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SCMP Reporter

FINANCIAL regulators are warning investors to be on the alert for unauthorised investment schemes offering huge returns in foreign property developments.

   This follows the recent successful prosecution by the Securities and Futures Commission (SFC), the territory's chief financial watchdog, of a mainland-based property development company for the unauthorised advertising of units in Zhuhai that offer 'guaranteed' returns on the money invested.

   There are growing concerns that the territory could again become the target of unregulated and unscrupulous operators keen to cash in on gullible investors seeking high returns for small outlays.

   Investment consultants warn investors to be cautious about buying unseen property where it is difficult to obtain independent, third-party opinions about development potential.

   They also warn against believing promises of high profits on developments still awaiting approval by authorities or where third-party buyers are not guaranteed.

   A spokesman for the SFC said that investors who were offered buy-back guarantees at a premium to the purchase price 'or other supplemental features promising a profit' should ensure that the company was authorised.

  This would ensure that the company had adequate financial resources to meet its commitments and would provide investors the prospect of redress if losses arose from fraud or negligence.

   Ong's Properties Consultants (China) was fined $100,000 for the unauthorised issue of promotional material and advertisements on the sale of units in Zhuhai's Giant Building development.

  The offer included a guarantee to purchasers that they would see an 80 per cent rise in the value of their investment or the developer, Zhuhai Giant Advanced Technology Group, would buy back the unit at 180 per cent of the original price.

  Other investors have recently received advertising from Walton Development (Asia), a Canadian-based property development company.

  Walton is encouraging investors to buy a lot in a 1,120-acre development for which the company has yet to obtain planning permission and find a local buyer.

   Investors are offered an acre of land in an area the company plans to develop in the province of Alberta, Canada, for an initial outlay of $60,000    The letter states: 'Walton will do the 'development plan' for you until the plan is approved by the local government. Then the project will be sold to a local builder. The investment is then completed.'    Walton claims that during the next five years the value of the investment could increase between four and five times because of the potential growth arising from the location's prospect of becoming a technology and natural resources centre.

   A spokesman for the company said the company did not need SFC approval because it was involved in selling land, not investment.

   A spokesman for the SFC said, however: 'It is not now an authorised company, but may need to be. We are looking into it.'   The risk for the investor is that the company will not be able to have the land re-zoned or find a local builder to develop the project.

  If it fails, the investor will only have title to the acre of land in Alberta.

  The company said it was involved in four projects in Calgary that were still awaiting government approval.

   A local property expert said that because of the small initial investment, it could be worth it to wait for four or five years for the possible return.

   But he added: 'Supposing that they can get zoning permission, the big question mark is who is going to use and develop the land.

   'An investor needs to compare the current price of land with similar developed land nearby.' 



Caution urged on property schemes