Making the case
The offer to take a stake in Sark’s future is going public. Swen Lorenz, the often controversial new resident who has been encouraging people into the island, has explained the opportunity in a lengthy blog post. James Falla took a long look at it
SARK prison, built in 1856, is one of the island’s major tourist attractions, certainly in terms of a photographed building.
New and influential resident Swen Lorenz says it’s because it symbolises so much about the island, including Sark’s reluctance to change its old ways.
He calls the island an accident of history, but also, as a man who has worked to attract more new residents, as a place with a lifestyle ‘that cannot be found anywhere else in Europe’.
Seigneur Christopher Beaumont describes the island’s future as ‘quiet, green and dark’ – take that positively or negatively – but acknowledges that the island’s ‘specialness’ is under threat.
Part-paradise, but partly in danger, agrees Mr Lorenz. ‘For all its great credentials, it’d be a struggle to describe the current Sark as economically viable or environmentally sustainable.’
He first visited Sark in 2004 and made it his life’s base in 2017. He said home in Sark was both convenient and enjoyable, but moments, such as when the island’s supermarket was threatened with closure, are worrying.
There are examples of island economies that have collapsed – Stroma in Scotland was inhabited for 1,000 years but the population collapsed from 375 in 1901 to no one 60 years later.
‘Today, it’s a home only for sheep. No one in Stroma in 1901 would have ever thought that possible, let alone within only 60 years. Island economies can – and do – die.’
In August 2020 Mr Lorenz started to properly encourage others to move to Sark, publishing a 300-page guide on how to do it, and the story went viral. But within four months there were 120 new residents on Sark, giving the island economy a ‘much needed shot in the arm’.
There were downsides too. An influx of solvent residents meant some islanders struggled to keep up with depressed rents now soaring with demand.
The churn of newbies was also high.
‘Some of the newcomers expected that the island should change around them, rather than them integrating into the existing way of life, which caused friction,’ Mr Lorenz admitted.
He got Mr Beaumont to write the foreword for the second edition of the guide, where he advised new arrivals to stay out of local politics at first and listen for a year or two.
Mr Lorenz described the campaign as a ‘marketing test’, but believed it proved that Sark had potential to become a success – not despite being old-fashioned and different, but because of it.
A German TV crew was interested in doing a feature on the island as a tax haven, but, he said, changed its approach to asking if the rest of the world could learn anything from Sark, he said.
Mr Lorenz worked, with Mr Beaumont, on a long-term plan for the island, one which could attract inward investment. He described it as a plan for all, geared to a 25-50-year horizon, encouraging islanders and stakeholders to consider long-term population size, given the risk of depopulation, but also being aware of what he also feared might be an explosion of interest in people moving to Sark to avoid tax.
His research showed that the island’s current real estate could easily house 1,200 residents without adding a single square foot to the current footprint.
Earlier this year he went public, raising the idea of buying up to £100m. of existing Sark real estate; providing further investment to enhance the real estate portfolio; and continuing to work on a long-term plan for the island – as long as residents wanted it.
‘The good news is, a lot is possible. Sark is the kind of place that mobilises support from near and far.’
Among unanswered questions were how deeply should the project aim to move Sark forward generally, or should it concentrate on its own assets?
Fixing derelict real estate was an obvious target, said Mr Lorenz, and the investment case was not complicated. They would fix up empty and decaying homes to cater for what he was sure would be ‘red hot’ demand.
The investment pot might stimulate the island’s housing market too as it would encourage banks to lend mortgages with a ‘legitimate local player’ offering a first loss guarantee to the value of £5m. for existing residents. Mr Lorenz said this could ‘unlock’ Sark and get things moving.
‘There are many other areas where we could create value, and potentially quite quickly. In a place where there is a lot of decaying real estate but also a lot of unmet demand, it’s not difficult to figure out how to make an investment case work.
‘Crucially, even such conventional measures would make it pay off for our investors, which is a prerequisite for all of this. Sark won’t ever get outside funding from anyone, and unless it’s commercially viable, our belief is that nothing might happen.’
The plan has caused a ‘flurry of activity and discussion’. The involvement of the Prince’s Foundation, as a ‘bottom up’ exercise to see what Sark residents want, went in line with the pair’s expectations, he said, showing ‘a considerable desire among Sark residents to see change’.
The wish list expanded to developing more housing, especially on the affordable side, improving harbour facilities, and better access to services, whether that be in hospitality or healthcare.
Mr Lorenz described participation as ‘huge’, with a desire among most to see improvements.
‘We would have folded our activities had we felt otherwise.’
Not everyone liked the ideas, however.
‘One resident accused my endeavour of breaking local financial regulation. Another resident wished a SWAT team with firearms to visit my house and arrest me. Some of the criticism was funny, while other parts merely reflected badly on the individual. In any case, we took any negative feedback seriously, and offered to sit down with anyone who wanted to talk.’
He entered the summer believing that ‘the stars were aligned for Sark to take ambitious steps forward’.
There followed a miserable summer, weather and tourism-wise. Mr Lorenz and Mr Beaumont went back to the drawing board, starting work on progressing plans for harbour improvements, extending the island’s tourism season, making housing more affordable, and plans for screening new residents for criminal activity, improving energy infrastructure, and securing Sark’s independence with an emergency fund of up to £100m. – as a multiple of the government’s annual budget, the world’s largest sovereign wealth fund.
All the while they were aware of the island’s history of large inward investment, ‘in a way that too many residents at the time found to be too top-down’.
‘We are all the more cautious for that reason. For anything that goes beyond fixing up derelict and underutilised properties, our approach is very much bottom-up. We’ll ask what’s desired, and analyse if there is a way we can provide help from within our commercial project.
‘Our base case for investing in Sark is to buy existing but underutilised commercial and residential property, and then revitalise it using the island’s existing building regulation.
‘What I can say is that the numbers confirm that there is a solid investment case for a less ambitious base case of simply improving existing properties. It would still be entirely and immediately aligned with the overall idea of protecting what makes Sark special.’
After two and a half years, Mr Lorenz believes that the project is 80% of the way there.
He has made three commitments:
. To existing real estate owners who are considering to sell: our company will make them the highest offer that anyone would pay for Sark real estate right now. Having a better plan than anyone else, we’ll simply be able to offer more than anyone else. Everyone will be free to turn down our offer, but it will be a good offer.
. To anyone from the community: our company will involve all stakeholders, and strive to work to the benefit of anyone who is willing to engage constructively. We will also be more transparent than anyone else has ever been on Sark.
. To the Seigneur’s family: our company will be a so-called perpetual capital vehicle, to support a multi-generational endeavour aimed at securing Sark’s future for generations to come. The Seigneur is one of the two directors of the company we set up for this purpose, so he (and his family) can shape this from the inside. Investors appreciate this, too. Just about every single investor we ever spoke to gave the feedback that having the Seigneur back the project is vital – no funding agreement will go ahead without him being on the inside.
Mr Lorenz says the project ‘has not been an easy endeavour, primarily because it’s extremely complex’.
‘Sark is the kind of investment case that will always get a lot of “interest” from anyone you mention it to, but this initial enthusiasm tends to fall away once someone looks at the underlying details.
‘It’s not unusual for potential investors to turn up on Sark with big ideas. However, as the derelict state of much of Sark attests to, these things subsequently never happen. Someone being interested is two a penny, getting someone to actually sign on the dotted line is where the difficulty lies. As the fundraising rule says: “Money is earned in due diligence.”
‘With where we are now, paying for it all is not our worry anymore. Other projects struggle to find one potential anchor investor – we’ve already had several of them at hand before even going public with this. We even turned down requests by some funders to fund the entirety of the project with a single cheque, because we didn’t want any one investor to dominate the company (or, by extension, Sark).
Now the scheme is going out to market, Mr Lorenz and Mr Beaumont say they are focused on fine-tuning the plan, continuing conversations with stakeholders, and getting suitable offers in front of existing owners to see if they can reach agreement.
‘Until then, our company is all concept and no property.’
He said he was himself surprised about the development of a publicly-listed company at an early stage.
‘I’ve been asked how someone can invest by more than one Sark resident. There are examples of public investment companies, which can provide “insane” long term returns for investors. Nothing of what we propose wouldn’t have been done elsewhere already in a comparable form, and it’s there for Sark to learn from.
‘Listing on a stock market would democratise investment in Sark’s future. Anyone with a few quid could buy and sell stock in the company. We might even gift a few shares to each bona fide resident of Sark, so that everyone legitimately living in Sark gets the opportunity to watch it all from the inside. Public listing makes the company more transparent than anything currently done on Sark.’
Mr Lorenz talks positively, but also accepts that there is risk in the project, not least in him talking about it.
‘To state just the obvious example, none of this may ever happen, and it could all turn out to have been but an expensive pipe dream. I may end up regretting every single word I put on paper. Also, whatever I say about our plans, there’s bound to be criticism.
‘Some media outlets will likely have a field day trashing our work, and their reporters won’t be able to, or be interested in, distinguishing if negative feedback is rooted in majority feedback or merely represents a vocal minority.
‘But putting yourself out there always leads to valuable feedback. Case in point, more Sark real estate owners than anyone would have imagined have already been in touch with us about being open to offers. There is a local perception that “nothing on the island is for sale”; however, that’s not true once owners can speak to a party that is credible financially and trusted to not publicly divulge conversations.
‘It had always been evident to us that Sark has a backlog of potential transactions caused by factors such as the lack of mortgage financing and inheritance cases, and this hunch has proven right in the meantime.’
There is talk of a maildrop to Sark residents to have a conversation about selling up, even to the point where the company could be prepared to buy up to 40% of the island’s surface area, if that is what it would take to implement their plan.
Mr Lorenz says he is talking with potential anchor investors from the UK, Western Continental Europe, and North America, and others may want to get involved in the future of Sark.