Governments and NPOs Acquiring Private Islands worldwide!

Nov 2011

Farhad Vladi, Founder and President of Vladi Private Islands

(Credit: Maria Schiffer)

In the last five years, and especially in the last six months, the trend of governments and nature conservancy groups buying islands in many countries has become obvious. With our unique global perspective, Vladi Private  has seen this phenomenon happening in diverse places including Canada, the USA, the Caribbean Sea, Western Europe, UK, France and Africa and the Far East, as well as New Zealand and Australia. Whatever the reasons are, we are concerned about the effect this may have on private island owners, and how we can help them protect their interests.

For the last few years, we have been observing this trend and very carefully analyzing what prices private island owners receive from governments and nature conservancy groups, how these purchase prices have been established, whether there is any pressure being put on the owners to sell the island. We are learning how to advise private island owners who may have properties of interest: in essence, how to best protect them and how to increase the value of their island for a potential sale.

So far we have not observed any pressure except for one expropriation in Ireland, where the owner was not complying with reasonable rules about development and the preservation of a historical site.

The positive news is that I have observed very amicable and fruitful negotiations between island owners and governments or NPOs (Non-Profit Organizations). Both parties will have done their due diligence and valuations. If they agreed on a price, the transaction was settled. If not, both parties went their separate ways. As long as this trend continues, it is a positive trend, especially in today’s market when organizations can pick up islands for lower prices then they may have seen five years ago.

When the market is slow and many island owners are motivated to sell, they have a readily available buyer without needing to incur any marketing costs. In some countries, including the British Virgin Islands, governments impose a “right of first refusal” on island sales. This means that if a third party has signed an agreement with the vendor to buy the property, the government can exercise an option to complete the transaction on those terms. This works well and everyone is happy, except for the third party purchaser, who of course will be disappointed.

Private Island News (PIN) is monitoring this trend, and will keep readers informed whenever islands are purchased by governments and/or NPOs. The reader will see the effects, the prices (if publicized), the reasons for the purchase, and how the vendor feels about the sale.

The most important factor in ensuring a fair transaction is anisland’s valuation, for which comparable sales data is highly important. Vladi Private Islands has a precise database on comparable sales and is therefore involved in many consultations and even valuations. Vladi Private Islands has also been hired as expert witnesses and for appraisals by the Irish and US governments. As an appraiser, we know that an undeveloped island increases in value when it has a building permit, a conveniently located mainland property with a boat house, and other characteristics that cost little to the owner but increase the value of the island exponentially.

Islands with existing development are not so much the focus of government and NPO interest, as the sale price is anticipated to be too high. It is important that owners of undeveloped islands know what they have to do, according to a checklist, to bring the island to a point where a valuation will consider the property’s characteristics and result in the highest possible figure. Needless to say, the market will be the overwhelming factor, but still, smaller aspects like building permits will still play a great part. Then, the island can be compared to other islands with the same attributes.

So far,this recent movement of islands from private to public hands has beena positive for the island industry and not harmful in any way, however, expropriation or any other kind of pressure on the vendors could turn it into a negative.  Rest assured that PIN and VladiPrivate Islands will observe thisimportant market trend very carefully, and report on any developing news.

Farhad Vladi

Visit the “Government buying Islands” section on privateislandnews.com and the official Vladi Private Islands website:www.vladi.de