Should the government allow banks to continue making bad decisions?

I write further to the article published in Property Week criticising Ardeshir Naghshineh – Chairman of Targetfollow – for being too proud. I find it bizarre for anyone to criticise a brilliant property man for being too proud. Surely being proud, hardworking and motivated are the qualities that should be admired and not criticised.

I believe the criticism should be directed at the faceless bank officials who made yet another bad decision by putting part of Mr. Naghshineh’s property empire into administration. On the one hand, these bank officials lend irresponsibly and excessively when property prices are rising, only to become irrationally fearful and start unnecessarily repossessing properties when they think the property market is no longer rising.

It has been proven time and time again that allowing competent property entrepreneurs the time and support they need to sell their assets themselves, is a far better and less costly process than appointing receivers with no knowledge of the properties they are selling. Unfortunately, banks are unduly influenced by short term market conditions, they become impatient and unreasonable at the time when they are most needed.

It is undeniable that most of the decision makers in the banks have no practical experience in the property industry and base their decisions solely on the strength of the paperwork put in front of them. In my open letter to Mr. Brown (then Prime Minister) published in the Times on 11-03-09, I argued that a fundamental change in the way which banks lend to the property industry was imperative as no amount of paperwork could possibly replace the expertise and experience required in deciding who to lend to, and understanding the viability of the property they are lending for.

I now believe that there is also an urgent need for change in the way banks place property companies into administration. In my opinion, it is important for the Government to set up a committee consisting of members with expertise and property experience to independently examine the bank’s decisions before they are allowed to place large property companies into administration.

Mamad Kashani-Akhavan
info@glfinance.co.uk

Is this a good time to invest in the London property market?

Dear All,

During the past few weeks I have been asked by many of you whether this is a good time to invest in the London residential property market. However, before I begin I would like to introduce myself to those of you who do not know me. I, Mohammad (Mamad) Kashani-Akhavan, have been working as an International Property Consultant based in London for the past twenty nine years.

Throughout my career I have witnessed a phenomenal growth in the value of London’s prime residential properties. This has in large, been due to strict and inflexible planning regulations creating a very limited supply of new properties coupled with a continued strong demand from foreign buyers looking for a safe haven to invest. To illustrate this point, I sold a house in 1984 for £1 million. This house – located in Knightsbridge – is now valued at £23 million. During the same time period, the value of the FTSE 100 has only increased 5 times.

In my open letter published in the Financial Times on 29th January 2009, I stated that foreign investors’ demand for prime properties in London is for many reasons. To name a few, the UK is politically stable and thus a good fairground for investment. It also has an established legal system safeguarding foreign ownership which gives foreign investors the security they need to invest.

However, is there a time when the prime London property market with all its attractions, will fail to attract an ever increasing number of foreign buyers to continue fuelling the engine of its price growth? It is important to remember that buyers are finding it increasingly difficult to find properties that represent sensible value anymore. As an example, it is difficult to justify an asking price of £11 million for a four bedroom apartment in a new development along Bayswater Road, a second-rank neighbourhood in Central London.

Given the fact that London property prices have now become too high compared to most other major cities in the world, I believe that a cooling off period in property demand from foreign buyers is likely. This could lead to a long period of stagnation. My advice to investors therefore is simple: whilst I believe it’s always a good time for long term investors to purchase property in London, it is now more important than ever, that they should wait for the right opportunity and only invest where the price of the property is sensible. Investors should not buy properties that do not represent good value with the sole hope of making money in what they believe will be a never ending rising market.

Wishing you all every success.

Mamad Kashani-Akhavan
info@glfinance.co.uk

Is the UK Government making its people prejudiced?

Dear Mr Cameron,

I have watched and read with interest your comments on restricting the number of immigrants into the UK. As a business man – having worked successfully as an international property consultant based in London for the last 29 years – I support most of your business related policies. I further believe that you have the necessary qualities to become an excellent Prime Minister.

However, I strongly disagree with your assumption that it is possible to control the number of immigrants coming into the UK. It would be extremely difficult to stop determined economic migrants – searching for a better life in the UK – from finding clever ways to enter and remain in the UK. More importantly, I believe the main concern of voters is not the number of immigrants but the unfair system that allows many immigrants who have not paid any taxes in this country to take advantage of social housing, free schools and a free health service. Voters would in fact probably welcome any number of immigrants wishing to reside in the UK as long as they bring in either capital or the required skills and hard work necessary to help the UK economy grow.

In my opinion, if you wish to receive the required votes to become the next Prime Minister, you must start listening to what the voters really want from a strong Conservative leader on important issues such as immigration. It would be fair to say that unless a case requires genuine humane consideration, immigrants should not be entitled to any benefits. To quote the words of a taxi driver I once met: “We like foreigners living in our country, what we hate is our government allowing immigrants so many freebies at our expense. Our government is making us prejudiced.”

Regards,

Mohammad (Mamad) Kashani-Akhavan
info@glfinance.co.uk

Should British Airways shareholders challenge their managers decisions?

Dear All,

I believe that the one thing the Credit Crunch should have taught us by now is that we should all go to any length to put our point of view forward, especially where a subject as important as the survival of an important British Institution such as British Airways is concerned. In the past our silence and in particular the silence of Shareholders and Board members, has allowed the Senior Managers of important institutions such as the Royal Bank of Scotland to continue making irrational and bad decisions. In my open letter to BA Shareholders in the Times on 24.03.2010, I stated that as a frequent premium passenger, I strongly felt the only important remaining advantage in flying with British Airways was the quality and experience of its cabin crew. Having put my opinion as a passenger forward, I would now like to consider the situation from a business perspective. One does not have to be a financial genius to figure out that British Airways’ only chance of long term profitability and survival is by continued improvement in the service that it currently offers to its premium class passengers. It is these business passengers who are generating a significant proportion of BA’s profit and they expect an excellent service in return for their continued loyalty in flying with BA. Coming from a family of entrepreneurs having employed thousands of people and with my own successful career in the property industry spanning over 28 years, I completely understand the necessity in certain circumstances of reducing expenditure religiously to remain competitive. However, it is of utmost importance to act intelligently when implementing a reduction in expenditure. Costs should be cut only in areas where the decrease in expenditure does not result in a reduced and inferior service to high paying customers. In the case of British Airways, customer satisfaction is directly linked to the experience passengers have when flying with BA. Their experience with a professional and experienced cabin crew who are the face of BA and the one asset it has left to offer which distinguishes it from many other airlines, should not be sacrificed for a relatively insignificant cost saving. I received a huge response to my open letter in the Times on 24.03.2010. These included responses from BA Shareholders expressing their anger and disappointment with the inflexible and arrogant manner in which BA’s Managers have been dealing with their cabin crew. It is undeniable the BA’s Senior Managers have made many serious mistakes such as price fixing, bad planning for the opening of Terminal 5 and now their unfair and commercially unjustifiable treatment of their loyal cabin crew. I believe BA’s Shareholders should hold its Senior Managers accountable for their actions before it’s too late. It has bee proven time and again, that Senior Managers often happily retire with big bonuses whilst the Shareholders, other employees and general public are left to suffer the consequences and losses resulting from their bad decisions. Let us hope this does not happen with BA.

Kind regards,

Mamad Kashani-Akhavan
info@glfinance.co.uk

Is British Airways’ fight against its crew member a financial necessity or absurdity?

Dear BA Shareholders,

I believe we have all heard enough opposing views from the BA Management Team and the Union. As a BA passenger, I would now like to put my point of view forward. I, Mohammad (Mamad) Kashani-Akhavan, have been working successfully as an International Property Consultant for the last 28 years. During these years I have flown frequently in the premium sections of British Airways and other airlines.

It is undeniable that some of BA’s competitors now offer newer planes with bigger seats and better entertainment at a much lower price in their first and business class cabins. Their only disadvantage is their often high turnover of staff which inevitably means that their crew lack the experience and care required to deal with the high expectations of their business customers.

The fact remains that BA’s profitability in linked to the satisfaction of their premium class passengers. In my recent experience the only important remaining advantage in flying with British Airways is the quality and experience of its cabin crew. I believe BA’s management should concentrate on keeping this advantage rather than trying to save a relatively insignificant amount of cost by alienating its loyal crew members.

If BA loses its valuable crew members what will it have left to offer?

Kind regards

Mohammad (Mamad) Kashani-Akhavan
info@glfinance.co.uk

Should the UK Government consider lending directly to the ailing property industry?

Dear Prime Minister,

I’m following with interest your continued effort to encourage banks to start lending to the property industry again. Given my own unsuccessful attempts to borrow during difficult market conditions, I believe your efforts will not be successful.

Over the past twenty years by following one simple old fashioned principle of investing in prime properties only when they can be purchased at excellent value, my investors and I have always profited well from property investment. However, during difficult market conditions, I have always found it impossible to persuade banks to lend for viable propositions. As a result, I had to rely on my Middle Eastern Investors for complete funding. Before wasting your valuable time and taxpayers’ money trying to convince banks to start lending again, I recommend that you ask yourself two important questions:

Could banks be encouraged to lend at a time when property prices are not rising?
My answer: No

By lending a substantial proportion of the property purchase price, banks risk a large amount of their capital for relatively small return. They will only do this if they are convinced that property prices are rising. It is often said that they are the cheapest so-called partner to have in a rising market as they have no equity partnership. However, since they are unduly influenced by short term market conditions, they are also the most impatient and unreasonable type of partner to have in a falling market. We have seen much evidence of this during previous recessions where banks have repossessed many prime properties and sold them at ridiculously low prices.

Are the banks really any better at lending to large property investors and developers than the government could be?
My answer: No

Many modern day bank managers do not have much common sense or experience in the real world of business and are primarily trained to complete loan applications to present to the Credit Committee. The Credit Committee members spend very little time in deciding whether or not to approve the loan and do not interview the borrowers directly. They usually make their decision purely on the strength of the paperwork put in front of them and the lending fund available to the bank at that time. Undoubtedly, this method of lending is irresponsible as no amount of paperwork could possibly replace the expertise required in deciding who to lend to, and understanding the viability of the property they are lending for. In my opinion the government could not possibly perform any worse than the banks when it comes to lending.

In conclusion, I believe that there needs to be a fundamental change in the way in which the banks lend to the property industry. On the one hand, they lend irresponsibly and excessively when property prices are rising, only to become irrationally fearful and stop lending altogether when they think the property market is falling. In the meantime however, the only solution to increase lending to the ailing property industry is for the government to set up its own Credit Committee consisting of members with expertise and practical business experience, and start lending directly.

Yours sincerely,

Mohammad (Mamad) Kashani-Akhavan
info@glfinance.co.uk

Has Britain really got nothing left to sell?

Dear All,

A few days ago Mr. Jim Rogers stated “The UK has nothing to sell to the world once the oil dries up”. Strong words from a well respected source. But do speculators really know more than the rest of us?

My answer: NO. The UK has and will always have many things to sell to the world. Having been an International Property Consultant for the last twenty seven years I shall limit my response to his statement to my own area of expertise – international investors and their continued interest in the London property market. London property alone has always proved a powerful tool in attracting foreign investment.

I believe that foreign interest in the London property market will rise continuously for many reasons. To name a few, first and foremost it is important to note that the UK is politically stable and thus a good fairground for investment. Secondly, it has an established legal system safeguarding foreign ownership which gives foreign investors the security they need to invest. Furthermore, strict and inflexible planning regulations mean that there will be a very limited supply of new properties coming into the market, yet another reason for future increases in the price of prime properties. To illustrate this point, I refer to a house I sold in Knightsbridge in 1984 for one million pounds. This house is now valued at twenty two million pounds.

I remember the wise words of a successful Middle-Eastern Investor in 1985 who said “The British pound is one of the oldest and most secure currencies in the world. It has never paid to bet against the long term value of the pound or the long term health of the British economy”. This was stated at a time when the pound had almost touched parity with the dollar, and investors abandoned the pound in droves – yet he remained calm and confident. It just goes to show that having smart theories and ingenious ideas is no substitute  for good old fashioned common sense.

In conclusion I believe it would be wise to consider why we are so easily influenced. Perhaps next time when the pound rises again (as it most certainly will one day), we can question our own foolishness in thinking celebrity speculators know more than we do.

I wish you all every success.

Mohammad (Mamad) Kashani-Akhavan
info@glfinance.co.uk