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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Carmarthenshire’s The Corran Resort and Spa Collapses Again

NEWS REPORT, JANUARY 25th 2020

The Corran Resort and Spa, at Laugharne in Carmarthenshire, has failed financially yet again.

ARC Hospitality Ltd, formed only on October 30^th 2018, entered creditors’ voluntary liquidation on December 6^th 2019, owing £56,050.45 to Hudson Energy Supply (UK), £26,120.50 in PAYE, £5,000 in VAT, and £24,493 in business rates to Carmarthenshire County Council. The company’s sole director is Cyril Royer, who was executive head chef at The Corran between November 2015 and September 2018, and for three years between 2012 and 2015 owned The Golden Mile Inn at Bridgend. The insolvency is being handled by Stones & Co of Swansea.

This collapse comes only a year after its predecessor, Corran Resorts Ltd, entered creditors’ voluntary liquidation in the hands of Swansea-based insolvency practitioners Mcalister & Co, with debts of £36,117.39 to HMRC and £84,402.91 to ‘trade and expense creditors’, according to the liquidator’s statement of receipts and payments up to December 3^rd 2019.

The Corran Resort and Spa in happier times

Corran Resorts Ltd, formed on November 23^rd 2017, was merely a year old when it could not pay its way. This company was owned by James Brown, whose address was given as The Corran, and the director at the time of liquidation was Sharon Adams, also with an address at The Corran. There was one former director, hotel manager Alison Reynolds.

Cyril Royer and Alison Reynolds formed a new company, The Cross & Keys Ltd, on January 9^th 2020. This company’s business interests are licensed restaurants and public houses and bars.

The Corran’s troubled history includes a failed unregulated investment scheme, selling shares in rooms to investors, who lost around £17 million. Sales of interests in rooms and fractions of rooms began in 2012, before the hotel reopened in 2013 after closure in a previous period of administration. The new owner was a company called Kayboo Ltd, and sister company East Marsh Operational Company Ltd managed the business. Both went into administration on October 18^th 2016, the date on which the administrator, then HBG Corporate Ltd of Tarleton, Preston, approved a deal by which a company called Glendore Real Estate Ltd bought the hotel for £150,000.

The sequence of brief ownerships and associated management continued with Glendore Real Estate Ltd, and Plustocks Management Ltd. Two former directors of these companies, County West Secretarial Services Ltd and Mr Keith Stiles, were also directors of Kayboo, which is now in the hands of liquidators Wilson Field, based in Sheffield. Companies House is proposing to strike off Glendore Real Estate Ltd for non-submission of accounts and confirmation statements, but Plustocks Management Ltd is extant and owned by James Brown, also the owner of Corran Resorts Ltd. County West Secretarial Services Ltd was dissolved in October 2017.

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: 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

Afan Valley’s Adventurous Beverly Hills Connection

Adventure resort plans parked

Adventure, anyone? Mr Gavin Lee Woodhouse’s dream of an adventure resort in the Afan Valley north of Port Talbot is parked on a shelf gathering dust while the planning department at Neath Port Talbot County Borough Council awaits more information, and there is as yet no date for the planning committee to debate the outline application, submitted in June 2018.

The site at Pen y Bryn, Croeserw, covers 327 acres on which would be packed ski slopes, zip wires, high wire, an aqua park, equestrian centre, mountain biking track, BMX track and skate park. There would be a 100-bed hotel, spa, retail and restaurants plaza, the European HQ of the Bear Grylls Instructor’s Academy, and parking for 800 cars. And 600 lodges as holiday homes, over phases 1 and 2 of construction.

The resort would evidently not cater for visitors seeking rural tranquillity. The very large number of buildings and leisure constructions would create an urban ambiance, as would the hoped-for 275,000 customers annually.

The adventure resort would occupy land between, and above, Caerau and Cymmer. Source: Google Earth

Sales to “sophisticated and high net worth investors”

As West Wales News Review has reported previously, holiday lodges are already being sold off plan although there is no planning permission yet.

Select Resorts Ltd, Poole-based and owned by Pauline and Paolo Bonanni, is one agency advertising properties in the adventure resort from £82,000 (as a deposit) to £240,000. Payment reserves a plot and buys an order for a lodge from a manufacturer, although in the absence of planning permission the buyer would not be able to locate the lodge on the park.

The Elite Investor Club is another organisation selling future properties in the future park, seeking to attract “sophisticated and high net worth investors” wanting to “build and protect multi-generational wealth” and offers them 450 lodges for deposits starting at £82,000.

The financial sell sounds enticing: “….acquire a superb 2 bedroom lodge worth £205,000 with just an £82,000 deposit. The remainder of the purchase price is repaid from our rental income then, at the end of the 10 year term, we sell the lodge back to the developer for 125% of its full initial value. That means a payment of £256,250 and, when you add in the £45,100 in rental payments we also receive, plus 14 days a year of personal use worth over £20,000, the overall return on capital employed is a staggering 393%!

“The site already has planning permission for a project on a similar scale to Afan Valley Adventure Resort,” potential investors read. “The developer has submitted a revised proposal which has been validated by the local authority planning team who expect to make their decision during November. Given the existing planning permission and the high level of support in the Welsh Assembly for a project that will create 1,250 new jobs near Port Talbot, the developer is confident that permission will be granted.”

Looking south-east from near Cymmer, over the proposed adventure resort, and showing its extent. Source: documents supporting the planning application

Elite Investor Club does flag up some risks. Planning permission might not be granted, but this would be “highly unlikely given the jobs being created and the wider economic impact”. The developer might go bust, but “their cash flow comes from lodge sales so they will always have money up front with which to build the infrastructure to support the development. No payments to investors will be required before 2020 so there is time for the park to become operational before the company needs to commence cash payouts. As a Plan B, banks and institutions would lend substantial sums against the value of the land once planning permission is obtained”. Tourists might not come, a risk regarded as minor “given the existing popularity of adventure tourism in Wales and the number of unique factors driving this project”, which the Club says include the involvement of Bear Grylls, the combination of extreme adventure experiences, year round skiing, a high-end branded spa and amazing countryside.

Maybe the park would flourish, but there was no decision “during November”. The last planning permission was for F&P Developments Ltd of Driffield, East Yorkshire, in 2010 for 240 lodges, a ski slope and a golf course, a lower-density project overall. F&P Developments did not go ahead because it proved impossible to raise sufficient investment funds.

As for lodge values, is a timber holiday lodge really worth over £200,000? Scandinavian-style timber lodges in the Cotswold Water Park can be bought for under £140,000 for a two-bedroom and for less than £165,000 for a three-bedroom version.

And there is still an empty site just one year before revenues are supposed to start flowing.

Mysing Capital takes a charge

Mr Gavin Lee Woodhouse heads the Afan Valley adventure park project through a chain of recently established companies.

Nineteen47 Ltd, chartered town planners and urban designers, submitted the outline planning application on behalf of Afan Valley Ltd, the sole director of which is Gavin Lee Woodhouse. Afan Valley Ltd, founded in April 2016 as Caerau Parc Ltd and recording a loss of £166,985 in the period from April 14^th 2016 to March 31^st 2017, is controlled by Northern Powerhouse Developments Adventure Resorts Ltd, set up in September 2016 with Gavin Lee Woodhouse as director, dormant at March 31^st 2017 with assets of £1, and which is turn is owned by Active Resorts (UK) Ltd, dormant at March 31^st 2017, when accounts show assets also of £1.

Active Resorts (UK) Ltd, also started in September 2016 and with Gavin Lee Woodhouse as the sole director, is owned by Northern Powerhouse Developments (Holdings) Ltd, another entity dating from September 2016, renamed from Bryn Lodge Ltd and owned by Gavin Lee Woodhouse.  The last published accounts for Northern Powerhouse Developments (Holdings) Ltd, to March 31^st 2017, are for a dormant company with assets of £1.

On December 5^th 2018 a company called Mysing Capital Ltd took a charge over the assets of Gavin Lee Woodhouse personally and 15 of the companies in the Northern Powerhouse stable. The 15 are

• Belmont Hotel Ltd
• Bourton Spa Ltd
• Campus House Ltd
• Dunsmore Hall Management Ltd
• Giant Hospitality Ltd
• Gilsland Hall Ltd
• Imperial Crown Ltd
• Llandudno Bay Hotel & Spa Ltd
• MBI Smithy Bridge Ltd
• Northern Powerhouse Developments Ltd
• Northern Powerhouse Developments (Holdings) Ltd
• Northern Powerhouse Developments Hotels Ltd
• The Old Golf House Hotel Ltd
• The Old Golf House Hotel Management Ltd
• Woodhouse Family Ltd

Mysing Capital has three owners: Steven Turner, Robert James Coxon and Matthew John Ferguson, and at March 31^st 2019 held shareholders’ funds of £1.476 million. All three have other directorships in common, including Mysing Care Ltd, which operates care homes and in the year to July 31^st 2017 employed 187 people, turned over £4.58 million, and made a post-tax profit of £173,126.

Northern Powerhouse Developments has more than 15 hotels in its portfolio, including six in Wales, without counting the hotel and lodges intended for the Afan Valley. The first phase of the adventure park, with 400 lodges, has a published costing of £130 million, which seems very low, less than £400,000 per acre.

Climate change questions

The town planning consultancy Nineteen47 Ltd, based in York and owned by Jamie Pyper and Richard Walshaw, submitted the numerous documents required by Neath Port Talbot’s planning department, an expensive commitment costing £139,500 in fees.

A Climate Change Mitigation Report is one of the documents. This is important, given the Welsh government’s commitment to achieve an 80% fall in greenhouse gas emissions between 1990-1995 and 2050.

Yet the report has more omissions than forecasts. It considers emissions from buildings only, and not from the construction process, the manufacture or transport of materials, traffic, the operation of the leisure activities, or lighting.

Nineteen47 explains: “This is due to the challenges of attempting to estimate such emissions at outline application stage where limited or no details are available, but also because the proposed buildings are likely to be the largest source of greenhouse gas emissions from the proposed development as well as the greatest scope for the reduction of such emissions.”

After confining the estimates to buildings in use, Nineteen47 suggests emissions would be 5,694.8 tonnes of CO2 a year before energy-saving measures, and 4,835.6 tonnes after, a potential reduction of 15.1%. Even 4,835.6 tonnes are a significant addition, and of course the figure ignores all other emissions pertaining to the site. Without knowing more about the overall total, it will be impossible to work out a plan to cut emissions elsewhere in Wales.

The Planning Statement, which is among the documents submitted, refers to the removal of 2,138 trees plus the possible removal of 654 more. We all know that trees absorb CO2, so removing up to 2,792 of them is the opposite of emissions mitigation. There would be new saplings planted, but they would be unlikely to compensate for the lost trees.

The applicants for Afan Valley Ltd seem to conclude that the prospect of hundreds of new jobs outweighs concerns about climate damage, but they appear rather coy about the actual business case for the development.

No business viability assessment

Mr Woodhouse’s Afan Valley Ltd has, via Nineteen47, told Neath Port Talbot Council that it is not going to submit a Business Viability Assessment. The firm is “not prepared to allow such sensitive information to be made available in the public domain. We do not consider that a request for the submission of these documents can be considered reasonably necessary in relation to either the validation or determination of the application”.

The reason, apart from a wish for complete confidentiality, is the newness and uniqueness of the “leisure brand”, i.e. there is no other UK resort with exactly the same combination of accommodation and attractions. This argument has the weakness that virtually every themed resort has to claim unique features, to encourage visitors to part with their cash.

No Business Viability Assessment, but there is a Sustainability Appraisal document, which mentions a wage bill of £12.97 million for 970 jobs in phase 1 of the park, which works out at an average of £13,371 each – bargain basement more than high end.

Beverly Hills connection

In 2018 Afan Valley Ltd announced it has “joined forces” with Landal Green Parks Ltd to develop the resort. The Landal Green Parks organisation, founded in the Netherlands in 1954, runs more than 80 resort parks catering for 2.8 million guests annually.

The chain of companies behind Landal Green Parks Ltd stretches all the way to Beverly Hills, California, to Tom Tewfic Gores and Platinum Equity Advisors Llc, which he founded and which “specialises in closing complex acquisitions across a diverse range of industries”.

The chain from Landal to Tom Tewfic Gores includes Holiday Cottages Group Ltd; the well-known UK brand Hoseasons Holidays Ltd; Compass Bidco Ii Ltd; and Compass Iv Ltd.

So, ultimately, Gavin Lee Woodhouse has a potentially very valuable connection with Tom Tewfic Gores and global acquisitions expertise.

Global investors would no doubt expect Afan Valley Adventure Resort to yield maximum returns, probably without deep considerations for damage to the global climate, or to the local environment. It will be about money brought into the valley and quickly extracted from it, much more than about money circulating within the communities of the valley to build prosperity.

That projected average salary of £13,371 is, surely, a stark indicator that rewards to workers would be tightly constrained.

When, and if, the plans are dusted down and taken off the shelf, Neath Port Talbot Council will have to make a very complicated decision, with the impacts likely to last for decades.

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

‘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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Nicholas Robert Hannah was fined £35,000 by the Guernsey Financial Services Commission in November 2016, and barred from directorships for five years, because he made false statements and was negligent in the management of Guernsey-registered Marlborough Trust Company Ltd. Fellow director Adrian Bradley Howe received the same penalty, and Marlborough Trust Company was fined £100,000. The Marlborough Trust Company is implicated in the 2009 failure of Arch Cru, a group of funds which invested £400 million on behalf of around 20,000 private investors. Marlborough Trust Company was, it appears, ultimately responsible for investment decisions over the assets underlying 23 of the Arch Cru funds held in SPVs – special purpose vehicles – for property, wine, and a company owning other companies which invested in ships.

Carbon credit and wine scams

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

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

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

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

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

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

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

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

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

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

Banking collapse

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

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

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

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

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

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

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

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

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

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

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

Beware removal of rights

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

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

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

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

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

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

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

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

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

 

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

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

[3] Article by Charlie Weston, as above.

[4] This happened at The Corran too.

[5] But registered in the British Virgin Islands.

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