SUNK – Investments Drown in Carmarthenshire Marsh
Corran Resort and Spa Investors Lose Millions
The Corran Resort and Spa at East Marsh, Laugharne, on the flat coast west of the Taf estuary and immediately north of the seven-mile long Pendine Sands in Carmarthenshire, is at the centre of an angry campaign by investors whose individual losses range from about £17,000 to well over £100,000, and total just on £16.7 million.
Investors’ losses include pension savings, highlighting the dangers of the UK’s new liberalised regime which allows people wide freedom to invest or spend their pension funds as they like.
Rooms at The Corran – ‘suites’ in marketing parlance – were sold to 416 investors, many of whom purchased fractions of a suite, as little as one-twentysixth for £17,000 or £18,000, depending on the seller.
The hotel was owned by a company called Kayboo Ltd and operated by sister company East Marsh Operational Company Ltd. Both went into administration on October 18th 2016, although the official date for the appointment of administrators was a couple of weeks later on November 3rd. Investor Ravinder Singh’s claim on East Marsh Operational for about £2,500 in unpaid rent was the first falling domino which led directors Peter Burnett and Keith Stiles to put the companies into administration. “They used it as an excuse for the ‘Notice of Intention’ that they filed and to ‘blame’ me for the companies going into liquidation,” he said. “I am one of the leaders of a group of investors who are seeking a return of our investment and hopefully justice served on the perpetrators of this fiasco.”
Kayboo’s latest published accounts, for the year to March 31st 2015, show fixed assets – land, property, machinery, furniture – of £14.5 million. Debts to be paid in the following year were £1.572 million, and debts repayable after that, £14.167 million. The company’s share capital was only £1, but a ‘revaluation reserve’ of £1.264 million padded out the balance sheet, and shareholders’ funds were reported as £861,000, more than double the previous year. In the following months, investors’ funds continued to flow in.
Eighteen months later, Kayboo was apparently so poor that the administrator thought it a good idea to sell the hotel for £150,000 in a pre-pack deal to Keith Stiles, one of its directors, so that it could remain open and continue employing staff. The deal was completed on October 18th 2016. Pre-pack deals are legal although apt to anger investors who have lost their money.
Investors bought room fractions through intermediaries such as Barrasford and Bird of Tavistock, Devon, and pensions specialist Rowanmoor of Salisbury, Wiltshire, which enabled individuals to put Corran investments into their self-invested personal pensions.
Investors thought they were buying leases, and started to do so in 2012, before the hotel reopened under new Kayboo ownership in 2013, after closure in a previous period of administration. Yet by November 2016 only three leases had been completed, according to Stuart P Kelly, joint administrator alongside Stephen Clark, both of HBG Corporate Ltd, a small firm of insolvency practitioners in Tarleton, Preston. Mr Kelly revealed this while chairing a creditors’ meeting on November 30th in the Angel Hotel, Castle Street, Cardiff.
Why only three completed leases, plus five executed but not completed? The leases should have been held in the fractional ownership companies set up for the purpose, but chartered accountant David Bates, a director of The Fractional Ownership Consultancy and of the numerous companies set up to hold the leases, told the creditors’ meeting that although he had signed many and returned them to Kayboo Ltd and East Marsh Operational Company Ltd, he did not know what was registered or counter-signed.
This prompted one of the investors present to comment that all the investors who had paid to belong to Kayboo Ltd have “no property interest, no interest in anything at all, all they have is membership of a company with no assets”.
Where are the other leases? The administrators did not seem to know.
This is among the many issues which Oliver Jackson, a partner in Freeths Solicitors representing investors, has raised with the administrators.
Some Significant Names in The Corran Story
David BATES Chartered accountant, director of The Fractional Ownership Consultancy and a large number of fractional ownership companies, based in Heswall, Wirral. Agreed with the administrators, HBG Corporate Ltd, to stop investors adjourning the creditors’ meeting on November 30th 2016 to allow them time to present documentary evidence contradicting information presented by the administrators.
Jamie BROWN Developer of property in Portugal arrested near Cross Hands in December 2011 for possession of cocaine and unlicensed guns and ammunition at Hurst House Hotel, now The Corran Resort, and in 2012 sentenced to five years in prison.
Peter BURNETT (55) Director of Kayboo Ltd, East Marsh Operational Ltd and several other companies including Pennaf Premier Group Worldwide Ltd. Contact address is in Port Talbot. Pennaf Premier Marketing (director Stephen Paul Turner, dissolved August 16th 2016) provided The Corran Resort & Spa’s website, http://www.corran.com.
Jeremy (Jerry) COBB Former director of The Fractional Ownership Consultancy Ltd, and based in Sotogrande on the Costa del Sol, Spain.
EAST MARSH OPERATIONAL Company Ltd Set up on February 22nd 2012 to operate The Corran on behalf of Kayboo. Put into administration on October 18th 2016.
The FRACTIONAL OWNERSHIP CONSULTANCY was incorporated on October 12th 2005 by company secretary Marlborough Secretaries Ltd of Farnley House, La Charroterie, St Peter Port, Guernsey, for agents Marlborough Trust Company Ltd of the same Guernsey address.
Oliver JACKSON Partner in solicitors Freeths, representing investors who have lost money.
KAYBOO Ltd Company which entered administration on October 18th 2016, set up on October 4th 2010 to own The Corran Resort and Spa. The early directors were Aderyn Hurworth, appointed at the date of incorporation and resigned October 15th 2010, and Charlotte Thornley (sometimes written Thornlky at Companies House) Acourt Dutton, appointed October 19th 2010 and resigned November 28th 2012. Charlotte is also a company director under the surname Roberts – she is married to Matt Roberts (see below).
These directors were succeeded by Keith Michael Stiles (August 1st 2012), County West Secretarial Services (August 20th 2012), and Peter William Burnett (January 11th 2013). There are connections between the old and new regimes, for example Charlotte Thornley Acourt Dutton, Keith Stiles, Paul Manley and County West Secretarial services were all at different times directors of Golden Oriental Catering Ltd, incorporated on June 26th 2002 and dissolved on December 9th 2014.
Stuart KELLY Administrator of Kayboo Ltd and East Marsh Operational Company Ltd, jointly with Stephen Clark, both of HBG Corporate Ltd, insolvency practitioners of Tarleton, Preston in Lancashire.
Paul MANLEY (61) Director of Glendore Real Estate Ltd and Plustocks Management Ltd, the companies which have replaced Kayboo Ltd and East Marsh Operational Company Ltd. Address listed is in Newquay, Cornwall.
Les MILTON Former director of The Fractional Ownership Consultancy Ltd, based near Jeremy Cobb in Sotogrande, Spain.
Neil MORRISSEY Actor and singer Neil Morrissey, a star of the 1990s TV sitcom Men Behaving Badly, and subsequently the voice of Bob the Builder. He bought Hurst House Hotel in 2001 but failed to make it pay. In its final year of trading under his ownership, the venture lost over £1.375 million. Administrators from the accountancy firm PwC sold Hurst House Hotel to Neil Morrissey’s business partner Matt Roberts in a ‘pre-pack’ deal which enabled the business to keep operating.
Matthew (Matt) ROBERTS Former business partner of Neil Morrissey in Hurst House Hotel. Bankrupt in September 2014. His wife Charlotte (see under Kayboo, above) runs a fractional investment scheme for an eco-village, the Convent in the Hills, in Norway and also runs The Convent, a hotel in South Woodchester, Gloucestershire, which is being developed with the assistance of crowdfunding.
Ravinder SINGH Investor in The Corran whose Zenith Consultancy is owed about £2,500 in unpaid rent. Mr Singh is allied to a group of investors who refused to accept Kayboo’s initial proposal, in July 2016, to rescind the obligation to provide investors with leases, and instead to issue non-voting shares in the project. These shares would receive 76% of any profits for a defined number of years but lack any element of ownership. Kayboo cited Mr Singh’s claim as the reason why Kayboo and East Marsh Operational had to go into administration.
Keith STILES (57) Chartered quantity surveyor, director of the two companies in administration and of the two replacement companies, Glendore Real Estate Ltd and Plustocks Management Ltd. Mr Stiles is a director of nearly a dozen other companies. Correspondence address is in Bedfordshire near Whipsnade Zoo.
Rooms in The Corran Resort and Spa were sold to investors, through intermediaries, on the promise of 999-year leases. Property firms selling space in The Corran in 2016 included Emerging Developments SL of Marbella, Spain, which offered one twenty-sixth of a boutique suite for £18,000 (valuing the full suite pro-rata at £468,000), and promoted the enticing potential returns from one package as 10% annually for ten years, 12% for the following five years, repurchase at 125% of the sale price in years five to 14, and at 150% in year 15.
The Villa Company was another property investment firm selling fractions of rooms in The Corran, from £18,000 and with returns up to 12%. “Invest with just £18,000 and receive on average £2,300 per year,” says an advert. “After 15 years the developer will buy back the property. Speak to one of our advisors now to learn more or book a viewing trip to The Corran.”
Neither Emerging Developments nor The Villa Company is currently offering investments in The Corran, but Solo Property Investments Ltd of London N4 – Finsbury Park – was still (January 11th 2017) advertising the “opportunity” in these glowing terms:
“An incredible UK property opportunity in a glorious rural setting with luxury suites and facilities to match, including a spa and fine dining restaurant, it’s no wonder The Corran’s success has resulted in profits for owners”. Incredible indeed.
Promoting fixed returns of up to 12% a year, and assured resale of up to 150% of the original capital investment, the marketing message emphasizes “the safety of an operating hotel and a deal almost unrivalled in today’s UK property market”.
In January 2017 Global Property Investors of London SW11 – Battersea — was another firm still inviting investments in The Corran, from £17,000.
The returns offered seemed excessive to West Wales News Review, which reported on the scheme here and here. In addition, the investments are unregulated and so should be made only by people who can afford to lose everything they have put in.
Buying Non-Existent Property?
In March 2013 the local planning authority, Carmarthenshire County Council, gave Kayboo permission to convert East House Farm, less than a mile away from the main hotel and bordering the dunes of Laugharne Burrows, into hotel rooms. This scheme was marketed as ‘phase 2’ but has not been completed.
A further phase, at Malthouse Farm less than 400 yards or so from the hotel hub, was rejected on appeal in October 2014, after the planning authority had turned it down because of possible flooding and risks to wildlife. An ambitious scheme for 200 holiday lodges, also on the marsh, failed to secure permission in December 2015, for similar reasons.
Far from having 77 suites and 200 lodges, as per the master plan, The Corran has 21 rooms, according to its website. Yet the fractional ownership companies should contain leases for which investors have paid in excess of £19 million, as recorded on documents available at Companies House. No investors with their wits about them are going to pay around £900,000 for a single hotel room, even if it is called a ‘suite’.
Where Did the Money Go?
Investors paid in £19.210 million, Kayboo reported in July 2016.
It had all gone by then. Kayboo’s expenditure analysis lists heavy costs, including.
- Site acquisition cost over £3.641 million
- Developer finance took £2.184 million
- Commission and fees to sales agents exceeded £4.910 million
- Subsidising the hotel operating company £2 million
- Constructing a spa £850,000
- Initial refurbishment of the existing hotel £650,000
- Other construction work at the hotel £179,000
- Preparation for the second phase, which would have 28 rooms, £640,000
- Payments to the design team and planning costs £515,000
- Legal fees and charges £400,000
- Pennaf management and marketing (Pennaf did the website) £380,000
- Marketing and promotional events £150,000
- Payments to The Fractional Ownership Consultancy £120,250
- Repayment to Lloyds Bank £70,000
Investors got some of their money back, £2.52 million classed as rental payments – but as they are deducted from the amounts investors paid in, they do not at all appear to be derived from sums paid by visitors to the hotel.
The money was exhausted before the 28 rooms in Phase 2 were completed, although investments in these rooms were sold.
As for Phase 3, after 200 holiday lodges were refused planning permission in December 2015, Kayboo floated a smaller scheme for 41 lodges in summer 2016, but did not apply for planning permission before going into administration.
The rapid exhaustion of investors’ funds, in what seems to be a speculative crowd-funding project, suggests wildly over-optimistic costings in the first place, or fatally weak cost control, or irresponsible advertising, and quite possibly all three.
Hotel suppliers are out of pocket, too.
They are creditors of East Marsh Operational Company Ltd, which ran the hotel for Kayboo and shares Keith Stiles and Peter Burnett as directors. Creditors include Thomsons Laundry of Haverfordwest, owed £29,099; Castell Howell Foods Ltd of Cross Hands, £16,317; and the butchers Eynon’s of St Clears Ltd, £10,079.
Huw Eynon of Eynon’s butchers had the impression that the hotel was doing well, and in one month had revenue of £200,000. For some reason, East Marsh Operational Company was saddled with obligations for rent payments to investors, when investors themselves are convinced their ‘agreements’ are with Kayboo. They tried, at the creditors’ meeting in November, to persuade administrator Stuart Kelly to adjourn the meeting to allow investors time to gather proof of this, but he refused. He had enough votes from David Bates, of The Fractional Ownership Consultancy, to push ahead regardless of investors’ wishes.
“The requested adjournment would have allowed time to investigate which company was responsible for about £3.5 million in outstanding dividends,” said Mr Eynon afterwards.
He continues to supply the hotel with meat, and says the payment arrangements are now very different. “It is cash on delivery,” he said. “Under Kayboo, the management at the hotel did not deal with payments, they just logged income.” He thought that one of the directors had dealt, or did not deal, with payments to suppliers.
Now that Keith Stiles has obtained the hotel for £150,000, through Glendore Real Estate Ltd, he can in future sell it on for whatever the market will pay, because there is no limit clause in his purchase agreement. This was a bone of contention at the creditors’ meeting. Robert Dymond of insolvency practitioners Wilson Field, representing investors, said that “regardless of the outcome of today’s meetings and whether the administrators’ proposals going forward are accepted, modified or rejected, it is likely that the investors will want to challenge and overturn this sale.”
Before a creditor’s claim forced Kayboo into administration, in summer 2016 the company proposed ending the obligation to provide investors with leases, and replacing it with the issue of non-voting shares in the project which would share 76% of any profits. If all went well, investors would receive their capital back in 2023. The directors would receive 26% of profits plus salaries, too. To judge from recent history the chances of the hotel, in six years to 2023, generating profits for investors totalling around £11.5 million — based on an annual return of 10% — would be in my opinion akin to winning the mega jackpot in the Euro Millions lottery. Investors made their displeasure known.
Kayboo then made another offer, to distribute 80% of profits to investors over a longer time frame, until 2031. The directors would receive 20% of profits, as well as their salaries. This deal still had no certainty, and no property ownership, other than the intention to repay original investments in 2031. Despite exhortations from sales agents Barrasford & Bird to accept the offer, because in their view it offered a better chance of funds recovery than if administrators took over, investors remained unconvinced.
Kayboo and sister company East Marsh Operational Company duly went into administration.
Angry Creditors’ Meeting
Creditors’ meeting chair Stuart Kelly closed it down “to avoid any unrest” because the attendees were becoming angry. Investors felt they were being railroaded into agreeing to the rushed deal which the administrators made with Keith Stiles, and were also denied votes, because at the date of administration – October 18th 2016 – they had not attempted to withdraw their money from the fractional ownership companies where the funds should have been invested, and therefore were not classed as ‘creditors’.
Of course, at that date, investors by and large had no idea that their money had disappeared into a series of massive payments to others. Investors wanted to adjourn the meeting to allow them time to make alternative proposals, but chartered accountant David Bates, representing The Fractional Ownership Consultancy, a force behind schemes to sell bits of hotel rooms, student rooms, parking spaces and so on, and a designer of the fractional ownership companies, was marching in time with Mr Kelly.
David Bates claims that Kayboo owes The Fractional Ownership Consultancy £164,394.67 in unpaid fees. Mr Kelly allowed all of this to count in the voting, but investors’ claims were cut to a nominal £1 each – meaning that although the investors have lost millions of £s, they were outvoted by Mr Bates’ Fractional Ownership Consultancy.
“Where did the money go,” investor Andrew Elder asked Stuart Kelly. “How can you sell the hotel back to the same crooks without knowing?”
Mr Kelly did not appear to regard the money trail as urgent. He told Mr Elder that the investigations part of the administration process was currently at a stage of infancy, but that as part of the administrators’ duties, there would be a thorough investigation into the companies – Kayboo and sister outfit East Marsh Operational Company — and where the funds had gone. “However,” he added, “I must reiterate, if that sale was not completed the hotel would have closed.”
Investor Jeff Matthews said he knew at least two investors who would have paid £200,000 plus for the hotel, but Mr Kelly claimed to be unaware of any interest from a second party. Mr Matthews continued: “I have met with Keith Stiles, and he claimed that the hotel is worth a lot more than £150,000. Is it possible that the sale could be unravelled?”
“It is possible,” replied Mr Kelly, “but it is a matter for the court”.
Mr Kelly told the seething creditors that the operational company, East Marsh, was losing cash because sales revenue was insufficient to cover its expenditure. East Marsh was being financially supported by Kayboo, he said.
“I do appreciate all of the concerns and a full investigation will be conducted,” he added.
An angry investor criticised the administrators for failing to tell investors what was going on. “You just sat in your office and didn’t have a problem with that,” he complained. “Who’s paying your fees? Inside job?”
Mr Kelly refuted the accusation with a single word. “No”, he said.
Meanwhile, the 416 investors have set up two closed Facebook groups to share experiences and co-ordinate action. The Corran Investors Initiative has 322 members, and The Corran Equitable Society has 224.
The Fractional Ownership Consultancy and its Associates
Chartered accountant David Bates, of Heswall in the Wirral, Merseyside, is at the heart of The Fractional Ownership Consultancy. He has dozens of directorships of fractional ownership companies, including those set up for The Corran. In The Fractional Ownership Consultancy, Mr Bates’ fellow directors included, in the past, Jeremy James Cobb, of Floresta, Sotogrande on the Costa del Sol, Spain, and Les Milton, also of Sotogrande. Jeremy Cobb is reported by the information service ZoomInfo to have represented the Marlborough Trust Company Ltd, which with Les Milton initiated The Fractional Ownership Consultancy.
According to the Guernsey Chamber of Commerce, it was a developer in Portugal who asked the founders of The Fractional Ownership Consultancy to construct a legal mechanism which would facilitate the sale of fractions of property on resorts.
Coincidentally, Portugal property developer and cocaine addict James ‘Jamie’ Brown, jailed in 2012, was arrested late in 2011 for possession of a cache of cocaine and illegal handguns when a guest at Hurst House, as the hotel was called before it became The Corran in 2013.
The FOC’s current directors are David Leslie Bates, Julia Rachel Day, Lucy Ann Whitfield, and SMD Secretaries Ltd. Jeremy James Cobb was a director from January 31st 2006 to October 1st 2010, and Les Milton for exactly the same span of time. Both became directors four or so months after the founder directors, Marlborough Nominees Ltd, Marlborough Trust Company Ltd and Marlborough Secretaries Ltd, all of St Peter Port, the capital of tax haven Guernsey.
The Guernsey Chamber of Commerce had a link to The FOC’s website, but that appears to have disappeared.
The Chamber of Commerce says: “The Fractional Ownership Consultancy Limited provides developers of worldwide holiday property with legal structuring, administration and consumer finance solutions enabling them to offer fractional ownership as part of their marketing mix.
“Over 12 years ago the individuals comprising FOC were asked by a developer in Portugal to construct a legal mechanism which would facilitate the sale of fractional product on their resorts. After years of successful operation and refinement it was decided that the product, and most importantly the back office systems which make it all work, were robust and ready to be rolled out to other developers and territories.
“They have since successfully implemented fractional ownership on a number of developments in Portugal, Spain, Greece, the UK, Turkey, Florida, Cyprus and Cape Verde.
“FOC now have over 10,000 fractions under management and have just launched OysterShare – a direct and equitable alternative to traditional shared property ownership, usage and holiday experience models.”
Two former directors of FOC, Nicholas Robert Hannah (January 31st 2006 to October 31st 2013) and Adrian Bradley Howe (May 15th 2009 to October 1st 2010) have fallen foul of the Guernsey Financial Services Commission, which on November 21st 2016 barred them from holding directorships for five years and fined them each £35,000 – and if they had been better off, it would have been £50,000. The censure was for management negligence and making false statements, in their capacity as directors of Marlborough Trust Company Ltd, another former ‘director’ of FOC.
The Marlborough Trust Company, fined £100,000 by the Guernsey Financial Services Commission, is implicated in the 2009 failure of Arch Cru, a group of funds which invested £400 million on behalf of around 20,000 private investors. Marlborough Trust Company was, it appears, ultimately responsible for investment decisions over the assets underlying 23 of the Arch Cru funds held in SPVs – special purpose vehicles – for property, wine, and a company owning other companies which invested in ships.
So the management of Marlborough Trust Company was inadequate. Could this weakness extend to its involvement in the Fractional Ownership Consultancy?
FOC’s David Bates appeared keen to keep his companies’ involvement at arm’s length. He said that investors’ contracts were with Kayboo, not FOC.
The contracts were mainly for non-existent assets, though, while their investments had sunk into the marshland.
Administrator Stuart Kelly said he would engage a firm of forensic accountants to prepare a report on the fate of investors’ moneys, and the report would be presented to the Financial Conduct Authority. This week (January 23rd 2017) a spokesman for Stuart Kelly refused to say whether forensic accountants had been engaged, because the whole matter was completely confidential.
The Corran location has a colourful past. The Corran name dates from 2013: before that, it was Hurst House on the Marsh, and prior to that, just Hurst House, a grade II listed small Georgian house built in 1797, with outbuildings.
The actor/singer Neil Morrissey, a star of the 1990s TV sitcom Men Behaving Badly, and subsequently the voice of Bob the Builder, bought Hurst House Hotel in 2001 but failed to make it pay. In its final year of trading under his ownership, the venture lost over £1.375 million. In 2004 he had purchased Brown’s Hotel in Laugharne town, but that did not succeed either.
Administrators from the accountancy firm PwC sold Hurst House in 2008 to Neil Morrissey’s business partner Matt Roberts in a virtually identical move to HBG’s with Keith Stiles late in 2016, a ‘pre-pack’ deal which enables the business to keep operating.
Matt Roberts and his company Followset did not stay afloat long. Two years on, in 2010, Hurst House owner Followset was in administration, this time with Grant Thornton. Kayboo was set up the same year, and East Marsh Operational Company two years later in 2012.
The disappointing commercial history of Hurst House may reduce the number of lenders and investors willing to fund its growth in future, but on the other hand, big investors know how to protect themselves.
Many of those who thought they were buying part of a hotel room at The Corran were not professionals but individuals, including pension savers and pension pot investors, attracted by the enticing advertising.
Current English and Welsh law relating to property investments fails to protect them against incompetent or reckless business practice at best, wilful misrepresentation at worst.