More Bad News for Corran Investors

News: Craze for Selling Hotel Rooms Set to Subside

The cruelly severe virus Covid-19 has, by forcing governments to close hotels, restaurants, indeed all venues where people are likely to be in close proximity, made it a lot harder for over-optimistic entrepreneurs to entice investors to part with savings to purchases leases of hotel rooms.

Investors in The Corran Resort & Spa, Laugharne, Carmarthenshire, are unlikely to receive a penny of their investments back, three years after the failed property company Kayboo Ltd entered liquidation with Lisa Hogg and Robert Dymond of Wilson Field Ltd, Sheffield.

In addition, the liquidators reported his month, May 2020, that one of Kayboo’s two directors has died of Covid-19.

An investor in The Corran has told West Wales News Review that the liquidators are uncertain whether any monies will be recovered. Kayboo Ltd, and its sister company East Marsh Operational Co Ltd, should have stopped trading in 2015, when it was clear that the business was in trouble, but the directors accepted investments of a further £500,000. Large payments were made to third parties, both connected and unconnected, without evidence of work done or services rendered, but given the bankruptcies of a number of these third parties, those payments appear to have disappeared beyond the reach of creditors.

So far, only nine investors have received compensation from the Financial Services Compensation Scheme, probably because their investments were placed in pensions, which are regulated, while non-pension investments in buyer-beware property schemes are unregulated.

The liquidators are dealing with 278 claims from unsecured creditors, totalling £14.429 million. In addition, a further 151 creditors, owed £3.155 million, have not submitted claims.

The debacle at The Corran was just one of several such schemes. Northern Powerhouse Developments sold hotel room investments in Wales and England, including in the  Fourcroft Hotel on the seafront at Tenby, and has been in administration with Duff & Phelps, Manchester, since August 2019. Northern Powerhouse Developments was also behind the ambitious plans for the Afan Valley Adventure Resort in Neath Port Talbot.

More recent still, a small Essex company called Sterling Woodrow Ltd acquired the Stradey Park Hotel, Llanelli, from its retiring proprietors, raising money from investors by selling off interests in individual hotel rooms.

The long-term repercussions of Covid-19, at least until an effective vaccine is developed, are likely to include a reluctance to stay in hotels or to eat in busy restaurants, so once they are allowed to reopen, hotels will face an uphill task to achieve profitability, and investors in hotels will need bucket-loads of patience.

The search terms Corran, Northern Powerhouse Developments, Afan Valley and Stradey Park will bring up past articles on these topics.

PDR

 

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Virus Means Lean Outlook for Stradey Park Hotel Investors

News: Fortunate timing for vendors

The sale of Llanelli’s Stradey Park Hotel by Gryphon Leisure, reportedly for £3.2 million to investment consultants Sterling Woodrow Ltd, is at the worst possible time for investors, to whom Sterling Woodrow has been promoting the purchase of individual rooms in the landmark building.

The promised returns of 10% a year, and buy-back at 115% of the purchase price after five years, will be difficult to achieve, given the Westminster government’s decision this month to require all hotels to close, to help restrict the spread of the Covid-19 virus.

The Stradey Park Hotel was sold soon before the order for hotels to close because of Covid-19.

Investors have paid from £59,950 per room for the 77 rooms in the hotel, in what could be labelled a variant of a crowd funding exercise.

Sterling Woodrow, based in Billericay, Essex, is a small company with 15 employees in the year to April 2019, tangible assets of £23,790, cash of £68,173 and shareholders’ funds of a negative £52,796. The company was founded in 2005, and is controlled by director Robert Horwood (56), who is also a director of new company Stradey Partners Ltd, formed in September 2019. Mr Horwood and fellow director Gareth Street jointly own Stradey Partners Ltd.

For Angela Saunders, Barry Saunders and Alison Anderson, the directors of Gryphon Leisure Ltd, the timing of the sale was fortunate in the light of the unforeseeable hammer-blow to the UK hospitality industry delivered by Covid-19.

PDR

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 3^rd 2019 and operating in “other service activities not elsewhere classified”. The duo also own Perennial Hotels Ltd, formed on August 20^th 2019, and Perennial Estates Ltd and Cumbria Park Ltd, both dating from September 18^th 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 20^th 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 13^th and Thursday January 16^th 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 10^th, 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 31^st 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

Update: Afan Valley Adventure Resort Down But Not Out

Investors in the proposed Afan Valley Adventure Resort at Pen y Bryn, between Caerau and Cymmer, stand to lose much or all of the money they paid in, but the scheme itself may be resurrected and financed with capital provided by corporate investors.

Neath Port Talbot County Borough Council’s planning committee agreed unanimously on September 24^th to extend, by six months into March 2020, an expired deadline for a legal agreement between the developer and the council for structural landscaping, habitat management plans, improvements to a national cycle route, and provision of a farm of solar photovoltaic panels.

The site of the proposed Afan Valley Adventure Resort, which could give a big boost to tourism in Neath Port Talbot. Photo from Google Earth.

Mr Peter Moore, who was key to Center Parcs’ success in the UK, has told the council he is working with Zenzic Partners, merchant bankers for ‘alternative assets’, to achieve the resort development, but has now less than six months to achieve the crucial legal agreement with Neath Port Talbot Council.

Sales agents for Northern Powerhouse Developments, the troubled group of companies behind the adventure resort and numerous other hospitality ventures, offered lodges on the Afan Valley site for sale before Neath Port Talbot Council had granted outline planning permission. Mr Moore was formerly the non-executive chair of leisure at Northern Powerhouse Developments, but has severed his connection with the group.

The stacked network of companies specific to the resort project includes only one, Afan Valley Ltd, currently in administration, now managed by a branch of multinational Duff & Phelps in Manchester. Afan Valley Ltd is controlled by Northern Powerhouse Developments Adventure Resorts Ltd, which in turn is a subsidiary of Active Resorts UK Ltd, and that is a subsidiary of Northern Powerhouse Developments (Holdings) Ltd, listed as under the control of Mr Gavin Lee Woodhouse.

Active Resorts UK Ltd also has Northern Powerhouse Developments Adventure Resorts Management Ltd in its stable, and this company has, as a subsidiary, Afan Valley Management Ltd.

Northern Powerhouse Developments (Holdings) Ltd’s accounts for the year to March 31^st 2018 included an independent assurance report by Manchester accountants Williamson & Croft Audit Ltd, who say on their website that “We truly understand that our business is invested in our clients, and that our success is reliant on theirs. This is why we go beyond the usual responsibilities of an accountancy firm, to ensure our clients have every possible chance at the success they desire.”

In the assurance statement, signed on November 27^th 2018, Williamson & Croft say: “The terms of our engagement exclude any requirement to carry out a comprehensive assessment of the risks of material misstatement, a consideration of fraud, laws, regulations and internal controls, and we have not done so.”

Property revaluations inflated balance sheet

Those accounts highlight the extent to which revaluations of properties underlie the apparently rosy picture presented in 2018, when it looked as though the holding company was sitting on equity of £11,246,564, even after allowing for short-term liabilities of £19,055,076, and long-term liabilities of £40,564,056, namely the obligations to investors.

Revaluations of properties during the year amounted to £21,725,862, almost £22 million, showing in the profit and loss account and more than compensating for the operating loss of £14,193,019. The accounts state that “Consideration has been given by the directors as to the fair value of properties held by the group. In determining the fair value they used representations from suitably qualified third parties who have considered the open market value of the property based upon their knowledge of the open market.” One problem may be that there is little open-market experience of trade in rights to income from leased hotel rooms.

Afan Valley Adventure Resort took the invest-to-rent concept to the level of a whole resort, 327 acres on which would be built ski slopes, zip wires, high wire, an aqua park, equestrian centre, mountain biking track, BMX track and skate park, plus a 100-bed hotel, spa, retail and restaurants plaza, the European HQ of the Bear Grylls Instructor’s Academy, and parking for 800+ cars. There would also be 600 lodges as holiday homes, over phases 1 and 2 of construction.

What exactly do investors ‘own’?

There is already doubt whether the investors, as lessees, can be classed as ‘owners’ of their investments. The view of Northern Powerhouse Developments (Holdings) Ltd, expressed in the notes to the 2017-18 accounts, is this: “It is the belief of the management of the group that the risks and rewards of ownership do not pass to lessees of the hotel rooms, as the group maintains control over the room operation, maintenance and insurance. In addition, the lessee receives fixed annual rental income and there is a fixed price for the group to buyback the room in the future. As such the transaction is treated as an operating lease for the group as lessor.”

In this view, the investor does not acquire the physical asset for the stated number of years, but the right to a specified quantity of income from it.

This ‘management belief’ would also mean that the physical assets could be offered for sale without the agreement of investors.

It does seem clear that investors are down the pecking order when property is disposed of. Anyone with a secured charge on the company’s assets comes at the head of the list. In the case of Northern Powerhouse Developments (Holdings), that is Mysing Capital Ltd, which on December 6^th 2018 recorded a charge over “All freehold and leasehold properties (whether registered or unregistered) and all common hold properties, now or in future (and from time to time) owned by the borrower, or in which the borrower holds an interest, and property means any of them.”

Mysing Capital Ltd is owned by Steven Turner, civil engineer Matthew John Ferguson and engineer Robert James (Rob) Coxon, the founding trio of the Castleford-based Stroma Group in 2002. Stroma provides building control and compliance services, certification for the construction industry and software to the energy and operational efficiency markets. Private equity firm LDC bought in to Stroma in 2014. LDC, Lloyds Development Capital, is a subsidiary of Lloyds Banking Group.

Investors’ prospects unclear

The dozen or so operational hotels within the Northern Powerhouse Developments (Holdings) group contributed turnover of only £6,413,624 in 2017-18, an average of about half a million pounds each. The hotels employed 422 people of the 466 in the group. The hotel workers were probably not among the highest paid, but even so could have accounted for over 80% of the £4,522,962 staff costs. The group’s ambitions to upgrade the hotels would appear to mean more staff, and therefore higher wage costs, further squeezing the possibility to pay room rents to investors.

When Northern Powerhouse Developments’ public website was online, the group’s financial model was explained like this:

“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.”

The word ‘buy’ appeared to have a conventional meaning in this publicity, and was compared with buy-to-let residential property. The language in the accounts, as highlighted above, contradicts this understanding by stating that investors are not owners. Foggy, puzzling language like this does not help investors to make sound decisions.

Currently it seems likely that investors in the hotels, and in the off-plan lodges at Afan Valley, will emerge with badly burnt pockets and depleted savings, but the adventure resort project itself lives on for another six months, at least.

For previous reports on Northern Power House Developments and the Afan Valley proposal, see for example here and here.

 PDR

News: Dark Days for Investors in Tenby Holiday Hotel

Tenby’s landmark Fourcroft Hotel, run by the Osborne family for over 70 years, was sold to Northern Powerhouse Developments less than three years ago, in January 2017.

Northern Powerhouse Developments (NPD) itself, the creation of 41-year-old Gavin Lee Woodhouse, is already in administration. So are numerous other companies in its portfolio.

NPD created two new companies for the well-known 40-bedroom hotel in Tenby on the coast of south Pembrokeshire. One was Fourcroft Hotel (Tenby) Ltd, the hotel operating company, which went into administration on August 8^th 2019. Fourcroft Hotel (Tenby) is now in the hands of insolvency practitioners Philip Duffy and Sarah Bell, in the Manchester office of New York-based multinational Duff & Phelps, a multi-faceted valuation, restructuring, corporate finance and consulting organisation active in 28 countries.  The day-to-day management of the hotel was taken over by Iain Shelton, who until the end of April 2018 was a director of Assured Hotels Ltd.

 

The Fourcroft Hotel in Tenby. Where has investors’ money gone? Photo from Google Earth

The second company was property holding company Carmarthen Bay Hotel Ltd, which also went into administration with Duff & Phelps on August 8^th. This company had the task of selling off individual rooms on leaseholds. The intended plan was for the rooms to be rented back to the hotel operating company, which would receive guests’ payments.

The accounts for both companies make interesting reading. In both cases they are for the year to March 31^st 2018. Carmarthen Bay Hotel Ltd’s balance sheet values the hotel at £2.760 million, compared with £527,916 the previous year – a more than five-fold increase. This ballooning valuation made the hotel appear profitable, when subsequent events show that it was not. In the year to March 31^st 2017, the company had negative value of £480,722, and a year later an apparently healthy surplus of £1,317,237 – all due to the supercharged property revaluation.

Fourcroft Hotel (Tenby) Ltd reported turnover of £812,423 in the year to end-March 2018, £67,702 a month. This was better than the average of £49,913 a month during the previous 18-month accounting period, and contributed to a healthy gross profit of £696,780. But not so fast! Administrative expenses amounted to £1,059,192, or £88,266 a month. Over the 18 months from October 1^st 2016 to March 31^st 2017, administrative expenses were less than half that at £41,033 a month. The higher expenses led to 2017’s £22,939 operating profit transforming into a £350,205 operating loss in 2018.

So the Fourcroft Hotel’s acquisition by the Northern Powerhouse Developments business group quickly turned into a financial bad news story – even worse when charges against assets are taken into account. Both the Carmarthen Bay and Fourcroft companies were subject to comprehensive charges in favour of North West Asset Finance Ltd, a small company controlled by Shays Assets Ltd, the sole director of which was Robert Ashley Hall from near Skipton, North Yorkshire.

During 2017 investors were drawn to the Fourcroft/ Carmarthen Bay by agents promoting benefits like these:

• “Operational 40 room hotel in Tenby with sea views
• Full refurbishment to bring up to stunning 4 star modern standards
• 23 rooms have sea views
• Full suite prices from just £60,000 (with the option of just £54,000 total cash input)
• All rooms to be finished with sumptuous décor and high quality furnishings
• 10% NET return for 10 years
• 125% buyback option in year 10 (or the option to extend the 10% for another 5 years, or take a 50/50 room revenue split)
• 2 weeks free usage in your room each year”                                                                         (from the agency Emerging Developments)

Those investors are now worried they will lose every pound they put in. For unregulated investments such as this, it is always a case of buyer beware, but the advertising can be very persuasive.

If investors paid £60,000 each for all 40 rooms in the Fourcroft/ Carmarthen Bay – and some were more expensive — the total investment would be £2.4 million.  This accords well with the revaluation of £2.76 million recorded in the 2018 accounts for the Carmarthen Bay Hotel Ltd. But it is extremely hard to see how a room costing £60,000 could yield a 10% return — £6,000 – annually, let alone £75,000 for a buy-back in year 10.

By September 2019, Fourcroft Hotel (Tenby) Ltd and Carmarthen Bay Hotel Ltd were just two of the failed companies in the Northern Powerhouse Developments collection. Duff & Phelps were managing about 20, including Afan Valley Ltd, a company behind the proposed Afan Valley Adventure Resort in Neath Port Talbot, and at least four more companies were being administered by CG & Co.

Woodhouse Family Ltd, Gavin Woodhouse’s own property company, is also in the hands of Duff & Phelps.

PDR.  More will follow

News: Liquidators’ Tough Task to Track Millions Lost in Unregulated Corran Investment Scheme

The BBC’s Rip Off Britain programme warns viewers to beware of unregulated investments — unless they can afford to lose everything they put in.

Hundreds of investors in hotel rooms at The Corran Hotel, Laugharne, Carmarthenshire, are unlikely to see their money back. Liquidators  Robert Dymond and Lisa Hogg, of Wilson Field Ltd in Sheffield, in their progress report dated May 20th 2019 and lodged with Companies House, have received claims from 439 unsecured creditors totalling £14,429,005 (and 09p).

Robert Dymond reported that he had yet to receive claims from 162 creditors whose debts total £3,413,315 “as per the company’s statement of affairs”. ‘The company’ in this case is property firm Kayboo Ltd, in liquidation alongside East Marsh Operational Co Ltd, which ran the hotel business.

The liquidators discovered “a number of issues which required further review, including the pre-packaged sale of the business, the dissemination of funds, potential mis-selling of the investments and failure to register the property titles at the Land Registry as well as a number of payments to connected and unconnected parties”.

Claims of £1,371,589.74 and £520,700 have been submitted by the liquidators to the bankruptcy proceedings of “connected individuals” who received payments “that were deemed not legitimate business expenditure”.

“A number of connected parties and individuals” explained that the reason they received funds was “because the Companies [Kayboo and East Marsh Operational Co] were experiencing difficulties with their bank due to anti-money laundering regulations and the account being frozen. In order for the business to continue operating the directors claim that they had to transfer the funds either to themselves or connected parties to process the funds on behalf of the company.”

Will any monies will be recovered? “At the present moment it is uncertain whether there will be sufficient funds to make a distribution to any class of creditors,” the liquidators state.

The BBC1 programme Rip Off Britain (broadcast on January 9th 2019, repeated July 17th 2019) featured Dexter Jeffrey, a disappointed investor in The Corran, and emphasized the risks of this and other unregulated investments.

The Corran Hotel, trading as The Corran Resort and Spa, is under new ownership.

 

 

 

 

News: Banned Businessman is Linked to The Corran Resort

Laugharne Hotel Cost Investors £ Millions

Investors lost around £17 million in The Corran Resort and Spa, East Marsh, Laugharne, Carmarthenshire.  Now, one of the businessmen involved in the resort hotel has been officially linked with financial fraud.

Today, December 19^th 2018, the UK government’s Insolvency Service announced the disqualification of Paul James Manley, who was a director of companies connected with The Corran.

Mr Manley, who has an address in Newquay, Cornwall, has been disqualified from running companies for 12 years, operational from January 1^st 2019.

The Insolvency Service found that he helped one of his clients to defraud creditors of more than £1.65 million.

The ban is not linked with The Corran directly, but with Mr Manley’s County West Commercial Services Ltd and its involvement with Inn Take (UK) Ltd.

The Insolvency Service says: “One of County West Commercial Services’ clients was Inn Take (UK) Ltd, a company which ran pubs on a short-term basis before it went into liquidation in December 2011. Two of its directors, William Dene Lyall and Joseph Harthen, have subsequently been banned from running companies for 8 years and 5 years respectively. On October 27^th 2016, the High Court of Justice ruled in favour of Inn Take’s creditors that parties, including County West Commercial Services, knew about and assisted Inn Take’s intent in defrauding its creditors.”

According to the Insolvency Service, Mr Manley made this admission: “Between 26 April 2010 and 14 February 2011, I caused County West Commercial Services Ltd to be a knowing party to the carrying on of a client’s business with the intent to defraud creditors. As a consequence £1,654,451.53 of client funds were received by a bank account controlled by the company and distributed with no discernible benefit to the client.”

Paul Manley was the company secretary of County West Commercial Services, and one of its two directors, the other being Elzbieta Maria Wernik. The firm, specialising in accounting and auditing activities, is currently being liquidated. Mr Manley is at present a director of two other companies – Simple Skips Ltd and Rigil Corporate Rescue Ltd — both in liquidation. He has 278 former directorships.

The Corran Resort and Spa, formerly known as Hurst House on the Marsh.

At The Corran, Mr Manley was a director of Glendore Real Estate Ltd and Plustocks Management Ltd, companies that replaced Kayboo Ltd and East Marsh Operational Co Ltd, the proprietors and operators respectively of The Corran. He resigned from both successor companies in October 2016. Companies House is now proposing to strike off Glendore Real Estate Ltd.

Plustocks Management continues to operate, under the ownership of James Brown, who controls Corran Resorts Ltd, the latest company set up to own The Corran. The hotel is still open, after HBG Corporate Ltd, the first liquidators when Kayboo failed, allowed a controversial pre-packaged buyback deal for just £150,000.

PDR

Liquidators Hunt Down Destinations of Corran Cash

Investors’ heavy losses

Liquidators for Kayboo Ltd, the bust company originally set up to develop The Corran Hotel and Spa at Laugharne, Carmarthenshire, have identified 441 unsecured creditors, owed almost £11 million. The total amount lost by investors is reckoned to be around £17 million.

The liquidators’ costly work has been complicated by the financial practices employed by Kayboo.

Robert Dymond and Lisa Hogg, of Sheffield solicitors Wilson Field, reported this summer that there are “various investigation issues that the joint liquidators are currently reviewing, including the pre-packaged sale of the business, the dissemination of funds, potential misselling of the investments, and failure to register the property titles at the Land Registry”.

Investors in The Corran thought they were buying whole hotel rooms or fractions of rooms in a hotel undergoing major expansion, but a proposed development of holiday lodges was refused planning permission and hundreds of investors received nothing at all.

The liquidators say they analysed more than 10 bank accounts of the companies and associated parties. ‘The companies’ refers to Kayboo and sister company East Marsh Operational Co Ltd, which ran the hotel side of the business.

 

“Highly complex and time-consuming task”

“It should be noted that the companies utilised a number of bank accounts that were not held in the companies’ names, which has in turn made the tracing of funds through the companies a highly complex and time-consuming task,” the liquidators reported. “Our analysis revealed numerous intercompany transactions and payments to connected parties and individuals.”

Those connected parties and individuals are not being named yet because “the investigations may lead to legal action and therefore there is limited disclosure of information in order not to prejudice any subsequent legal action”.

So far, the liquidators have traced £12.39 million of investors’ funds coming in to the numerous bank accounts. The figure excludes payments in by cheque because the cheque originators are not shown on bank statements.

The travels of payments from investors included:

• £2.276 million paid to “a corporate entity connected by way of common shareholders and directors”. That entity is now in a creditors’ voluntary liquidation. A director offered the explanation that ‘payments were paid to the company to facilitate the distribution of investor payments on behalf of the company’.
• Another £1.884 million went to another connected corporate entity, also in creditors’ voluntary liquidation. Kayboo’s liquidators submitted a claim to the corporate entity’s liquidators, only to be presented with a counter-claim for £1.391 million for “legitimate commission agreements” outstanding when Kayboo was folded.
• The liquidators also refer to “commission payments made to numerous other parties”.
• £1.768 million went to a non-connected corporate entity also in creditors’ voluntary liquidation. This liquidator of the non-connected entity said the payments were genuine commissions. After considerable reluctance, this entity’s records were provided, but were “not as comprehensive as anticipated, given the level of transactions with the companies”. The next step was to be an analysis of bank accounts to try and determine if the funds received in were paid out to “any connected parties”.
• A particular individual connected to Kayboo received £649,290. That individual proffered an entitlement to sales commission and said they were still owed around £500,000.

The money gushing to commission agents suggests that little was left to actually build the hotel.

Investors in fractions of hotel rooms were also paying for the administration of the companies set up to manage those fractions. The liquidators found £355,000 paid to one entity for administration of the fractional companies formed to manage leases of rooms in The Corran. This seems generous considering that only THREE leases had been registered when Kayboo’s financial frailty resulted in its failure.

Kayboo, of which Peter William Burnett, County West Secretarial Services Ltd and Keith Michael Stiles are directors, made several other payments, detailed in the liquidators’ report, chiefly to entities “now subject to insolvency proceedings themselves”. The task of obtaining any redress for misled investors seems immense.  Apart from the rapid loss of investors’ monies, the liquidators’ forensic work is expensive, ranging from £500 an hour for directors and insolvency practitioners down  to £130 per hour for secretarial and support work.

 

Hotel bought back for £150,000

In October 2016 Glendore Real Estate Ltd, a company incorporated in February 2016, bought the hotel for £150,000 in a ‘pre-packaged’ deal with the original insolvency practitioners, HBG Corporate Ltd of Preston, Lancashire. The directors of Glendore Real Estate Ltd were Keith Stiles, also a director of Kayboo; Paul Manley; and County West Secretarial Services Ltd, of which Mr Manley was a director, and which was also listed as a director of Kayboo. The original directors of Glendore Real Estate have resigned and the sole director at October 11th 2018 was Mr Michael Nicoletti. Plustocks Ltd, which took over the hotel operations from East Marsh Operational Co Ltd, was dissolved in April 2017.

Investors’ anger at Glendore’s bargain purchase was an important factor in their decision to oppose the decisions being made by HBG, and to secure alternative liquidators who are readier to listen to their concerns.  In their view HBG appeared to be treating the insolvency as the failure of a hotel business, not as the failure of an unregulated investment scheme.

 

Money-losing pensions

Many investors put in money via SIPPs, self-invested personal pensions, or SSASes, small self-administered schemes for directors and companies. One of the names linking The Corran with pension investments is Rowanmoor, of Salisbury, Wiltshire, part of the Embark Group since July 2016. The major shareholder in Embark Group is Richard Wohanka, among whose directorships are Scottish Widows Group and several other companies within the Lloyds Banking Group, and other well-known active and defunct financial services institutions.

The name Rowanmoor has also cropped up in connection with fractional property sales by The Resort Group in the Cape Verde Islands, because the fees they charge have perplexed pension investors who are losing money on their illiquid and often nebulous purchases.

 

Who owns The Corran now?

The Corran is at present in the hands of Corran Resorts Ltd, a new company dating from November 23^rd 2017 and with a registered address in Riverside Business Park, Swansea.

The owner of Corran Resorts Ltd now, in October 2018, is a Mr James Brown, born in December 1966 and currently 51 years old.

 

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 28^th 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.

‘High Octane’ Afan Valley Resort — No Planning Permission Yet, but Lodges Already Offered for Sale

Would you buy a house off plan before the site even had planning permission?

Northern Powerhouse Developments, the smartly named real estate company led by Gavin Lee Woodhouse, is selling lodges off the blueprint for the Afan Valley Adventure Resort in Neath Port Talbot.

“With the emphasis on healthy living and high octane activities, Afan Valley will offer guests of all abilities a unique and exhilarating experience which will be the first of its kind to hit the UK holiday market. With its wealth of breath-taking activities, this exciting new resort has been designed to push guests to the limit while at the same time recharge, rejuvenate and relax all who visit,” proclaims the Northern Powerhouse Developments website.  There is also a reference to ‘award winning restaurants on site’, which is clearly in advance of reality, because currently the development has not started.

The company says it completed the purchase of 450 acres of land in December 2017. The website mentions 400 lodges, but the outline planning application submitted on May 21^st 2018 increases this to 600 lodges. There would also be a 100-bed hotel, restaurants, adventure activities, accommodation for administration, and of course lots of parking.

All this on 450 acres for adventurous activities would be a tight fit. Even if the holiday lodges were crammed in at 12 to the acre – the minimum density for most new housing –they would cover 50 acres.

Despite the application’s submission in May, there is no sign of it in Neath Port Talbot Council’s planning application database. When I rang the council to ask what had happened to it, I was told that it is not yet a valid application because the planning department has not received all the necessary information. So there is no date for the proposal to come before the planning committee.

That is potentially worrying for investors who have already paid for lodges, but only one of the many risks in this type of scheme.

Today, the ‘Financial’ page of Northern Powerhouse Developments’ website is missing. The teaser text said ‘commercial assets are retained by the SPV’, but the ‘Financial’ page itself was not there. I had wanted to see if the information on it was any different from the contents in October 2017, when I last looked (Risky Deals? Landmark Welsh Hotels Sold Room by Room to Investors, see here), but no luck.

SPV stands for Special Purpose Vehicle, a company with a legal structure isolating it financially from the parent company. This sort of structure is common in the investment markets for hotel rooms, suites and annexes, care home rooms and student accommodation. Typically, an investor buys a hotel room, or chalet, or holiday lodge leasehold from a property company and rents it back to an operating company for a specified number of years. The property company ‘guarantees’ to buy the ‘asset’ back at the end of the term, often at a premium to the purchase price.

This was broadly the arrangement at The Corran Resort and Spa, Laugharne (see here, and search this website), where close on £20 million of investors’ cash disappeared. Rooms and fractions of rooms at The Corran were sold off plan, in what seemed to me a Ponzi scheme (returns to early investors, enough to generate a ‘buzz’, appear to have been paid with purchase funds from later investors, who are very disappointed).

Why didn’t the investors do more due diligence, especially as this type of investment is not regulated by the Financial Conduct Authority? A lot of hard selling went on, backed with classy marketing materials, and the often elderly investors, with money losing real value in savings accounts paying interest below the rate of inflation, were desperate to boost their rate of return.

Northern Powerhouse Developments may not be another Kayboo Ltd, the former owner of The Corran, but information at Companies House raises flags that are reddish in hue. A company called Mysing Capital Ltd has in 2018 taken a charge on all freehold and leasehold properties  acquired by Northern Powerhouse and associated companies The Imperial Crown Hotel Ltd, The Old Golf House Hotel Ltd, and Gilsland Hall Ltd and all properties that may be acquired by them in the future.

Mysing Capital, known as Mysing Properties Ltd until December 8th 2017, is controlled by Steven Turner (51), civil engineer Matthew John Ferguson (47) and engineer Robert James (Rob) Coxon (51), the founding trio of the Castleford-based Stroma Group in 2002. Mr Turner’s address is listed as 9 Fryers Way, Ossett, West Yorkshire WF5 9TJ, the same address as Mysing Capital. The address for Mr Ferguson and Mr Coxon is Murray Harcourt Accountants, Elizabeth House, 13-19 Queen Street, Leeds LS1 2TW.

Stroma provides building control and compliance services, certification for the construction industry and software to the energy and operational efficiency markets. Private equity firm LDC, with funding from Royal Bank of Scotland’s NatWest, bought in to Stroma in 2014, and since then the founders have resigned from the board, but have ventures like Mysing Capital to keep them busy.

Mysing’s balance sheet at March 31^st 2017 showed shareholders’ funds of almost £1.27 million, up from £0.978 million the year before. It was carrying £15 million of debt, but had cash of over £9.215 million and £7.143 million in monies due from others.

As for Northern Powerhouse, it has acquired three more properties since October 2017, bringing the total portfolio to 18. The latest is a hotel to be called Lakeside Manor (formerly Monk Fryston Hall) at Monk Fryston between Leeds and Selby in Yorkshire. Almost half the properties and developments are not yet operational. The Afan Valley Adventure Resort seems the most ambitious, and sales agents are busy extolling its future charms. Select Portfolio, which appears to be selling the majority of Northern Powerhouse’s opportunities, advertises Afan Valley properties between £82,000 and £240,000 and suggests returns on investments of up to 268%.

The time scale is optimistic, given that no planning permission yet exists. Select Portfolio says the resort should be completed between April and June 2021, less than three years away. Investors are enticed with ‘iconic global brands’, ‘world class facilities’ and ‘one of the biggest and most thrilling outdoor adventure parks in the UK’. Lodge purchasers are told they can use it themselves (once it is built, of course) for two weeks a year, one in high season, one in low.

The purchasing procedure is also ahead of reality. According to Select Portfolio, on completion of a purchase, an order for the lodge “will be placed with the manufacturer”. A buyer will hope to receive a return of 10% between years four and ten, when the lodge would be bought back by the developer for 25% more than the net purchase price.  A couple of purchasing models are offered, but in both no return is payable for the first three years.

I hope it works. I hope the Afan Valley Adventure Resort will receive permission and be a resounding success with local residents and with visitors alike. I hope all the other hotel investments will pay off.

But the risks associated with this crowd-funding approach to development are real,  substantial, and not for those for whom loss of capital would be a disaster.

PDR