due diligence

JMBroad · #13 10-06-2008, 01:32 PM

First off - GNG got their first license - in case you weren't reading the thread about them. However, there is a huge factor you both seem to be either overlooking of forgetting. It's been mentioned before more than once however let me repeat it again.

GNG - Grupo Sanchez was being sold and promoted as "Pre-Launch" - that means that there was always the risk of licenses not being granted. We as a company don't promote "pre-launch" as we prefer lower risk investment solutions for our clients. So we chose not to market it - other companies decided to offer it and I suspect they probably regret it.

"Pre-Launch" means that the investors had the chance to invest at a very early stage when prices were at their lowest on that development however at the same time the risk is going to be obviously higher as not all licenses had been granted and there is always a risk that they won't be granted or that they will be delayed.

While the legal Due Diligence said that the risk was high on that particular development, the fact that they had public figures such as Ronaldo and Antonio Banderas/Mellanie Griffiths advertising the development for them, as well as the background of the team behind the development lent credibility that the development would eventually get their licenses. And as mentioned earlier - they received their first license a couple of weeks ago!

Don't forget that not only have the investors lost out on this deal, but the estate agents who were promoting it have also bitten the bullet and in a big way. Apart from "lost opportunity" - money they could have made by using their marketing budget to promote another development, they have had a lot of money tied up in commissions from this development - cash flow nightmares on this development will have helped more than one small agency close it's doors.

While Pre-launch investments can give the big payoffs, they are also the higher risk ones and therefore not ones that I'd go for personally, but everyone has their own opinions.

As to what you can do to check if the DD has been done - find out exactly what the agent calls "due diligence", what was checked and how they know it is a safe investment - and use your common sense. If some one tells you the water is deep enough to dive into, you'd normally ask them how they know, rather than take the plunge blindly.

As far as I know, everyone who bought on GNG knew it was pre-launch and that the licenses hadn't been granted yet.

As I've always said - doing your own Due Diligence on a property in a foreign country in a foreign language and without living there for a long time is almost impossible for the layman to do, especially considering that laws are different in each country.

However doing your own Due Diligence on a company in Europe - checking their reputation, speaking to the person to get a feel for what they know about the company is often much more in line with the possibilities of each individual investor.