Never before interested because too dangerous!