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West Wales News Review — analysis with a sustainability slant

Archive for the category “Financial services”

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.

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.”

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The Corran Resort and Spa. Photo from marketing promotion

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.

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The Corran from the air: marshland getaway. Photo from marketing promotion

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.

 

Missing Leases

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.

 

Sales Hype

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.”

 

Kayboo’s Offers

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.

 

Troubled History

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.

 

 

Over-ambitious investment promises fail at Laugharne’s Corran Resort

When bank base rate is 0.25%, investments offering up to 15% a year, and an uplift in capital, look too good to be true.

In the case of the Corran Resort and Spa near Laugharne, Carmarthenshire, the promised returns were too hot, and have evaporated into the air above Carmarthen Bay.

Kayboo Ltd, the company owning the freehold of the resort property — currently a 21-room hotel with a spa – was forced into administration on October 18th.  Creditors were kicking up a fuss because, they claimed, they had not received the advertised returns, and they could not withdraw their capital.

Comments from unhappy investors  on the website ‘question.com’ include:

“I invested in a glitzy hotel scheme called Corran Resort and Spa. The hotel is still operating in Wales and hundreds of investors have put money in that scheme. I have been asking for buy back of my investment for more than a month but no reply from them.”

“It is not clear to me where all the funds of the investors went.”

“They were paying quarterly till Q3 2015. Then they stopped and I understand they stopped for everyone.”

During the final quarter of 2015, the Corran had to digest Carmarthenshire County Council’s decision to refuse a planning application (reference W/31936) for 200 lodges, a swimming pool and additional restaurant, because of the proposed location in a flood plan, and fears of significant ecological damage. Kayboo said it had a deal agreed with the US-based resorts, hotels and self-catering multinational Wyndham Worldwide to partner it in the lodges venture – but no permission, no well-heeled partner either, and disappointment for Kayboo’s directors Keith Stiles and Peter Burnett.

West Wales News Review’s previous concerns about the investment model were aired here in December 2015,

Investments in the Corran are still being advertised, for example on buytoletinvest.com and quantaxinternational.com. Buytoletinvest.com advertises annual returns of 10% net from years 1 to 10, and 15% between years 11 and 15, with assured resale at 125% of the original investment after year 5, rising to 150%. The promotion claims “Customers can also sell their property on the open market, typically for far greater capital returns.”

Buyers were offered fractions of a room, such as one-twenty-sixth of a ‘boutique suite’ for £18,000 in 2015, as well as whole suites, but the formula relied on high occupancy at very high room rates, such as £340 a night for dinner, bed and breakfast in a top-notch suite at a weekend.

Kayboo’s most recent annual accounts, for the year to March 31st 2015, show tangible assets of £14.5 million, up from £11.5 million the year before, and net assets of £867,092, more than double the year before. £1.572 million had to be paid to creditors within one year, and £14.167 million more after that — an excessively heavy obligation, especially if the physical assets had been optimistically valued.

The message? Mega returns might occasionally materialise, but they don’t come without mammoth risks.

PDR

Lloyds Bank to close in Llandovery

Lloyds Bank in Llandovery is to close completely on March 7th 2017.

As recently as 2012, Llandovery was home to four banks — Barclays, HSBC, Lloyds and NatWest. One by one, they have fallen victim to online banking.

HSBC, in Market Square, closed in 2012. Nat West, also in Market Square, shut its doors on June 1st 2015. Lloyds and Barclays soldiered on as part-time banks, Barclays open on Mondays, Wednesdays and Fridays, and Lloyds on Tuesdays and Fridays.

Now that Lloyds is to close, a part-time Barclays will be the only bank left in town.

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Lloyds Bank, Llandovery. Photo: Dyfed Family History Society, copyright Pauline Eccles, Creative Commons Licence 

The impending Lloyds closure is of more than commercial significance. The imposing building, Prospect House in High Street, was the final headquarters of the Bank of the Black Ox, the pioneering venture set up by successful drover David Jones in 1799, and taken over by Lloyds Bank in 1909.

Campaign to keep Lloyds open in Llandeilo

Llandeilo’s county councillor, Edward Thomas (Independent), started work at Lloyds in Llandovery in 1971, and regrets the ending of over 200 years of history. He is also worried about the future of Lloyds in Llandeilo, which has cut opening days from five a week to three – Monday, Wednesday and Thursday — and has written to Jonathan Edwards, MP for Carmarthen East and Dinefwr.

The letter raises Cllr Thomas’s concern that “the Llandeilo Branch of Lloyds Bank has only a short amount, two years, left on its lease of 137 Rhosmaen Street” and that there is a strong indication that “with the reduction of hours, reduction of days from five to three, that Lloyds Bank are planning to close this branch”.

“I am sure you will realize that that will leave Lloyds customers in North Carmarthenshire with no coverage and effectively their nearest branches will be Brecon or Ammanford,” continued Cllr Thomas.

“I am concerned that this will leave customers with no choice. The bank no doubt will state that they no longer see the footfall in their branches as customers are switching to internet banking. I am sure you will agree this is just cynical and does not look after older customers who are not happy to deal with a faceless computer and appreciate the good service provided by our local branches.

“I hope you will raise this matter at the highest levels and whilst I am singling out Lloyds, the other banks are doing the same thing and we could be faced with our rural communities without bank representation.”

HSBC has closed in Llandeilo as well as in Llandovery, leaving customers in northern Carmarthenshire facing journeys to branches in Ammanford, Carmarthen or Lampeter. Lloyds customers could soon face the same travel demands.

Mobile Lloyds Bank coming soon

Lloyds says that mobile branches should be in the area soon.

The bank’s spokesperson said that the Llandovery branch “has been identified for closure because of the changing way customers choose to bank with us, which has resulted in customers using it less often.  The majority of customers also now regularly use alternative branches or use other ways to bank such as online and telephone banking to complete their banking needs. We apologise for any inconvenience that this may cause and have informed customers of the closest alternative branches.

“We are also investing in a new fleet of mobile branches for Lloyds Bank to help customers in more rural communities, alongside other ways to access banking locally. One of the new mobile branches will visit Llandovery. Full details of the mobile branch service will be available in advance of the new service becoming operational.”

The bank said that around 80% of personal customers in Llandovery already use other branches, such as Llandeilo branch. In 2015, the number of personal customers using Llandovery branch fell about 36%, leaving only 35 regular weekly personal and business customers.

The Post Office is an option, says Lloyds. In Llandovery it is less than 200 metres away, and customers can deposit cash and cheques and withdraw money there. In addition there is an ATM outside Barclays Bank.

PDR

Glitzy Investment Scheme Sells Rooms In Laugharne’s Corran Resort….. But Is It Too Good To Last?

So, plans for 200 ‘lodges’ on East Marsh, Laugharne, have been rejected by Carmarthenshire’s planning committee (webcast, December 3rd).

The development, a major expansion of The Corran Resort and Spa, looked very tempting to Cllrs Anthony Jones (Labour, Llandybie) and Kevin Madge (Labour, Garnant) and, citing the potential economic benefits, they both urged the committee to approve the plans, against the recommendation of planning officers.

But the majority of members heeded the warnings about flood risk and environmental damage, and turned the application down.

The Corran lies in a C2 flood risk area. ‘C2’ means it lacks any significant flood defence infrastructure.

The hotel, owned by Keith Stiles and Peter Burnett, looks very smart and comfortable, to judge from the promotional material, and Cllr Madge was highly impressed when he attended a function there. The lodges, plus a swimming pool and a restaurant, would surely be super-stylish, but they would be in a high-risk flood area and would also affect an important Site of Special Scientific Interest, Laugharne-Pendine Burrows, where the Golden Plover overwinters. The development would also have changed the landscape of the Taf and Tywi Estuary Registered Historic Landscape of Outstanding Historic Interest.

Mr Stiles and Mr Burnett announced in May that Wyndham Worldwide, a US-based multinational company with annual revenues of around $5 billion, and already big in the UK holiday self-catering business with multiple brands such as Cottages 4 U, would partner them in the lodges venture.

It would have been interesting to see whether the lodges village would have relied on a financial model which is in place for the existing hotel. Rooms in The Corran Resort and Spa are sold to investors through intermediaries, thereby providing funds for expansion. Property investment firms currently selling space in The Corran include Emerging Developments  SL of Marbella, Spain, which is offering one twenty-sixth of a boutique suite for £18,000 (valuing the full suite pro-rata at £468,000), and is promoting 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 is 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.”

Selling investments in rooms and part-rooms, whether in hotels, care homes, or student accommodation, has become big business, fuelled by low returns elsewhere and now by the 3 percentage points stamp duty surcharge on conventional buy-to-let properties, announced by chancellor George Osborne last month in the Autumn Spending Review.

Big business – but risky. Investments in rooms and part-rooms – including investments placed in a self-invested personal pension (SIPP) — are not covered by the Financial Services Compensation Scheme, and should be targeted at experienced, affluent investors who can, in theory, afford to suffer a loss.

The Corran is luxurious and pretty pricey by local standards – it has to be, to pay the returns expected by investors. A top-of-the-range suite is £225 per night for bed and breakfast mid week, £340 per night for dinner, bed and breakfast at a weekend. A double room is £175 a night for a mid-week B&B, £290 at the weekend with the addition of dinner.  A snip for an oligarch – and the presence of a helipad signals that The Corran works to appeal to international guests.

Now that the 200 lodges have been rejected, a question comes to mind: without a stream of new property to sell to investors, how easy will it be for The Corran to deliver the projected returns to those who have already invested?

On a wider scale, are the advertised returns from investments in hotel rooms really possible over the long term?

PDR

 

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