‘High Octane’ Afan Valley Resort — No Planning Permission Yet, but Lodges Already Offered for Sale
Would you buy a house off plan before the site even had planning permission?
Northern Powerhouse Developments, the smartly named real estate company led by Gavin Lee Woodhouse, is selling lodges off the blueprint for the Afan Valley Adventure Resort in Neath Port Talbot.
“With the emphasis on healthy living and high octane activities, Afan Valley will offer guests of all abilities a unique and exhilarating experience which will be the first of its kind to hit the UK holiday market. With its wealth of breath-taking activities, this exciting new resort has been designed to push guests to the limit while at the same time recharge, rejuvenate and relax all who visit,” proclaims the Northern Powerhouse Developments website. There is also a reference to ‘award winning restaurants on site’, which is clearly in advance of reality, because currently the development has not started.
The company says it completed the purchase of 450 acres of land in December 2017. The website mentions 400 lodges, but the outline planning application submitted on May 21st 2018 increases this to 600 lodges. There would also be a 100-bed hotel, restaurants, adventure activities, accommodation for administration, and of course lots of parking.
All this on 450 acres for adventurous activities would be a tight fit. Even if the holiday lodges were crammed in at 12 to the acre – the minimum density for most new housing –they would cover 50 acres.
Despite the application’s submission in May, there is no sign of it in Neath Port Talbot Council’s planning application database. When I rang the council to ask what had happened to it, I was told that it is not yet a valid application because the planning department has not received all the necessary information. So there is no date for the proposal to come before the planning committee.
That is potentially worrying for investors who have already paid for lodges, but only one of the many risks in this type of scheme.
Today, the ‘Financial’ page of Northern Powerhouse Developments’ website is missing. The teaser text said ‘commercial assets are retained by the SPV’, but the ‘Financial’ page itself was not there. I had wanted to see if the information on it was any different from the contents in October 2017, when I last looked (Risky Deals? Landmark Welsh Hotels Sold Room by Room to Investors, see here), but no luck.
SPV stands for Special Purpose Vehicle, a company with a legal structure isolating it financially from the parent company. This sort of structure is common in the investment markets for hotel rooms, suites and annexes, care home rooms and student accommodation. Typically, an investor buys a hotel room, or chalet, or holiday lodge leasehold from a property company and rents it back to an operating company for a specified number of years. The property company ‘guarantees’ to buy the ‘asset’ back at the end of the term, often at a premium to the purchase price.
This was broadly the arrangement at The Corran Resort and Spa, Laugharne (see here, and search this website), where close on £20 million of investors’ cash disappeared. Rooms and fractions of rooms at The Corran were sold off plan, in what seemed to me a Ponzi scheme (returns to early investors, enough to generate a ‘buzz’, appear to have been paid with purchase funds from later investors, who are very disappointed).
Why didn’t the investors do more due diligence, especially as this type of investment is not regulated by the Financial Conduct Authority? A lot of hard selling went on, backed with classy marketing materials, and the often elderly investors, with money losing real value in savings accounts paying interest below the rate of inflation, were desperate to boost their rate of return.
Northern Powerhouse Developments may not be another Kayboo Ltd, the former owner of The Corran, but information at Companies House raises flags that are reddish in hue. A company called Mysing Capital Ltd has in 2018 taken a charge on all freehold and leasehold properties acquired by Northern Powerhouse and associated companies The Imperial Crown Hotel Ltd, The Old Golf House Hotel Ltd, and Gilsland Hall Ltd and all properties that may be acquired by them in the future.
Mysing Capital, known as Mysing Properties Ltd until December 8th 2017, is controlled by Steven Turner (51), civil engineer Matthew John Ferguson (47) and engineer Robert James (Rob) Coxon (51), the founding trio of the Castleford-based Stroma Group in 2002. Mr Turner’s address is listed as 9 Fryers Way, Ossett, West Yorkshire WF5 9TJ, the same address as Mysing Capital. The address for Mr Ferguson and Mr Coxon is Murray Harcourt Accountants, Elizabeth House, 13-19 Queen Street, Leeds LS1 2TW.
Stroma provides building control and compliance services, certification for the construction industry and software to the energy and operational efficiency markets. Private equity firm LDC, with funding from Royal Bank of Scotland’s NatWest, bought in to Stroma in 2014, and since then the founders have resigned from the board, but have ventures like Mysing Capital to keep them busy.
Mysing’s balance sheet at March 31st 2017 showed shareholders’ funds of almost £1.27 million, up from £0.978 million the year before. It was carrying £15 million of debt, but had cash of over £9.215 million and £7.143 million in monies due from others.
As for Northern Powerhouse, it has acquired three more properties since October 2017, bringing the total portfolio to 18. The latest is a hotel to be called Lakeside Manor (formerly Monk Fryston Hall) at Monk Fryston between Leeds and Selby in Yorkshire. Almost half the properties and developments are not yet operational. The Afan Valley Adventure Resort seems the most ambitious, and sales agents are busy extolling its future charms. Select Portfolio, which appears to be selling the majority of Northern Powerhouse’s opportunities, advertises Afan Valley properties between £82,000 and £240,000 and suggests returns on investments of up to 268%.
The time scale is optimistic, given that no planning permission yet exists. Select Portfolio says the resort should be completed between April and June 2021, less than three years away. Investors are enticed with ‘iconic global brands’, ‘world class facilities’ and ‘one of the biggest and most thrilling outdoor adventure parks in the UK’. Lodge purchasers are told they can use it themselves (once it is built, of course) for two weeks a year, one in high season, one in low.
The purchasing procedure is also ahead of reality. According to Select Portfolio, on completion of a purchase, an order for the lodge “will be placed with the manufacturer”. A buyer will hope to receive a return of 10% between years four and ten, when the lodge would be bought back by the developer for 25% more than the net purchase price. A couple of purchasing models are offered, but in both no return is payable for the first three years.
I hope it works. I hope the Afan Valley Adventure Resort will receive permission and be a resounding success with local residents and with visitors alike. I hope all the other hotel investments will pay off.
But the risks associated with this crowd-funding approach to development are real, substantial, and not for those for whom loss of capital would be a disaster.