The disposal of the Royal Pharmaceutical Society (RPS)’s former headquarters at 1 Lambeth High Street was always a story. In 2015, there were reports that the landmark site had changed hands for £30m – just two years after the RPS announced it had sold what had been its home for more than 40 years for just over half that amount.
The story, however, appears not to be quite as straightforward as the RPS first made it out to be. Documents seen by P3pharmacy leave the Society bosses of the day with questions to answer about how much they considered the possible value of the land and whether the RPS benefitted when the price escalated as it did. Did they know that millions from the price paid in the final (and only) sale of the site to Taylor Wimpey, which according to Land Registry records occurred in 2015 (interestingly, the sum paid is redacted) would end up in the offshore tax haven of the British Virgin Islands via the low tax jurisdiction of the Isle of Man?
The RPS announced the sale of its Lambeth headquarters and the purchase of a new base at East Smithfield, near Tower Hill, on 10 June 2013. It said the move would save it £400,000 a year in running costs, while “removing the risks and associated legal responsibilities of being a commercial landlord”. The RPS had been leasing part of the building to the General Pharmaceutical Council (GPhC) following its demerger from the old RPSGB. The GPhC announced its intention to move out of the building in 2012.
RER has designed a fabulous scheme with unspoilt views of Lambeth Palace, The Houses of Parliament, the London Eye and the Shard. It provides a great opportunity to develop a landmark building in an area where values continue to rise.
Property Week (PW) carried the news the same day, saying that the RPS had exchanged contracts to buy News International’s Admiral House at 66-68 East Smithfield and “sold its former headquarters at 1 Lambeth High Street to Ballymore director Tim Farrow’s Real Estate Resolutions” [RER London Ltd]. PW said the 66,700 sq ft building had been sold for “around £15m” and would be redeveloped as a mixed use residential scheme.
Speaking at the RPS annual general meeting (AGM) on 26 June that year, finance director Simon Redman confirmed that the Society had sold the Lambeth building for £15.3m, generating a net profit of approximately £10.9m (£6.8m in assets and £4.1m in cash) after taking into account sale costs and the book value of the building. The costs of buying and developing the £6m HQ at East Smithfield would be placed on the balance sheet as a new fixed asset. The RPS would pay the £6m over three years.
In November 2014, Lambeth councillors approved plans to redevelop the site into 55 luxury homes and 14 affordable flats. By March 2015, Levy Real Estate was reporting on its website that the site – now known as ‘Palace View’ – had been bought by Taylor Wimpey “for more than £30m”. Levy Real Estate, which says it advised RER on the sale, reported tremendous interest in the site. “RER has designed a fabulous scheme with unspoilt views of Lambeth Palace, The Houses of Parliament, the London Eye and the Shard,” it said. “It provides a great opportunity to develop a landmark building in an area where values continue to rise.”
That year, at its 2015 AGM, the RPS reported a net loss of £1m in 2014, following a rise in costs attributed to “investment in staff and product development”, with expenditure up by more than £2m. At that point, the RPS stated it had a temporary net current liability at the end of 2014, with ongoing costs resulting from the purchase and refurbishment of its new HQ (including a period in temporary accommodation in Aldgate). “Net current assets will be restored in the 2015 financial statement once the £15.4m sale of the 1 Lambeth High Street premises goes ahead,” the RPS said, insisting its financial position remained “very strong”. This statement is an admission by the RPS that its 2013 announcement of the sale of the building was at best premature.
According to the Pharmaceutical Journal, Mr Redman told the 2015 AGM: “The RPS is part way through its strategy of enhancing and growing the range of products and services for its members and customers of its publishing portfolio. Our plans showed that in the short-term this would result in a loss for 2014 [the actual loss was higher than the budgeted deficit of £849,000], but this was necessary in order to secure the future of the organisation. We are beginning to bear the fruits of these planned developments, and as a result we are well positioned to return to profitability within the next few years.”
As the RPS’s own financial statements show (see table), that return to profitability has yet to happen. And the rumours in the market are that the 2019 accounts will also find the RPS significantly in the red, with job losses and a further restructuring underway.
The documents obtained by P3pharmacy reveal that at least six entities were involved in the sale of the RPS headquarters between 2012 and 2015, including the RPS, its advisors Capita Property and Infrastructure Ltd and the eventual purchasers Taylor Wimpey UK Ltd.
Capita was appointed to market the building for sale in February 2012. RER, with several signature developments in London under its belt, was selected as the preferred buyer later that year.
A letter from Capita to RPS finance director Simon Redman, written on 10 April 2015 after it became clear to the RPS that RER had sold on the property with planning permission for more than £30m, reveals that 20 offers were received; some, including one for £26.5m, were subject to obtaining planning permission for redevelopment. That higher bid, Capita said, had been dismissed on the grounds of a lack of evidence that the bidders had “either the track record or the resources to deliver the scheme”.
According to a “subject to contract” letter signed by the president of the RPS, Martin Astbury, to Mr Farrow, on 30 January 2013, the RPS Assembly meeting of 18 December 2012 reconfirmed the sale for redevelopment of the site as its preferred option, including a return to bespoke office space in the redeveloped building. The letter also states that a ‘Transition Board’ meeting on 21 January had confirmed a preference to sell the site on an “unconditional basis”, with the completion not subject to the granting of planning consent.
By the time of the announcement of the sale, the RPS, following option testing, had decided a move was preferable, and the Smithfield site was identified and committed to.
At this point, two new players enter the story: Lambeth Investments Ltd,a company incorporated in the Isle of Man, and Best Basin Ltd, incorporated and registered in the British Virgin Islands, the notoriously secretive Crown dependency (and tax haven) in the Caribbean. It appears these two companies provided the finance for the deal and were therefore the major beneficiaries from the increase in value of the site between 2013 and 2015.
The Isle of Man (IoM) is a self-governing British Crown Dependency in the Irish Sea. Last year, the IoM ranked 17th in the Tax Justic Network's corporate tax haven index, although the island is more usually referred to as a "low tax jurisdiction". According to isleofman.com, individuals and companies resident in the Isle of Man enjoy complete independence from the UK in matters of direct taxation. There is no capital gains tax, inheritance tax or stamp duty, and personal income tax has a 10 per cent standard rate and 20 per cent higher rate.
Unlike the BVI, a Companies Register provides direct access to company records. There is a 'benign' tax environment for corporates. The IoM has a standard zero rate of corporate tax; a higher rate of 10 per cent applies to banking activity and retail businesses with annual taxable profits of £500,000 or more. The Double Taxation Agreement between the UK and the Island, which dates back to 1955, provides relief on certain incomes passing between the two countries and contributes to the Island's reputation as an offshore financial and accounting centre for businesses which might otherwise be based in the UK itself.
Lambeth Investments Ltd appears to have been set up for the sole purpose of being engaged in the redevelopment and sale of the Lambeth site – a practice that is not unusual.
It was created under the Isle of Man Companies Act 2006 on 23 April 2013, some six weeks before the RPS announced the “sale”, and actions to dissolve it began on 26 May 2015, just five days after the official copy of the register of title shows the proprietor of the freehold land at 1 Lambeth High Street as Taylor Wimpey. The company would eventually be dissolved on 9 February 2016, a day after confirming the distribution of its assets.
For obvious reasons, less is known about Best Basin Ltd – including who its beneficial owners are. What is on public record is the Registration of a Charge in the form of a debenture dated 23 May 2013 between Lambeth Investments Ltd as “borrower” and Best Basin Ltd as “lender” covering as “relevant agreements” under Schedule 2 of the Charge, a “sale agreement for the sale and purchase of 1 Lambeth High Street” between the RPS and Lambeth Investments Ltd, and a “deed of overage” covering the same.
This Charge allowed Best Basin to secure all present and future obligations relating to the 1 Lambeth High Street site. The assets were released and the Charge discharged on 18 May 2015, eight days before Taylor Wimpey is shown as the freehold title holder.
The British Virgin Islands (BVI) is a British Overseas Territory in the Caribbean, situated to the east of Puerto Rico and north-west of Anguilla. In 2019, the BVI was listed at the top of the international Tax Justice Network's corporate tax haven index, which scores each country's system based on the degree to which it enables corporate tax avoidance, combined with the scale of its corporate activity.
According to lowtax.net, a website produced by tax and accounting software providers Wolters Kluwer, individuals in the BVI pay no income tax, land or housing taxes. There is no capital gains tax, wealth tax, inheritance tax, gift tax, sales tax or VAT. Stamp duty is payable on some transactions, and there is a tax on employment, with payroll taxes of between 10 and 14 per cent split between employer and employee.
BVI-based company search website companysearch.vg states that the amount of information available for a BVI company is limited. "Confidentiality is one of the most interesting features of the BVI jurisdiction, and nearly all of the companies incorporated here are looking for it."
There is nothing to suggest that any of this is illegal or even irregular. The existence of tax havens and money men hiding behind offshore and secretive companies is either a necessary evil or a blight on the global order, depending on your individual politics.
But the RPS headquarters is not just a building project. It is a considerable asset of a membership body, established under a Royal Charter, whose patron is Her Majesty The Queen. The “flipping” of its building, within two years for twice the initial price, even considering expenditure (estimated at £2m) on two planning applications, architects and other consultants, does not look good.
This was clearly of significant concern to RPS finance director Simon Redman. Twice in 2015 he asked Capita to recap the sale process, suggesting that the RPS might at some point have to explain to its membership how it had sold its key asset for half what it was worth to somebody else.
Capita’s assessment in January 2015, when the development was offered back to the market, was that “the potential upside is in line with market reward expectations for the risk involved”, although the £25m asking price was “ambitious”. As for the decision, Capita put the ball firmly back in the RPS’s court, saying the ‘Board’ (presumably the Transition Board) felt “that to speculate on development was beyond the remit of the Society and would introduce too much uncertainty at a time when the Society was facing considerable pressure on its ability to meet its own running costs.”
The RPS bought its new property at East Smithfield at the same time as the disposal, with the proceeds of the sale, and so has achieved a significant overall gain for its members.
That explanation is amplified in the second letter to Mr Redman in April 2015, by which time it was becoming clear that the “ambitious” valuation was not only reached but exceeded by 20 per cent.
“The deal was done on an unconditional basis and for a price in excess of all credible conditional offers,” Capita says. “The RPS bought its new property at East Smithfield at the same time as the disposal, with the proceeds of the sale, and so has achieved a significant overall gain for its members.
“It is difficult to support Taylor Wimpey’s anticipated values” [for the flats in the redeveloped building], Capita adds, a suggestion that the builders paid over the odds. To date, the 44 flats (of a total of 55) in Palace View for which the sales data is publicly available, have sold for a total of just over £51m.
At the point of the original announcement of the sale of the building (and the simultaneous commitment to purchase at East Smithfield), the transaction had not been completed, although there was an agreement that the RPS would receive just over £15m for the land two years later (after planning permission).
This looks risky for the RPS executives and officers at the time. Had permission been denied, the only money guaranteed was the initial £3m being held in escrow by the RPS’s solicitors. The Society would have had two buildings, and their costs, and precious little in its reserves. The 170-year old body could have been in dire straits – to the embarrassment of all concerned, including its royal patron.
And then there is the deal itself. References to an overage deed in the documents suggest that those overseeing the sale at the RPS at least considered the possibility that the eventual price realised for the site might be greater than the original £15m. But nothing in the financial statements since suggest the Society obtained more.
Asked to comment, an RPS spokesperson said: “The latest published RPS finances for the year ending 2018 are open access and available to view in the 2018 annual report. The 2019 finance report will be available at our forthcoming AGM. Members can be confident our finances are planned effectively and with due diligence.”
April 2010 - The Pharmacy Order 2010 establishes the General Pharmaceutical Council (GPhC), leaving the RPS as landlord at 1 Lambeth High Street for the new regulator, adding uncertainty to the medium-term viability of the building.
February 2011 - GPhC first moots a possible move out of the building, for which it is paying almost £2.5m a year in rent.
February 2012 - Capita Property & Infrastructure Ltd is appointed by the RPS to market the site.
Late 2012 - Real Estate Resolutions Ltd (RER) accepted as preferred buyer on the basis of "the most robust offer".
December 2012 - RPS Assembly reconfirms "sale for redevelopment" of the site as its preferred option.
January 2013 - RPS Transition Board confirms preference for sale on an "unconditional basis" and exploration of alternative premises for its headquarters.
February 2013 - The GPhC announces its intention to secure new premises independent of the RPS elsewhere in London.
April 2013 - Lambeth Investments Ltd is established in the Isle of Man.
May 2013 - Lambeth Investments Ltd registers a Charge in the form of a debenture over the sale and purchase of 1 Lambeth High Street in favour of Best Basin Ltd, a company registered in the British Virgin Islands - ownership unknown.
June 2013 - RPS announces "sale" of 1 Lambeth High Street for £15m and purchase of new premises at 66-68 East Smithfield for £6m.
Summer 2014 - RPS vacates 1 Lambeth High Street for temporary accommodation in Aldgate.
November 2014 - Lambeth councillors approve plans to redevelop the 1 Lambeth High Street site with 55 luxury homes and 14 affordable flats.
April 2015 - Community website londonSE1 reports that the 1 Lambeth High Street site, now known as Palace View, has been bought by Taylor Wimpey for £30m. RPS finance director Simon Redman asks Capita for a recap on the sale process for the site, in light of unconfirmed but informally corroborated reports that RER has sold the property for in excess of £30m.
May 2015 - The Charge registered to Lambeth Investments Limited is discharged. Taylor Wimpey is shown as the title holder on the freehold of the site at 1 Lambeth High Street. The sale price on the Registry is redacted.
July 2015 - The RPS moves into newly fitted out headquarters at East Smithfield.
February 2016 - Lambeth Investments Ltd is dissolved as a company in the Isle of Man.