West Wales News Review

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Archive for the category “Financial services”

Unregulated Investments Offered in Llanelli’s Stradey Park Hotel

FEATURE, JANUARY 21st 2020

Rooms in the well-regarded Stradey Park Hotel and Spa, Llanelli, are for sale from £59,950 for 999 year leases. The Stradey Park has average ratings of 4 out of 5 from Trip Advisor, 8.4 out of 10 on Booking.com and 4.5 out of 5 on Facebook.

The hotel, owned since December 2000 by Gryphon Leisure Ltd and with 112 staff in 2018-19, was put on the market for £3.8 million with London-based agent Christie & Co in 2018 but no sale has yet been recorded.

West Wales News Review understands that Christie & Co is negotiating with a small company called Sterling Woodrow Ltd, based at 84a High Street, Billericay, Essex, with an overseas office in Shanghai, and formed in 2005. Sterling Woodrow has two directors, Gareth Street (33) and owner Robert Horwood (56 in January 2020). The latest published accounts are for the year to April 2018, showing 10 employees and shareholders’ funds of £85,661, compared with £35,026 the previous year. Sterling Woodrow Ltd is not to be confused with Sterling Woodrow Estates Ltd, formed in October 2017 and dissolved through being compulsorily struck off in April 2019, where the directors were also Robert Horwood and Gareth Street.

Entrance to the Stradey Park Hotel, where rooms are for sale to investors. Source: Google Maps

Robert Horwood and Gareth Street are, in addition, directors and joint owners of a new company, Stradey Partners Ltd, formed on September 3rd 2019 and operating in “other service activities not elsewhere classified”. The duo also own Perennial Hotels Ltd, formed on August 20th 2019, and Perennial Estates Ltd and Cumbria Park Ltd, both dating from September 18th 2018. None of these four companies has been required to submit any accounts yet. Robert Horwood also owns Perennial Management Services Ltd, incorporated on March 20th 2018.

Sterling Woodrow is in turn is offering rooms to investors, selling through property agents.  Cassini International Property Ltd, Investinrooms Ltd, Moving Up Estates Ltd, Property Invest UK, Property Wealth Ltd and Qatar World Property Ltd are among the agencies selling rooms in the four-star hotel near the former Stradey Park rugby ground, and containing 76 rooms.

Essex-based company Sterling Woodrow has an office at 84a Billericay High Street. The former Thomas Cook travel shop is no.84. Source: Google Maps

10% a year offered for five years before buy-back

The agents suggest that buyers will receive an annual 10% yield for five years, and buy-back at the purchase price plus 115% or 120% — the agents differ – at the end of that term.

Between Monday January 13th and Thursday January 16th Christie & Co, Sterling Woodrow and management at the Stradey Park Hotel were invited to comment on the investment scheme, but so far have chosen not to do so.

The sale of hotel rooms – and rooms in care homes, student halls of residence and other multi-occupation buildings – are unregulated in the UK, meaning that investors carry the whole risk.

Investinrooms Ltd, for one, makes this very clear, stating:

“Investinrooms Ltd is not authorised or regulated by the Financial Conduct Authority (FCA). Investinrooms Ltd does not provide any financial or investment advice. We can provide a referral to a regulated advisor who will offer appropriate advice, or to the company offering an investment who will determine your suitability for the investment prior to any offer being made. We strongly recommend that you seek appropriate professional advice before entering into any contract. The value of any investments can go down as well as up and you might not get back what you put in. You may have difficulty selling any investment at a reasonable price and in some circumstances it might be difficult to sell at any price. Do not invest unless you have carefully thought about whether you can afford it and whether it is right for you and if necessary consult with a professional adviser in accordance with the Financial Services and Markets Act 2000. These products are not regulated by the FCA or covered by the Financial Services Compensation Scheme and you will not have access to the financial ombudsman service. Information is provided as a guide only, is subject to change without prior notice and does not constitute an offer of investment. Some investments may be restricted to persons who are high net worth, sophisticated or professional investors or who take independent advice from an authorised independent financial advisor.”

Over-confidence in future profits?

Investors in the Stradey Park Hotel need to have confidence in a prosperous future for the Welsh hotels business, probably better than currently experienced. Figures for 2017 released by Stats Wales show the average occupancy rate for hotels was 68%. Booking sites online suggested an average price of £85 per night for a room in the Stradey Park on January 10th, although hotels.com and trip adviser had rooms for £72.

If a room is sold at the lowest current price of £59,950, and pays the investor 10% a year for five years, the amount to be paid out is £29,975. There is a buy-back offer at the end of that term. Even at the lower figure of 115% offered by Qatar World Property, and not the 120% mentioned by other companies like Property Invest UK, an additional £68,942.50 has to be paid out then, making a total return to the investor of £98,917.50.

If that room is occupied at an average of £85 a night for 68% of five years, the gross revenue is £105,400. The pay-out to each investor would be almost 94% of the gross revenue. Of course, it might be possible to raise the room rate substantially, or increase the occupancy, but even if both were achieved, and a share of non-rental income was added, investors would need a solid dose of optimism to have confidence in the sales offer, especially as agents and service companies would need to be paid too.

If the 76 rooms in the Stradey Park were valued at the lower-end price of £59,950, they would have a combined valuation of £4.556 million, over three-quarters of a million £s more than the advertised price for the whole hotel in 2018.

The actual room prices go up to £140,000, according to Lujo Investments Ltd, surely requiring extraordinary successful performance to give investors the flagged returns.

Gryphon Leisure Ltd, an experienced and resilient hotelier company owned by Alison Roxana Anderson, Angela Saunders and Barry Saunders, all in their 60s, had shareholders’ funds of £2.026 million at January 31st 2019. There were secured debts, but confined to £212,224 in bank overdrafts and £213,092 in bank loans.

Northern Powerhouse Developments failure shocked investors

The Stradey Park sale offer has similarities with the promises made by Northern Powerhouse Developments (NPD) to investors in rooms in a rapidly-acquired portfolio of hotels throughout England and Wales. Northern Powerhouse Developments, built up by Gavin Lee Woodhouse, is now in administration and investors may not recover more than a few pennies in every pound. Some 25 associated companies, including those owning and operating around 10 hotels   – including the Fourcroft in Tenby and the Fishguard Bay, Goodwick, both in Pembrokeshire, and the embryonic Afan Valley Adventure Resort in Neath Port Talbot – owe Northern Powerhouse Developments £12.663 million, according to figures compiled by Duff & Phelps, the multinational administrators of much of the mirage that was the NPD property empire. The costs incurred by the administrators, averaging £306.97 per hour, also eat into any surviving funds.

PDR

Investors Fleeced in Financial Wild West

Lack of protection for individuals investing in new hotels and holiday resorts is a serious problem, emerging from a financial Wild West where it is unwise to rely on any law at all. Often investors are at the bottom of the pecking order and receive little, if anything, after everyone above them has taken a cut.

West Wales News Review has reported several times on the plight of investors in The Corran Resort and Spa, Laugharne, Carmarthenshire (here, here, here and here for example), who lost some £17 million net, and also on hotel investments in Wales sold by Northern Powerhouse Developments (here), including unbuilt properties in the Afan Valley where the site did not even have planning permission (here).

In many hotel investment schemes, people can purchase what they think is a fraction of a room or apartment.

Some key persons in The Corran saga appear in other complex fractional deals sold to private investors. One is David Bates, chartered accountant of Heswall, Wirral, Merseyside. Hundreds of fractional investment property companies were registered to Mr Bates’ address until this year, when there was a sudden, mass switch to Milestone House, Nursery Court, Kibworth Harcourt, Leicestershire, an address of tax consultant David Warren Hannah, founder of Cornerstone Tax Ltd.

David Bates is, according to Companies House, a director of only two companies currently instead of around 1,570 previously. That large number of mainly fractional property companies included Dunas Beach Apartment 107 Ltd.

Dunas Beach is a resort on Sal island in Cape Verde, an independent group of islands in the Atlantic just over 300 miles west of Senegal. Andrew Walton, who has contacted West Wales News Review, had thought his July 2011 investment in Dunas Beach Apartment 107 Ltd had purchased one-eighth of an apartment. The purchase was off plan as at that time the resort had not been built.

But Dunas Beach Apartment 107 Ltd seems to own nothing at all. The last published accounts, dated April 30th 2017, show it has no value and no assets. Neither does it have shares, therefore investors cannot own shares in it and cannot receive dividends. The company is limited by guarantee, a legal form generally adopted by non-for-profit organisations. If the company fails, its members are required to contribute only a pre-determined amount.

Companies House lists the controller of Dunas Beach Apartment 107 Ltd as Robert Jarrett. He is the founder of The Resort Group plc, a British man with a home in Gibraltar, where The Resort Group is registered. He founded the company in 2007 and on Sal bought land for two beach resorts, Tortuga and Dunas. The Dunas Beach resort opened in 2014, managed by Melia Hotels International.

Mr Walton says he was told verbally he would receive between 5% and 7% annually on his investment of £21,179.11, so between £1,059 and £1,482. Over seven years that would be between £7,413 and £10,374. A return of 5% to 7% would be excellent in today’s climate, but not so high as to flag up, automatically, a ‘too good to be true’ warning.

The reality is somewhat different, though  –  a loss of just on £1,045.

His investment is a SIPP, a self-invested personal pension. He was alerted to the possibilities of a SIPP investment in commercial property by Consumer Money Matters Ltd. This firm introduced him to Real SIPP LLC, owned by CIB (Life & Pensions) Ltd. Real SIPP sold him one eighth of what he thought was a hotel room, but which turned out to be membership of a company without any assets.

Consumer Money Matters went into administration in October 2015. Real SIPP was dissolved in September 2017 and CIB (Life and Pensions) in February 2018. Rowanmoor, part of the Embark Group, took over administration of Real SIPP’s portfolio, including Andrew Walton’s pension.

The gross ‘room revenue’ from Mr Walton’s ‘apartment’ has Melia’s operational costs deducted. Rowanmoor charges fees, and The Resort Group takes a cut. Dunas Beach Apartment 107 Ltd also charges a fee (although it does not appear to have any turnover at all).

The investor is right at the end of the line and in Mr Walton’s case, he is paying out instead of receiving any income.

He is not alone. The magazine FT Adviser reported on June 28th 2018 (‘Offshore investor returns eaten up by Sipp fees’) on the plight of a number of investors in property built for The Resort Group. They are making losses and unable to get their money back or sell their investment. Even if a marketplace in membership of fractional companies were established, a queue of buyers is unlikely.

Fractional property investments are not regulated, so it is definitely Buyer Beware. Investors may qualify for a portion of net income from ‘their fraction’ of a room, apartment or villa, but do not own any physical asset at all. They are probably presented with figures, but it is pretty much impossible for them to know if those figures are genuine.

In Mr Walton’s case, the fees charged by Rowanmoor are greater than the net revenue apparently due to him, so his pension investment has lost money and he does not know if he can ever recover his capital.

Comments on Trip Adviser indicate that the Dunas Beach resort is far from crowded. Reassuring noises from The Resort Group suggest they expect room occupancy rates and therefore income to increase, but they may be over-optimistic about the attractions of holidaying on a small island known for salt pans and moon-like scenery. Holidaymakers go for the beaches and sun – there’s not a great range of activities on Sal, which is less than 19 miles long and is under eight miles at its widest point.

Investors like Mr Walton, who were persuaded to put pension money into unregulated products divorced from actual assets, have a case to claim mis-selling. He contacted the Pensions Ombudsman in December 2016, and some months later was told an adjudicator would investigate. That adjudicator went on sick leave and by February 2018 had left, so Mr Walton had to start all over again, with no result yet.

As at The Corran, investors in Dunas Beach and hundreds of other fractional investments are confronted by opaque, obscure arrangements which appear deliberately designed to prevent oversight of investment performance.

Investing in fractions of other people’s holidays seems a very good way to ensure you won’t be able to afford a whole holiday yourself!

UPDATE

Investors who have lost money in pension transfers into unregulated ‘products’ are raising funds to engage a firm of private investigators.

Cashless Society Damages Local Trade

Llansawel Market is this Saturday, July 21st, in the village hall from 10am to noon. The third Saturday of the month is always market time in this North Carmarthenshire village, more or less in the centre of a triangle with Lampeter, Llandovery and Llandeilo at the corners.

One modern development does not help it at all, though – the cashless society.

The nearest cashpoint is a good ten miles away, at the Co-op supermarket in Llandeilo. We rely increasingly on Co-op supermarkets to provide this rural area with cash, from the cashpoints in Llandeilo, Llandovery and Lampeter, and from the tills as ‘cashback’. These small but historic towns have suffered the withdrawal of banking services. HSBC, Lloyds and NatWest closed in Llandeilo and Llandovery. In both, Barclays is the only bank left in town, four days a week in Llandeilo and three days in Llandovery. The university town of Lampeter has lost NatWest, another blow for rural areas delivered by parent company Royal Bank of Scotland, which since 2008 has been bailed out by taxpayers to the tune of some £45 billion.

Getting hold of your cash is not at all easy, especially if you do not have your own transport. Closer to home than Llandeilo, the friendly Post Office in the National Trust village of Cwmdu, six miles away and open in the mornings Tuesday to Saturday, is an extremely valuable community asset, and so is the Post Office van at Llansawel village hall for an hour (2.15-3.15) on Monday afternoons. What we don’t have is a free-to-use cashpoint available round the clock.

Llansawel Village Hall, home of the village market — which runs on cash

Stallholders at the market take cash. Customers need cash. The market sells local products – such as cheeses, fruit and vegetables, beef, eggs, baked goods, confectionery, plants, crafts – so is an outlet for nearby enterprises, delivering the short supply chains which the EU has been encouraging. Small-scale producers who sell at markets and fairs benefit the rural economy and are helping to keep villages viable. Yet their need for customers with cash to spend is largely ignored by the big banks.

We are not talking about shoppers carrying wads of £20 notes, just modest amounts of cash for buying from small traders and also for donating to charity collectors. Homeless and recently homeless sellers of the Big Issue magazine, for example, depend on passers-by stumping up £2.50 for a copy. A debit card is no use for buying the Big Issue.

The scarcity of cashpoints in the countryside is itself a big issue, needing government and banks to get together to work out how to prevent rural regions from descending into financial deserts.

 

PDR

Risky Deals? Landmark Welsh Hotels Sold Room by Room to Investors

Tenby’s prominent Fourcroft Hotel , looking out to sea from above North Beach, changed hands earlier this year and had its name altered to the Carmarthen Bay Hotel. The Osborne family, after operating the hotel for more than 70 years, sold to Northern Powerhouse Developments for an undisclosed sum.

Tenby’s Fourcroft Hotel, renamed the Carmarthen Bay, has a prime location overlooking the sea. Photo: Google

What’s the story? It’s not a traditional purchase, one hospitality firm buying a going concern hotel from another. Northern Powerhouse Developments is very different. It acquires hotels and sells individual rooms to investors on long leases such as 125 years. A sister company like Giant Hospitality Ltd leases each room back for 10 years, typically, and promises to pay specific rental amounts to each investor.

Room-by-room investments are now widely marketed in the UK. A brand called Emerging Developments, for example, advertised investments in the Fourcroft like this:

  • “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”

Booking a room at the Fourcroft/ Carmarthen Bay cost from £101 a night on Trip Adviser in October 2017, but anyone who invested £60,000 in the room would expect £6,000 a year for ten years plus £75,000 buy-back — working out at £13,500 a year. The funding model, based on avoiding bank loans, means there may be no bank interest. This increases the profit potentially available to pay investors.  If the hotel is so brilliant that it can charge top room rates, yes there could be more profit – but top hotels are labour-intensive and have correspondingly higher salary costs.

How safe is this type of sale and leaseback  ‘alternative investment’? It depends on the success of the hotel, but the promised returns require business to be booming. All the time.

The sale of hotel rooms is unregulated, so investors take all the risk.

Northern Powerhouse also acquired, in 2016, Caer Rhun Hall in the Conwy Valley of north Wales, and set about selling the 23 planned bedrooms, and then 42 rooms in an annexe and 6 in a cottage.  The hall was an accountancy school and also a wedding venue. Conwy Borough Council agreed change of use to a country house hotel on August 9 2017. Of course, it would have been tough on investors if the council had refused.

Investors are told in a marketing brochure from Select Portfolio, a firm of agents:  “Offering a choice of single, double/twin and premium accommodation, the hotel delivers an annual rental income of circa 10% net of the purchase price for 10 years, with 2 weeks personal use included each year and units starting from £75,000, ranging up to £180,000.”

Northern Powerhouse is also behind the Afan Valley Adventure Resort at Caerau, Cymmer, north of Maesteg,  and Select Portfolio sells lodges there. The four-bedroom ‘lodge 20’ is £249,000 and ‘lodge 33’, also four bedrooms, is £259,000. That’s a great deal more than a timber lodge would cost from the manufacturers – probably between three and four times more, for a lodge constructed and insulated well enough for year-round occupation.

The concept is a form of crowd funding. Investors’ money pays for building conversion and new development, on the promise of receiving operating income for the next decade or so. But if the hotels and resorts are not popular, there may not be enough income to pay to investors.

This is a sales proposition for Caer Rhun Hall: instead of paying £111,000 for a premium double room (including £1,000 reservation  fee), pay £87,000 and go without income for two years. The target income for the next eight years is £88,000, and then Northern Powerhouse would buy it back for the full purchase price plus 25%, £137,500. In a typical scenario, it is hard to see how one room can generate, reliably, a surplus of £11,000 a year (especially as the investor has the right to use it for up to two weeks a year). And then there’s the commitment to buy it back for 25% more than the purchase price.

Given a  typical hotel occupancy rate of 75%-80%, the room would be occupied for 274 to 292 nights. Trip Adviser on October 23 had a double room – not necessarily an official premium room –at Caer Rhun available for £68, which times 274 is £18,632 and times 292 is £19,856. This is not profit, of course. At 7%, the net profit could be £1,304 to £1,390, at 15% £2,795 to £2,978. Respectable, but not sufficient to pay giddy amounts to investors.

Northern Powerhouse Developments currently has a portfolio of six hotels in England, and seven in Wales. The Wales collection is:

  • Afan Valley Adventure Resort, Caerau, Cymmer
  • Belmont, Llandudno
  • Caer Rhun Hall, Conwy (to be joined by a large annexe, and lodges)
  • Fishguard Bay Hotel, Goodwick
  • Fourcroft Hotel, Tenby (Carmarthen Bay Hotel)
  • Llandudno Bay Hotel, Llandudno
  • The Queens Hotel, Llandudno

The three Llandudno hotels, the Fishguard Bay and the Fourcroft/Carmarthen Bay, and Caer Rhun Hall are all trading. The Afan Valley Adventure Resort, and the annexe and lodges at Caer Rhun, are in development.

On its website, Northern Powerhouse Developments explains its funding formula:

“The group is funded utilising a tailored funding mechanism known as sale and lease back. The business operates an op co (operational company) prop co (property company) business model. In its most simplistic form the prop co provides individuals the opportunity to buy a room in the hotel and then rent the hotel room back to the hotel operator. This is an alternative to the residential buy-to-let market.

We sell our properties through a global network of sales agents who offer private and institutional buyers the opportunity to buy individual rooms, multiple rooms or whole developments within a given project.

Our team welcomes enquiries from agents, Financial Advisors, Fund managers, UK and overseas estate agents, wealth coaches or property networks.”

Targeting buy-to-let investors is logical because of ex-Chancellor George Osborne’s fiscal attack on buy-to-let landlords, whom he appeared to blame for removing homes from the reach of first-time buyers. From April 2016 there has been a 3% stamp duty surcharge on properties bought to let out. By 2020 landlords will not be able to count any mortgage interest as a business cost. April 2020 is also the time when all privately rented homes must have an Energy Performance Certificate rating of E or better.

George Osborne’s actions to discourage buy-to-let investment have led to savings looking for investment options. Student accommodation, hotel suites, and rooms in care homes are all now marketed as investment opportunities. In these cases, and unlike whole freehold properties, there is no established resale market.

Northern Powerhouse’s model is a form of fractional investment. Not fractions of rooms, as so disastrously at The Corran, Laugharne, but fractions of hotels. Does Northern Powerhouse Developments have a track record to inspire confidence?

Not yet. The company was incorporated on January 7 2016, and is controlled by Mr Gavin Lee Woodhouse, born in March 1978 and so currently aged 39. He also controls Northern Powerhouse Developments (Holdings) Ltd, incorporated on September 30 2016, and several other companies recently formed, none of which have had time to establish a track record.

Northern Powerhouse Developments Ltd’s first accounts, for January 7 2016 to March 31 2017, are available, and show that the company lost £171,635. In addition, although it is owed £3,717,663 by 13 other companies controlled by Mr Woodhouse, it itself owes £4,663,866 to 11 other companies in the expansive Woodhouse portfolio.

We asked both Northern Powerhouse Developments, and Select Portfolio, a firm in Dorset selling the rooms to the public, about their policies for warning novice investors about the risks involved, but have not received replies.

The team assembled to build the business is large and impressive. The operational board of six, chaired by Gavin Woodhouse,  includes corporate banker Andrew Kitchingman; the former managing director of Center Parcs, Peter Moore OBE; and Richard Lewis, former CEO of Landmark Hotels in Dubai. If all these business heavyweights have confidence in the funding model, why question it? It could be that super-rich international investors will be attracted to the idea of buying up established hotels in not-particularly-fashionable locations (that’s one of Northern Powerhouse’s key concepts) and building activity-focused resorts (there is a tie-up with the Bear Grylls Survival Academy for the Afan resort plans).

But medium-scale investors with tens of thousands of £s in search of reliable returns, and not £ millions, please be very careful.

From Laugharne to the Algarve — Fractional Ownership: Timeshare Misfortune Reborn?

Bill Peters hoped that owning half of an apartment in the Portuguese Algarve would be his route to sun-filled worry-free holidays.

Instead, his purchase has created a labyrinthine quagmire of confusion.

The labyrinth extends far beyond Portugal to England, Guernsey and the British Virgin Islands. Guernsey and the British Virgin Islands (BVI) are both tax havens offering secrecy, and the BVI especially are a popular place for money to be obscured. Details are occasionally leaked, as in the Panama Papers, offering a tantalising glimpse of who keeps assets hidden from tax authorities.

The Panama Papers show that companies involved in Bill Peters’ property purchase are sequestered in the British Virgin Islands, a territory in the Caribbean scoured and scarred by hurricanes Irma and Maria in September 2017.

Bill, who lives on Merseyside, would like to unravel the tortuous web of companies which, he believes, are keeping him in the dark about his property rights, while sending out bills for he knows not what.

In May 2015 he signed a purchase and sale agreement for two quarter shares of Apartment 2A, Block 37, Plot F, Várzea da Luz. The seller was William Hurley of Chillenden, Kent. Bill Peters paid €90,000 and looked forward to holidaying on the Algarve.

What exactly did Bill Peters buy? According to purchase and sale agreement, it was shares 3 and 4 in a company called Isaura Properties Ltd.

Isaura Properties was then registered at 208a Telegraph Road, Heswall, Wirral, but is now at PO Box 5, Willow House, Oldfield Road, Heswall, Wirral. This address, a private house barely visible behind high walls and stout gates in a quiet road, is the home of an accountant called David Leslie Bates. Mr Bates has featured on West Wales News Review before, in an administrative connection with The Corran Resort and Spa, Laugharne: https://westwalesnewsreview.wordpress.com/2017/01/27/sunk-investments-drown-in-carmarthenshire-marsh/. Investors lost £17 million in the venture.

The house in Oldfield Road, Heswall, the unlikely headquarters of a fractional property business empire. Photo: Google

The purchase and sale agreement states that Isaura Properties is the legal owner of Apartment 2A. This company is non-trading and has no assets, according to records at Companies House. The directors are Fractional Secretaries Ltd, David Leslie Bates, Julia Rachel Day, and Lucy Ann Whitfield, all at PO Box 5, Willow House. Previous directors include Nicholas Robert Hannah of La Hougette House, Route des Deslisles, Castel, Guernsey, and three more ‘Fractional’ companies – Fractional Administration Services Ltd, Fractional Administration Solutions Ltd and Fractional Nominees Ltd.

Nicholas Robert Hannah was fined £35,000 by the Guernsey Financial Services Commission in November 2016, and barred from directorships for five years, because he made false statements and was negligent in the management of Guernsey-registered Marlborough Trust Company Ltd. Fellow director Adrian Bradley Howe received the same penalty, and Marlborough Trust Company was fined £100,000. The Marlborough Trust Company 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.

Carbon credit and wine scams

Marlborough Trust Company appears to operate on the wilder margins of the investment world, and features in a report by the UK Government’s Insolvency Service in November 2015. After investigation by the Insolvency Service, the High Court ordered the liquidation of eight interlinked companies which had been operating scams selling carbon credits called carbon benefit units, and wines. Marlborough Trust Company, and sister company Marlborough Nominees Ltd, were directors of two of the eight companies, Consolidated Carbon Projects Ltd and WK Investments Holdings Ltd, both registered in the British Virgin Islands.

The Insolvency Service reported[1] that “Marlborough Trust Company Ltd based in Guernsey made various representations as to the position of Consolidated Carbon Projects Ltd and WK Investments Holdings Ltd and requested the petitions against these two companies be withdrawn by the Secretary of State“. Who represented Marlborough Trust at the (unsuccessful) petition hearings?

The Insolvency Service said: “David Bates of Marlborough Trust was present at the hearing of the petitions.”

As for Isaura Properties Ltd, this is a company limited by guarantee and has no shareholders. It seems to fit the Oxford Dictionaries’ definition of a shell company, “an inactive company used as a vehicle for various financial manoeuvres or kept dormant for future use in some other capacity”.

So where did Bill Peters’ €90,000 go? William Hurley says he received just over €75,000, but that leaves nearly €15,000 footloose. “William Hurley told me that some went to estate agents in Portugal, Casas do Barlavento at Lagos; some to lawyers; and €2,000 to ‘fractional owner’,” said Bill Peters. Could that have been Fractional Administration Services Ltd, at that time still a director of Isaura Properties? (It is legal for companies to be directors of other companies, but not transparent or, one suspects, conducive to good management.)

Bill Peters made his purchase despite not receiving clear answers from his lawyer in Portugal, Cristina Marcelino, to questions such as “Is there any debt or lien associated with the property?” A lien is a right to keep property belonging to someone else who owes them money, until the debt is paid.

He learnt this year, from Mr David Bates (as a director of Fractional Administration Services Ltd), that there was at least one debt relating to his fractions of the apartment, £945 in administration fees.

Although Bill Peters bought what he thought was a half share in the apartment back in 2015, the details were apparently not transmitted to the Fractional Ownership Consultancy Ltd (FOC), registered on Tortola in the British Virgin Islands. On August 8 2017 FOC sent, from its office in Guernsey, a bill for £1,195 to Mr William Hurley, the previous ‘owner’, as his portion of moneys due to FOC from Isaura Properties Ltd in 2016, 2017 and 2018. Isaura Properties Ltd is the dormant company which is the legal owner of Apartment 2A. The money was to be paid into Barclays Bank in Ellesmere Port, Cheshire.

Why is FOC demanding money for Apartment 2A? The ‘owner’ of another Algarve property received a document from FOC headed Oceanico – Members FAQ, which indicates the answer.

The background of Oceanico Group is that it acquired land in Portugal and other tourist venues to build resorts with a focus on golf. Apartment 2A is part of an Oceanico development. The Portugal-registered group was created in 2006 by Gerry Fagan from Drogheda, Ireland and Simon Burgess from the UK. At the time Simon Burgess, who had been based in Northwich, Cheshire, was serving a five-year disqualification from holding directorships in the UK, running from February 2003 until February 2008, according to the Irish Independent.[2] Oceanico had troubles from the beginning, selling properties and taking in deposits before it had planning permission.[3], [4]

Banking collapse

Oceanico’s irrepressible (some would say irresponsible) optimism was dashed against the rocks of bank failure in 2008. Anglo-Irish Bank, to which Oceanico was heavily indebted, failed and was nationalised by the Irish Government. The Oceanico loans were passed to Ireland’s National Asset Management Agency, which in 2015 instructed prestige estate agents Savills to sell Oceanico’s Portuguese portfolio.

The background of banking collapse makes it more likely that companies with interests in the distressed real estate would seek to recoup losses in any way possible. This brings us back to the FAQ document from the Fractional Ownership Consultancy, which said that it is:

“the owner and operator of the fractional system used by Oceanico. FOC is based in Guernsey,[5] so it has arranged for all the UK work to be carried out by SMD & Co under a contractual arrangement. This is because the UK companies used in the fractional system are required to have a UK registered office, directors and secretaries which SMD provides from its office in Heswall, Wirral.”

The document continued: “SMD & Co is paid for its services by FOC, and FOC recover those costs through the contractual arrangements with Oceanico, and, ultimately, the fractional owners.”

“SMD & Co is owned, controlled and managed by David Bates, a chartered accountant (ICAEW 7600847) and chartered tax adviser (CIOT 135624). David is also a minority shareholder in FOC, having been involved with that business since its commencement.”

So FOC owns the fractional sale system, which employs companies limited by guarantee (without shares or shareholders) as the legal owners of the properties in which fractional interests have been sold. In Bill Peters’ case, this is Isaura Properties Ltd.

For Isaura, the company secretary is Fractional Secretaries Ltd, but SMD Secretaries Ltd is the company secretary for Fractional Secretaries Ltd. These companies are so similar! David Bates is secretary and director of SMD Secretaries Ltd and a director of Fractional Secretaries Ltd. Julia Day and Lucy Whitfield are directors of both.

Several connections between the Fractional Ownership Consultancy and the Marlborough Trust Company (whose motto could well be ‘wing it and pray’) include David Bates – as a shareholder in FOC, and representative of Marlborough Trust petitioning against the compulsory winding up of Consolidated Carbon Projects Ltd and WK Investments Holdings Ltd, for both of which Marlborough Trust Company was a director. Marlborough Trust Company itself, and Nicholas Hannah, are both among former directors of the FOC.

No wonder Bill Peters cannot find out exactly what he owns, who is entitled to charge him, and for what. It appears that he does not have many rights at all. His fractions of Apartment 2A are dispensed by legal owner Isaura Properties Ltd, which wrote for itself Articles and Memorandum of Association greatly in favour of itself, not the fraction holders – who are not directors of the company. The directors on incorporation in 2006 were Fractional Administration Services Ltd and Fractional Nominees Ltd, and the secretary was, as now, Fractional Secretaries Ltd, all at Mr Bates’ Post Office Box address in Heswall.

The directors can suspend or vary the rights of fraction-holding members for multiple reasons including not paying money when it is demanded, and for behaviour which directors think is detrimental to the company or the property. A fraction-holder whose rights are suspended “shall continue to be liable for all the obligations attaching to membership (unless they have been cancelled).”[6]

The company’s ‘founder member’ is important, too. This was Oceanico Stepping Stones Ltd, registered at the Heswall PO Box address. The founder member and all other members have to approve any transfer of ownership, including the price to be paid, and the founder member can veto the sale – so Bill Peters has purchased something he might not be able to resell. And who are the directors of Oceanico Stepping Stones? Fractional Secretaries Ltd, David Bates, Julia Day and Lucy Whitfield.

Beware removal of rights

It is feasible to argue that it is in Oceanico Stepping Stones’ interests, as the powerful founder member, for other members to be confused over the correct procedures for registering their interests, because the founder member can then make a case for removing their rights.  William Hurley’s lawyer in Portugal, Justin Ryan, emailed David Bates on August 30 2017 to say “In my opinion, if the buyers [William Peters] want to register their ownership then they need to deal with you.” Mr Bates did not answer this question but wrote: “I don’t want to upset anyone, but it is not our position to agree who pays the fees. If you have agreed the buyers pay, that is fine, but they do need to be paid otherwise they remain the obligation of Mr Hurley.” So what is the procedure for registering a new member of Isaura Properties? If anyone should know, it is surely the directors of Isaura Properties itself, including David Bates.

Buying a fraction of Isaura Properties has not been, for Bill Peters, a passport to trouble-free holidays. He might have expected his purchase to be protected under the European Union Timeshare Directive, introduced across the EU by February 23 2011 as a response to timeshare misselling scandals. (See, for example this article, ‘Timeshare horrors: fresh hope for 100,000 people locked into costly contracts’, by Kate Palmer, in The Telegraph online, May 30 2015.)

The status of fractional ownership remains a grey area, but buying a right to use an apartment or villa for a portion of every year is much more like timeshare than joint ownership of a property. The Resort Development Association advised back in 2010 that members should behave as if the directive definitely applies to fractional sales. The rules are nothing difficult, principally an obligation for full disclosure in marketing and sales, a ‘cooling off’ period of 14 days after a purchase agreement is signed, and a bar on any money changing hands during the cooling off period.

Bill Peters says: “I was not given information about any debts on the property, or any regular payments due, even though I asked specifically.”

We asked David Bates whether, in his opinion, fractional ownership is covered by the EU timeshare directive, including the requirement for full disclosure. We also asked for his take on advantages and drawbacks of fractional investments. As yet, we have not received a reply.

The fractional saga, which cost investors in The Corran, Laugharne, so many £ millions, appears a tale of mystery enveloped in mist – but buyers can start to penetrate the fog:

  • by searching out and reading all the small print
  • by not signing anything until all their questions have been answered satisfactorily, with documentary proof, and
  • by avoiding solicitors recommended by vendors and choosing one with a high reputation to uphold

Bill Peters relied on a lawyer in Portugal recommended by the estate agents selling the fractions of apartment 2A, but feels he was fobbed off with sparse, incomplete answers.

And he still doesn’t know exactly what it is he bought.

 

[1] ‘8 companies involved in multi million pound international carbon credit and wine investment scam ordered to close’, press release from the Insolvency Service, November 27 2015.

[2] ‘Oceanico defends its director barred in UK’ by Charlie Weston, July 7 2006.

[3] Article by Charlie Weston, as above.

[4] This happened at The Corran too.

[5] But registered in the British Virgin Islands.

[6] Articles and Memorandum or Association section 12.2(e).

Fraud Inaction

“Misunderstanding the role of Action Fraud appears to be rife” – inspectors

Fraud appears to be flourishing. Sophisticated criminals know that their chances of conviction are slim, and they are helped by failings in the police service – failings to which Her Majesty’s Inspectorate of Constabulary (HMIC) has tried to draw attention.

The investment minefield that is fractional ‘ownership’ of hotel rooms, student flats and other accommodation came to West Wales News Review’s attention during investigations into the fate of close on £20 million paid to Kayboo Ltd for leases at The Corran Resort and Spa,  Laugharne, Carmarthenshire.

No authority seemed at all interested in investigating the fate of monies, including pension savings, which investors entrusted to Kayboo, a company now in liquidation. Investors looked to Action Fraud, a branch of the City of London Police, but Action Fraud opted for total inaction.

HMIC has sharply criticised Action Fraud. In ‘Real lives, real crimes: A study of digital crime and policing’, published in December 2015, the inspectors write (chapter 9, paragraphs 9.16-9.25):

  • During our study, we found very few police officers and staff who understood either their own roles and responsibilities or those of their force in relation to the investigation of fraud. In particular there was a lack of knowledge, at all ranks, regarding the functions of Action Fraud and the National Fraud Intelligence Bureau.
  • “Consequently, the advice and support which the police should provide to the victims of such crime are poor. For example, on two occasions, in two separate forces, we were told by neighbourhood policing officers that they didn’t understand the process and they would advise victims who reported frauds to call 101.
  • “Misunderstanding the role of Action Fraud appears to be rife.
  • “We conducted a group discussion in one force with call handlers and enquiry desk staff who commented that they would:
    • “refer the victim direct to Action Fraud”;
    • “deploy a police officer to take a crime report from the victim”;
    • “transfer the victim to the criminal investigation department”;
    • “make an appointment for a police community support officer to speak to the victim”; and
    • “transfer the victim to the force economic crime unit”.
  • “This clear lack of understanding among many who come into contact with victims about the right procedure to adopt was consistent across most police forces which helped us in our study, both at tactical and strategic levels.
  • “Yet, all the forces which we visited had a nominated officer, at either detective sergeant or detective inspector level, to receive and manage those cases referred to the force from the National Fraud Intelligence Bureau. He or she was responsible for the case management of the investigations and was fully aware of the way in which fraud cases should be reported to Action Fraud and of the response that could be expected from the bureau. However, it appeared that these officers did not carry sufficient weight to ensure that the remainder of police officers and staff in their forces were equally well informed.
  • “When we spoke to chief officers about National Fraud Intelligence Bureau referrals, they invariably directed us to those specialist middle-ranking officers. In all but one force, there was an absence of strategic leadership and direction, which resulted in a lack of performance management and priority setting in relation to the reporting and investigation of fraud.
  • “The numbers of crimes reported to Action Fraud annually have more than doubled since 2013. Despite this, fewer than 50 percent of forces regularly assess the impact of fraud in their strategic risk assessments. (See: National Fraud Capability Survey”, national police coordinator for economic crime, March 2015, page 10.)
  • “We are aware that the National Police Co-ordinator for Economic Crime wrote to every chief constable in March 2015 highlighting best practice. In his letter, he stressed that the entire process needed to be “owned by an accountable chief officer”. He asked that every force notify him of its nominated chief officer.
  • “By August 2015, he had received only 14 responses out of a possible 43.”

Reporting fraud to Action Fraud is difficult, and pointless if no one investigates. And how can you properly report complex fraud via an online form or a call centre?

One-stop fraud reporting may have appeared a brilliant labour-saving idea, but it doesn’t work.

Who benefits? The fraudsters!

Action Fraud Didn’t Answer the Phone

Investors in The Corran Resort and Spa, Laugharne, have lost almost £20 million due to opaque and unethical business practices, such as buying non-existent property on land the vendor did not own, and they feel their plight is not recognised and is not being investigated.

The Financial Conduct Authority had a look at Kayboo, the former owner of some of the property at the hotel site near Laugharne, but investors tell me they are unaware of any findings. They are in the dark.

I have tried to ask for an investigation myself, but  without success. Dyfed Powys Police seemed a good starting point, but their website has firm instructions to contact Action Fraud.

That’s easier said than done. I wanted to speak to a person who could give me further directions, not complete an online form that might drop into an abyss, and rang 0300 123 2040, the phone number prominently featured on the Action Fraud website. I phoned three times, and each time got a recorded message “we apologise for not being able to answer your call”, followed by swift disconnection.

So I tried online chat, and after six minutes an agent called ‘Shannon’ asked me to state the issue. After a couple of lines of typing, a message flashed up, “Too many characters, try again”. How do you state a complex problem in a Twitter-length message? I split the message in two, and Shannon typed back to say I should ring the telephone number!

Circles, mazes, no way forward. Investors had already told me that Action Fraud didn’t seem concerned.

I’ll try again, but maybe dodgy dealings and fraud are so entrenched in our financial system that there is no realistic hope of rooting them out.

What a sad state of affairs.

PDR

We have reported on The Corran several times, e.g. https://westwalesnewsreview.wordpress.com/2017/03/11/financial-conduct-authority-has-investigated-corran-company/https://westwalesnewsreview.wordpress.com/2017/02/26/beware-opaque-investments/https://westwalesnewsreview.wordpress.com/2017/02/19/corrans-tangled-webintentional-misrepresentation/https://westwalesnewsreview.wordpress.com/2017/01/27/sunk-investments-drown-in-carmarthenshire-marsh/

Financial Conduct Authority has Investigated Corran Company

Down on the marshes at The Corran Resort and Spa, Laugharne, at the development into which investors – including pension savers — poured over £19 million and lost nearly all of it, the hotel management are advertising multiple job vacancies, for a receptionist, therapists, housekeeping supervisor, spa cleaner, and food and beverage team members.

The recruitment boom comes after the Financial Conduct Authority has investigated former owner Kayboo Ltd.

Keith Stiles, a director of the insolvent Kayboo, bought the hotel through his new company Glendore Real Estate Ltd for £150,000 in a pre-pack deal just before Kayboo went into administration.

The administrators, HBG Corporate, took over on October 18th 2016 but are now seeking creditors’ permission transfer the steaming hot potato to Robert Dymond and Lisa Hogg of Wilson Field Ltd of Sheffield, for a creditors’ voluntary liquidation.

Liquidation has been held up since November, while the Financial Conduct Authority investigated “various matters surrounding the company”. The results of their investigations have not been revealed.

Not that there is much left to liquidate. The administrators say that “For the period 12 November 2016 to 8 March 2017, the Joint Administrators have received £33 of interest into the estate bank account, held for the benefit of the creditors.”

HBG Corporate clocked up £47,975 in fees — £17,000 of which have been paid — and £33,753.31 in disbursements, totalling £81,728.31. Administering a bust company is an expensive business.

For previous history see, for example, here, here, and here

Beware Opaque Investments

Too many cooks spoil the broth. Too many companies in the mix may damage your investment.

We are in an era of low returns, but people saving and investing for pensions want – need — to generate more than 1% or 2% a year, and The Corran hotel scheme at Laugharne, ostensibly offering leases of hotel rooms, or of fractions of hotel rooms, appeared to offer just what they required.

Rowanmoor Trustees Ltd, trustee of The Rowanmoor Pensions Self-Invested Personal Pension Scheme, approved investments in The Corran for pension clients. One of those clients showed me a copy of his ‘Agreement for Sale of Membership of a Company’. Not ‘for sale of a lease’, note.

The agreement was between the ‘Founder Member’, Kayboo Ltd, the company owning some of the property shown in marketing materials for the scheme, and Rowanmoor Trustees Ltd.

Kayboo “wishes to procure the admission of the Purchaser (the pension client) to membership of the Company…”  The ‘Company’ is Hurst House Fractional K Ltd, one of the fractional ownership companies set up to hold the leases. Hurst House is the former name of The Corran.

“The Company has/shall enter into a 999 year lease (“the Term”) granted in accordance with the laws of England and Wales… The Lease entitles the Company to 365 days usage of the Property in each year,” said the agreement.

Further on, the document says “The Company has entered into a lease agreement with the Founder Member.”

Well, that did not apply in most cases because only three leases had been completed when Kayboo and its sister company, hotel management company East Marsh Operational, went into administration in October 2016, four years after the first ‘leases’ were sold to well over 400 investors who paid in some £19.21 million. Around £2.52 million of that was returned to investors – their own capital, not rents from the hotel, according to abbreviated accounts presented to anxious investors in summer 2016.

The complexity of the scheme is clear from the agreement, which describes roles for the ‘Founder Member’ (Kayboo Ltd), the ‘Company’ (in this case Hurst House Fractional K Ltd), the ‘Purchaser’ (the pension client, represented by Rowanmoor Trustees Ltd), and also the ‘Manager’ (East Marsh Operational Company Ltd, supposed to hold a sub-lease from Hurst House Fractional K Ltd).

Rowanmoor Trustees took care to curtail their own liability. The document states that “In the event that the Purchaser is required to provide warranties under the Sub Lease that the liability of Rowanmoor Trustees Ltd shall in all respects be limited to the assets of the Rowanmoor Pensions self invested person pension for the Scheme Member”.

So apart from a risk to its reputation, Rowanmoor Trustees Ltd – Kayboo’s counter party in the agreement – removed liability risk from itself.

Rowanmoor used to market itself as the UK’s largest independent small self-administered scheme provider, but in July 2016 was bought by Embark Group in a private cash transaction. Rowanmoor’s managing director Ian Hammond chose to retire.

A problem for any investor in such an opaque transaction is that no participant will intend to work for nothing. Everyone will seek a slice of the pie, making the advertised returns – varied between sales agents, but around 10% a year for ten years and 12% annually for the next five, and repurchase at 125% of the sale price in years five to 14 and 150% in year 15, even less likely to materialise.

For reasons that are hard to fathom, the administrators – Harbour Business Group – sold The Corran to Glendore Real Estate Ltd, a company of which Keith Stiles, a director of the failed Kayboo, was in January 2017 the sole director. The price? £150,000 – when investors had piled in over £19 million.

The scandal also raises questions about the due diligence – or lack of it – undertaken by pensions providers.

Corran’s Tangled Web:Intentional Misrepresentation?

The strange story of some £16.7 million of lost investments in The Corran Resort and Spa, Laugharne, becomes ever more troubling. Investor Ian Dixon discovered that Kayboo, in administration since October 2016, sold 166 fractions of hotel ‘suites’ on land then owned by EHF Hospitality Ltd and which contained no hotel accommodation.

EHF Hospitality’s property at East House Farm is now with Secured Bridging Finance, the mortgagor. Secured Bridging Finance’s Alan Lister contacted West Wales News Review with the following information:

“Our company, Secured Bridging Finance Ltd (via our company’s wholly owned subsidiary company) owns Barns 3, 4, 5, 6, and 7, East House Farm. From time to time Mr Peter Burnett [director of Kayboo Ltd, East Marsh Operational Company Ltd, Pennaf Premier Group Worldwide Ltd and several other companies] enquired about purchasing our barns, but he failed to follow through.

“Our barns appear from the diagram in your article to be included in the fractional ownership scheme. We were not aware that our barns were included.

“While the five barns continue in our company’s ownership we would not have agreed, had we been asked, to their being included in any such scheme.

“We are concerned that our barns – and perhaps our company – may have been intentionally misrepresented as being under the control of the promoters of the scheme.”

EHF Hospitality’s sole current director is Matthew Roberts, who was declared bankrupt in September 2014. Companies House proposes to strike off EHF Hospitality, which has not submitted any accounts since the year to February 28th 2011. Former directors of EHF Hospitality are County West Secretarial Services Ltd (February 4th 2010 to September 23rd 2013) and Paul Manley, of Newquay, Cornwall, for a single day, February 4th 2010.

Paul Manley was, from February 29th 2016 to October 11th 2016, a director of Glendore Real Estate Ltd, which currently owns The Corran, and of the hotel operating company Plustocks Management Ltd (to October 13th). These two companies have replaced Kayboo Ltd, which owned the hotel, and East Marsh Operational Ltd, which ran it. East Marsh Operational Ltd is, like Kayboo, in administration.

Kayboo and East Marsh Operational Company director Keith Stiles remains a director of Glendore Real Estate and of Plustocks Management.

So round and round we go. Round and round.

Ian Dixon also reports that Kayboo sold 133 fractions of suites on land owned by Paul Manley, and that Malthouse Farm, the intended third phase of The Corran’s expansion, was not owned by Kayboo or by Kayboo director Peter Burnett, contrary to a statement made on the application for planning permission (which Carmarthenshire County Council rejected because of flooding and environmental risks, and which was also rejected on appeal).

Investors thought they were buying 999-year leases on land, and property on it, in many cases for their pensions.

But most of them were buying nothing at all.

The depressing story is far from finished.

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