What is the best investment Sir Richard Branson ever made? Craig Turnbull

GUEST OBSERVATION

Sir Richard Branson has an estimated net worth of $5BN USD, owns (& part-owns) airlines around the world, along with about 500 other companies, 200 or more of which feature the Virgin brand. His empire covers trains, airlines, mobile phones, financial services, media, holidays and health clubs, yet none of these figure as his best investment.

It might surprise you to learn that Sir Richard Branson’s self-described “best financial move” was to buy some land – 74 acres to be precise – an island in the Virgin Islands known as Necker Island. And the original reason he bought it? He wanted to impress a girl – who in fact later became his wife.

In 1978, when Mr. Branson was just 28 years old and building Virgin Records, he heard of an island group with the same name – the British Virgin Islands. He enquired after an island for sale and was flown down to visit, along with his intended future wife – though she didn’t know that! He was quoted a price of $5M for the uninhabited, but very beautiful island. He did not have that kind of money, but made the highest offer he could afford - $100,000, which was quickly rejected.

Nearly a year later the island broker re-contacted him, saying the owner really needed the cash and a deal was done – at just $180,000. Quite a discount from the original asking price. The only catch was, Richard had to build a resort on it within 4 years, or the government would reclaim ownership. A further $10M was invested over a number of years to create what is now an incredible tropical paradise that Sir Richard now calls home.

A recent article estimates the value of the island today could be upwards of $200M USD. That makes the return on investment of over twenty times his money over a 37 year period.

So what can we, as property investors, learn from Sir Richard Branson’s best financial move?

1. Sometimes a cheeky offer can work miracles - It would have taken a lot of bravado, and some real courage to actually make an offer with money he didn’t have, knowing that he would have to find millions more to build on the island if he was successful. A low offer isn’t going to work in a crowded overheated market, but cycles always turn and the time will come again when you can buy with lowball strategy.
2. He walked away – when his offer was not accepted he walked away and patiently waited, connecting occasionally with the agent and upping his offer slightly. Eventually, the seller needed the cash and with no other buyers on the scene, Mr. Branson was to become the lucky new owner. Branson relied on the lesson in one of his own sayings – “Business opportunities are like buses, there’s always another one coming.” He treated the purchase of Necker like a business and did not get emotionally tied up in to the purchase. There were plenty of other islands out there in the Caribbean.
3. He bought a valuable asset that nobody else wanted – a vacant island, even in the Caribbean, is always going to have a limited pool of potential buyers. And the late 1970’s was not a period of huge economic good times in Britain, which meant the owner, Lord Cobham, ended up needing to sell to generate some cash. Branson bought when no one else was buying.
4. He had a big dream and a huge vision – he wanted to build something wonderful on Necker, yet he could barely scrape together enough to close on the deal, let alone another $10M to build on the resort. Somehow he found the money to do all of that over the next five years. It was necessary to improve the value and income earning potential of this unloved and unwanted asset by building something desirable and wonderful on the land.
5. Vacant land doesn’t produce an income – although he ended up paying what now seems an incredibly small sum to buy the empty island, it could not generate an income. Branson invested another $10M over the following five years building a world class home and resort. If you would like to visit Necker and you don’t have a personal invite, all you need is $65,000 USD per night to rent out the island. That would of course help cover the cost of the 90 staff who are employed on the island, where Sir Richard lives and works running his empire. If you can call it work!
6. Property investing is usually for the long term – in the late 1970’s and early 1980’s Mr. Branson invested what would have been a huge sum in today’s dollars. In 2006, Necker was valued at around $60M USD and just nine years later, that value is estimated at over $200M USD (~$275M AUD).  Even if Mr. Branson had paid the full asking price and spent another $10M, his return still would have been in excess of thirteen times his money over the three decades or so he has owned Necker.    

I consider Sir Richard Branson as one of my personal heroes – he is one of the world’s most successful entrepreneurs. I completely admire his ability to see something and make it happen; to dream big; to play hard; to follow his passion and to have a whole lot of fun.

I look forward to meeting him one day soon.

Craig Turnbull is an author, property developer and real estate investor. He can be contacted here.