News: Dark Days for Investors in Tenby Holiday Hotel
Tenby’s landmark Fourcroft Hotel, run by the Osborne family for over 70 years, was sold to Northern Powerhouse Developments less than three years ago, in January 2017.
Northern Powerhouse Developments (NPD) itself, the creation of 41-year-old Gavin Lee Woodhouse, is already in administration. So are numerous other companies in its portfolio.
NPD created two new companies for the well-known 40-bedroom hotel in Tenby on the coast of south Pembrokeshire. One was Fourcroft Hotel (Tenby) Ltd, the hotel operating company, which went into administration on August 8th 2019. Fourcroft Hotel (Tenby) is now in the hands of insolvency practitioners Philip Duffy and Sarah Bell, in the Manchester office of New York-based multinational Duff & Phelps, a multi-faceted valuation, restructuring, corporate finance and consulting organisation active in 28 countries. The day-to-day management of the hotel was taken over by Iain Shelton, who until the end of April 2018 was a director of Assured Hotels Ltd.
The Fourcroft Hotel in Tenby. Where has investors’ money gone? Photo from Google Earth
The second company was property holding company Carmarthen Bay Hotel Ltd, which also went into administration with Duff & Phelps on August 8th. This company had the task of selling off individual rooms on leaseholds. The intended plan was for the rooms to be rented back to the hotel operating company, which would receive guests’ payments.
The accounts for both companies make interesting reading. In both cases they are for the year to March 31st 2018. Carmarthen Bay Hotel Ltd’s balance sheet values the hotel at £2.760 million, compared with £527,916 the previous year – a more than five-fold increase. This ballooning valuation made the hotel appear profitable, when subsequent events show that it was not. In the year to March 31st 2017, the company had negative value of £480,722, and a year later an apparently healthy surplus of £1,317,237 – all due to the supercharged property revaluation.
Fourcroft Hotel (Tenby) Ltd reported turnover of £812,423 in the year to end-March 2018, £67,702 a month. This was better than the average of £49,913 a month during the previous 18-month accounting period, and contributed to a healthy gross profit of £696,780. But not so fast! Administrative expenses amounted to £1,059,192, or £88,266 a month. Over the 18 months from October 1st 2016 to March 31st 2017, administrative expenses were less than half that at £41,033 a month. The higher expenses led to 2017’s £22,939 operating profit transforming into a £350,205 operating loss in 2018.
So the Fourcroft Hotel’s acquisition by the Northern Powerhouse Developments business group quickly turned into a financial bad news story – even worse when charges against assets are taken into account. Both the Carmarthen Bay and Fourcroft companies were subject to comprehensive charges in favour of North West Asset Finance Ltd, a small company controlled by Shays Assets Ltd, the sole director of which was Robert Ashley Hall from near Skipton, North Yorkshire.
During 2017 investors were drawn to the Fourcroft/ Carmarthen Bay by agents promoting benefits like these:
- “Operational 40 room hotel in Tenby with sea views
- Full refurbishment to bring up to stunning 4 star modern standards
- 23 rooms have sea views
- Full suite prices from just £60,000 (with the option of just £54,000 total cash input)
- All rooms to be finished with sumptuous décor and high quality furnishings
- 10% NET return for 10 years
- 125% buyback option in year 10 (or the option to extend the 10% for another 5 years, or take a 50/50 room revenue split)
- 2 weeks free usage in your room each year” (from the agency Emerging Developments)
Those investors are now worried they will lose every pound they put in. For unregulated investments such as this, it is always a case of buyer beware, but the advertising can be very persuasive.
If investors paid £60,000 each for all 40 rooms in the Fourcroft/ Carmarthen Bay – and some were more expensive — the total investment would be £2.4 million. This accords well with the revaluation of £2.76 million recorded in the 2018 accounts for the Carmarthen Bay Hotel Ltd. But it is extremely hard to see how a room costing £60,000 could yield a 10% return — £6,000 – annually, let alone £75,000 for a buy-back in year 10.
By September 2019, Fourcroft Hotel (Tenby) Ltd and Carmarthen Bay Hotel Ltd were just two of the failed companies in the Northern Powerhouse Developments collection. Duff & Phelps were managing about 20, including Afan Valley Ltd, a company behind the proposed Afan Valley Adventure Resort in Neath Port Talbot, and at least four more companies were being administered by CG & Co.
Woodhouse Family Ltd, Gavin Woodhouse’s own property company, is also in the hands of Duff & Phelps.
PDR. More will follow
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