west*wales*news*review

West Wales News Review — analysis with a sustainability slant

Pembrokeshire Council Burns Cash on Fuel for Under-Occupied ‘Innovation Centre’

The Bridge Innovation Centre in Pembroke Dock has modern workshops and offices but too few tenants, and that has landed Pembrokeshire County Council, the owner, with extremely high annual utility bills – around £50,000 for gas and £23,000 for electricity for this one centre, said independent councillor Tessa Hodgson (Lamphey).

“Perhaps we should turn the heating down,” she told Cabinet members on February 12th, reminding them that the workshop space had never been fully occupied.

Such high bills for empty space are hard to swallow when the county council is considering a 12.5% increase in council tax, which would take a Band D property from £883.15 to £993.54 – a rise of almost £110. And that excludes the police and crime precept, which in 2017-18 is £213.87 for Band D.

The county council is advertising workshops to let in The Bridge Innovation Centre, from £8,136 a year for 1,356 square feet to £17,616 for 2,936 square feet. The council says: “Occupiers are responsible for paying their own utilities and Business Rates and a basic rental of £6 a square foot. With the prior agreement of Pembrokeshire County Council, tenants may undertake interior alterations which can provide a full first floor which effectively doubles the floor area of the workshop. This effectively reduces rent to £3 a square foot and can create a large office space, computer rooms, clean rooms or other types of laboratory space.”

Paying for the utilities on top could be pricey, considering the burden they currently impose on the county council, but the rents appear reasonable. So why is the centre under-occupied? There is a gap between businesses which the council would like to see – high-margin digital enterprises and precision engineering firms, for example – and the businesses which do often prosper in West Wales, sole traders and micro firms in industries such as construction, food processing and vehicle repair, which have specific work and storage requirements.

Each workshop at The Bridge has an office, “generous” workspace and a plant room which houses a gas boiler, utility meters and the main power distribution board. Could it be that the space is too smart, and thus too expensive, for typical new businesses in Pembrokeshire?

PDR

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Llandeilo Bypass Route — Unsafely Close To Ysgol Bro Dinefwr?

The Llandeilo bypass could be squeezed between Ysgol Bro Dinefwr and houses in Ffairfach. 

TUESDAY FEBRUARY 13th, 2pm to 7pm in Llandeilo Civic Hall, Crescent Road — there is a public consultation about the construction of a Llandeilo bypass.

If you want to know more, you can contact Llandeilo’s county councillor, Edward Thomas, on 07842 649261, email egthomas@sirgar.gov.uk.

A leaflet delivered locally draws attention to air pollution within about 30 metres of Ysgol Bro Dinefwr, and to fears that “heavy, fast-moving traffic will threaten the safety of children travelling to and from the school”.

Talk of a Llandeilo bypass, which began in 1939, has resurfaced amid rising worry about dangerous numbers of heavy vehicles, and illegal levels of air pollution, along the A483 Manchester to Swansea trunk road where it slices through the centre of the town.

All the possible routes considered so far have drawbacks – and the lately built Ysgol Bro Dinefwr, at Love Lodge Farm, Ffairfach, could cause new and expensive complications.

The Welsh Government’s budget, agreed with the Plaid Cymru opposition in October 2016, includes a commitment to explore ways of bringing forward construction of a Llandeilo bypass.

The bypass project, which would improve air quality and road safety in the town, but would damage historic landscapes regardless of the route selected, has been prepared for dusting off a number of times, but remained shelved. In 2013 Edwina Hart, then the Welsh Government’s Minister for Economics, Science and Transport, gave a start date of 2016. Welcoming the news, Carmarthenshire County Council’s Executive Board member responsible for transport at the time, Pontamman’s Colin Evans, said the bypass would be likely to cost over £40 million.

Several routes have been proposed over the years. The Outer Western Route, not a preferred option, would slice right through the protected landscape of Dinefwr Park and the new £30 million, 1,200-pupil Bro Dinefwr school, and so is off the table.

The Inner Western Route and the Inner Eastern Route would both require a roundabout where the eastern boundary of the school meets the A476 road to Cross Hands, which is used by much traffic bound for the A48 and M4.

The Outer Eastern Route avoids going anywhere near the new school, but it also avoids meeting the A476.

The prospect of a large roundabout in the cramped space between Ysgol Bro Dinefwr and Ffairfach raises issues of risks to pedestrians and of too-close proximity to the vehicle entrance to the school, which is just yards further along the A476.

During construction works, building a roundabout between the school and Ffairfach would impede and slow down access to the school for vehicles and pedestrians.

The Welsh Government, though, said late in 2016 that it had no concerns about fitting in a roundabout between the new school and Ffairfach.

A spokesperson said: “The proposed route of the Eastern Bypass of Llandeilo has been protected for a number of years and pre-dates the construction of Bro Dinefwr comprehensive school. When the local planning authority was developing proposals for the school they consulted with our transport department to ensure that the school was positioned to take into account the proposed bypass route.”

There is less space, though, than that occupied by the A40-A483 roundabout on the eastern side of Llandeilo, and the far larger numbers of pedestrians who would need to cross the bypass roundabout would surely require wide paths, taking up even more room.

PDR

Secret Viability Reports Let Developers Escape Affordable Home Contributions

‘Private Property Rules OK’ is the philosophy of the past four decades, and has reduced the power of local government to serve communities. Section 106 agreements – named from Section 106 of the Town and Country Planning Act 1990 — are one example of ways in which the public can be short-changed.

Councils can use Section 106 agreements to require developers to contribute to community viability, often by providing money towards affordable homes.

But developers have found it relatively simple to circumvent Section 106. Specialist firms offer to do the work for them, by providing viability reports (to explain why the developer cannot afford to make a contribution). One firm, S106 Management of Exeter, set up in 2011 by property developer Robin Furby, reckons to save the developer as much as £1,000 per square metre.

The poor old public, though, doesn’t get to know how much developers ‘save’ by getting out of Section 106 agreements, because the viability reports are ‘commercially sensitive’ and therefore confidential.

Carmarthenshire’s planning committee had been hoping for an affordable housing contribution from Angela Beverley Williams’ and Huw Rhys Williams’ H R W Contracting Ltd of Betws, as part of planning permission for a six-bedroomed detached house at Hafod Road, Tycroes, but confidential calculations presented to planning officers persuaded the planning department to propose axing the contribution requirement because with it, the development would apparently not be commercially viable.

So there could be a six-bedroomed, four-bathroomed brick and tile house with double garage and workshop, presumably for occupants who are not that likely to be languishing on the council’s housing waiting list, and no contribution to making the list shorter. Could be, not definitely will be, because on February 8th Carmarthenshire County Council’s planning committee rejected the application, against the advice of planning officers. The developers can appeal the decision.

The viability assessments are not cheap, typically costing between £2,500 and £7,500, but developers expect to save far more than that.

When property developers seek to avoid paying a levy into the public purse, surely at the very least the calculations should be in the public domain and open to public scrutiny.

The Hafod Road planning application number is S/35645

PDR

Regulations Flouted? You Think Planning Authorities Must Act? WRONG!

It was news to me that planning authorities do not have to order rule-breakers to mend their ways. They can if they want to, but they do not have to.

Carmarthenshire County Council’s lawyers, Liverpool-based Weightmans, wrote in October 2016 that “the law of England and Wales does not allow an individual to recover compensation from a public body where the statutory duty or power involved did not itself confer a private law cause of action for a failure to exercise it.”

This information, in a letter to Trisha Breckman of Maesybont, told her in legal-speak that the county council’s reluctance to control industrial development on the farm next door did not entitle her to any compensation for noise/ harassment/ loss of amenity, because it was up to the council whether to allow or stop activities contrary to planning regulations.

The letter went on: “…there is the further point that the legislature had chosen not even to impose a duty but a discretion which is not justiciable in terms of the council’s decision to use the power or not.”

One implication of this ‘power not duty’ is lack of fairness. It’s easy to imagine a situation in which the planning authority forces a stop to unpermitted quarrying, say, next door to a Mr X, but allows similar activity next door to Mrs Y.

In this case, Trisha Breckman and Eddie Roberts, who live at Pantycastell Fach next to Blaenpant Farm, have spent 15 years fighting what was, in the judgement of many observers, unauthorised quarrying and haulage and the repercussions of that, and have suffered personal harassment and financial loss as a result. They bought their 6.5-acre smallholding in good faith in 2003, but have spent between £20,000 and £30,000 on legal fees and their health has deteriorated.

Trisha Breckman: a 15-year horror story 

Trisha was arrested six times on the say-so of Andrew Thomas and the late Karen Bowen Thomas of Blaenpant, and later received a full apology from Dyfed Powys Police, but no compensation.

Trisha and Eddie were also vindicated in 2012 by Peter Tyndal, the Public Services Ombudsman for Wales at the time, who said the couple had suffered an injustice and that Carmarthenshire council was guilty of maladministration.

The criticism did not open the council’s wallet, however. The ‘power’ but not the obligation to stop unlawful activities is a get-out-of-jail card for public bodies which want to avoid paying any compensation, but it also means that the victims of the unlawful activities can suffer severe financial loss with no opportunity of any recompense. This may be legal but it is not ethical. Public organisations are hard-up, yes, but a compensation fund could be started, perhaps financed by an additional premium on public bodies’ insurance policies.

A timely award from a compensation fund would have helped Trisha and Eddie to move on from the trauma and reshape their lives.

PDR

To read previous posts on this topic, type ‘Breckman’ into the search box.

Corran Missing Millions: Police ‘May Be About To Decide’ Not Pursue the Case

The Corran Hotel and Spa, on the marshlands west of Laugharne, Carmarthenshire, has swallowed some £17 million net of investors’ money, money long ago disappeared to destinations unknown (although they can be guessed). The story is chronicled here, herehere, here , and elsewhere on this blog — just search for ‘Corran’.

Courtesy of Simon Hart, MP for Carmarthen West and South Pembrokeshire, we have an update into officialdom’s investigations into the missing millions. The message is from the Financial Crime Team at the Crown Prosecution Service:

“Dear Mr Hart, I apologise for the delay in responding to your email, however I’ve been chasing the City of London Police trying to ascertain what decision they have made in relation to this matter.

“I have now received a response and it would appear that having carried out an initial scoping exercise they may be about to decide to not take it on. I am led to believe they are currently assessing the level of involvement of other interested parties, namely the FCA [Financial Conduct Authority], Insolvency Service and the SFO [Serious Fraud Office].

“I have been promised a full assessment of the review within the next 7-10 days and have been assured that we will be given the opportunity to discuss the outcome of their review.

As soon as I know more I will come back to you.”

….So the lost £ millions are not being wholly ignored, but may be in danger of being dropped down a black hole as the investigation parcel is passed from regulator to bankruptcy investigator to police and back again.

No wonder the UK is so popular with organised financial crime;  we don’t seem to be anything like world class in conducting complex, multi-layered investigations.

PDR

‘The Change We Need’ – a personal view

Leanne Wood is leading Plaid Cymru in the right direction as far as I am concerned. Hers is an open Wales, its distinct identity reinforced by decentralised socialist policies.

Leanne’s Y Newid Sydd ei Angen / The Change We Need, revealed on January 15th, places Plaid firmly on the Left but not the Statist Left. It’s about decentralisation, co-operatives, local control, planning at community level, low impact and live-work homes, community renewable energy schemes, and encouragement for new entrants to farming, horticulture and other land-based industries.

I can imagine a less-than-delighted response from certain Welsh commentators for whom ‘green’ means both ‘disreputable’ and ‘English incomer’. As an English incomer 30 years ago (although with some Welsh ancestors), I prefer Leanne’s inclusiveness. If you want to be Welsh, you can be Welsh, but being Welsh does not preclude other identities. Rural? British? European? Human? Ultimately we are all related to each other and so highlighting differences does not make sense to me.

For this reason I am not sure about Adam Price’s proposal for Arfor. Adam, MP for Carmarthen East & Dinefwr from 2001 to until 2010 when he went to study at Harvard, and AM for the same constituency from 2016, is well known and widely respected. Nevertheless, why  Arfor? This would be, as I understand it, a local government region comprising current Carmarthenshire, Ceredigion, Gwynedd and Môn (but excluding Pembrokeshire, the ‘Little England Beyond Wales’). Arfor would include the locations of all four current Plaid MPs – Jonathan Edwards in Carmarthen East & Dinefwr, Ben Lake (Ceredigion), Liz Saville Roberts (Dwyfor Meirionnydd) and Hywel Williams (Arfon).  Arfor would be the heart of Welsh-speaking Wales, answering a demand  for language protection, but would it divide rather than unite Wales, by appearing to focus on language as the organising principle?

Leanne Wood says, in The Change We Need, “The decentralised socialism of Plaid Cymru is the opposite and therefore an alternative to the top-down, undemocratic model which has been embraced historically by British Labour.

“Decentralist socialism has been one of the core aims in the constitution of the Party of Wales since the 1980s, following the failure of the centralising policies of Labour during the late 1970s which led to the election of Margaret Thatcher in 1979.”

If we have decentralised socialism as an organising principle, and this energises the whole of Wales, not just the Arfor region, language and culture will have every opportunity to thrive throughout the nation.

There are many green policies in The Change We Need, and these are shared with the non-political community interest company Calon Cymru Network, which works for sustainable regeneration in the corridor of the Heart of Wales Railway (linking Swansea to Shrewsbury). New eco homes and land-based industries, live-work affordable homes, co-operative energy generation, are all important to Calon Cymru, which is in the process of establishing a community land trust, potentially the first of several.

There’s a wider basis, of course, to The Change We Need, including proportion representation, a publicly-owned investment bank, an agricultural land bank, education for citizenship, tertiary education for all, and Leanne argues that Plaid members can be the community champions who help to realise this decentralised future through participating in local action and community projects.

It’s an exciting plan, and will be effective if enough of us make an effort to back it and work for it.

PDR

Utopia: The End

Dylan Evans has been living in Guatemala, in the hills above Antigua.  ‘So?’, one might say.

Dylan Evans has written several books including ‘The Utopia Experiment’.

The experiment, he said, failed.

The Utopia Experiment

Back in 2006, Dr Evans – PhD in philosophy — was obsessed with the notion that civilisation was about to collapse. This impelled him to sell his house, leave his job in a robotics laboratory, advertise for volunteers, load up his ancient Peugeot and drive to a valley near Culbokie on Scotland’s Black Isle, north of Inverness.  This was the site of the ‘Utopia Experiment’.

If he was hoping for a homespun paradise, he was wrong. For him it quickly became a hell from which he needed to escape. True, he had not spent enough time learning survival skills, or planning how it was all going to work, or even deciding how to set up  a genuine experiment. He funded the yurts on the campsite, the food, the tools, himself and soon started to worry what would happen when he ran out of cash. Volunteers came and went, his girlfriend didn’t want to live in a communal yurt so he rented a cottage for her and divided his time between yurt and cottage, loosening the connection between him and the project he was supposed to be leading.

He lasted about a year, on and off, before admission to a psychiatric hospital.

The process of ‘recovery’ led him to theorise that he started the venture as a result of mental illness, that civilisation was not in danger, and that he had been over-reacting.

Subsequently he worked on artificial intelligence in Cork, before settling in Guatemala to live frugally and try and make a living from writing.

‘The Utopia Experiment ‘ is more a story of a retreating obsession than ‘how to survive an apocalypse’ and because of this emphasis the message that comes over is ‘Don’t Worry’, which is just as alarming as urging everyone to live in tents in cold muddy fields. ‘Don’t Worry’ could be more a product of medication than genuine lack of concern.

At Utopia, the members of the frequently changing group did not all get on well, although they presumably shared similar beliefs about the looming demise of civilisation as we know it. Co-operation was fitful at best, and the group was really a collection of individuals with their own agendas. Even if groups start off as intentional communities, it is rare for intentions fully to coincide for long.

Channel 4’s ‘Eden’ was supposed to be a series about 23 volunteers trying to survive in a remote part of the Ardnamurchan peninsula on the other side of Scotland, in 2016-17. It was in fact the opposite of Eden. Thirteen of the initial group left and only 10 were left at the end of the year-long experiment, which was largely untelevised because of low viewing figures. There were fights, bullying, hunger and disenchantment. William Golding’s ‘Lord of the Flies’ seems to be art imitating life.

Here in Wales, there is talk of ‘scaling up’ One Planet Developments, which enable people to live in the countryside and build a house provided that at least 30% of their basic household needs are met directly from the land and the balance up to 65% indirectly, for example from running courses. Scaling up into One Planet eco-hamlets, rather than separate single-household entities, would require participants to co-operate to achieve the figures on which their planning permission depends.

‘Utopia’ and ‘Eden’  show that the consequences of scaling up One Planet Developments may be to destroy them.

The Utopia Experiment was published by Picador in 2015.

 

Housing Costs to Bankrupt the Population? Compulsory Purchase Regulations Widen Wealth Inequality

Small island, population approaching 70 million. Investors flock to put their money in land. Values soar way beyond the commercially reasonable, to the disadvantage of the economy overall, and here in West Wales, to our important rural economy.

Government does not want to upset the investors. In any case, there is a sizeable crossover between elected representatives and the moneyed class.

Meanwhile, the countryside fills with retired folk, whose demand for homes pushes up property prices beyond the reach of local people on minimal local wages. Surely we need energetic young people moving in with bright ideas for new businesses?  But land is so expensive that it is impossible to provide homes they can afford.

This year I have been carrying out a study for Calon Cymru Network, into the feasibility of a sustainable neighbourhood at Llandovery, in eastern Carmarthenshire. One of the recommendations is to make compulsory purchase cheaper by reducing the amount paid to landowners.

It was only because public authorities could buy land at agricultural value that the new towns – Stevenage, Crawley, Cwmbran, East Kilbride, Harlow, Basildon, Bracknell and many more — were built after the second world war. The new towns, and social housing estates on land also acquired at agricultural value, were important factors in the post-war economic recovery and in social advancement.

That all changed in the 1970s. Top judge Lord Denning ruled, in a landmark case in 1974, that a land vendor had the right to share in the development value of each site, not just to be paid agricultural value. That has led to protracted wranglings, delays, landowners holding out for the whole value uplift, and escalating the shortage of housing which does not pauperise its residents.

Landowners who benefit from the current get-what-you-can regime are unlikely to be enthusiastic about receiving less for their land when public bodies come calling, but change seems essential. Vendors of farmland, to be used for whatever purpose, do not have to pay Capital Gains Tax if they re-invest the proceeds in more land, and this (as well as farmland’s exemption from Inheritance Tax) reinforces their advantages over ordinary tax-paying mortals and speeds their accumulation of wealth. In less than 50 years, land has reverted to its post-Enclosure Acts status as a completely private possession.

Public-spirited philanthropists sometimes donate land for housing or other community uses. The BBC’s Countryfile programme mentioned one on November 12th, Vanora Hereward of Toller Porcorum in Dorset, who left land for affordable homes. But we can’t rely on philanthropists to solve the national housing problem.

No, we need a fairer distribution of the value gain from development, so that public and not-for-profit bodies receive half for the community, leaving half for the vendor. With farmland typically worth between £4,000 and £8,000 an acre in West Wales, and development land costing over one hundred times more, around £750,000 to £1 million per acre, landowners gain hugely from planning permission. Say that as farmland, two acres were worth £12,000. With planning permission, that same land could be £1.5 million to £1.75 million, a windfall of up to £1.49 million to £1.74 million which can be tax-free if reinvested.

If the value uplift were split, the public or community organisation would have a rebate of £745,000 to £870,000, and the vendor would receive the same amount, in addition to the agricultural value of the land. It would be cheaper to build homes, and the vendor would still make a tidy profit. The cost of building each home would fall by about £31,000 to £36,250, at a density of 12 to the acre.

The Welsh Government has probably missed a trick here. The original devolution settlement said nothing about compulsory purchase, so the Welsh Government could have launched its own regime. Now, the Wales Act 2017 says explicitly that compulsory purchase powers are the preserve of the UK Government in Westminster.

And the present government is most unlikely to upset landowners by cutting their potential for profits. The Budget on November 22nd is expected to contain announcements on housing – but if the Chancellor moves to cut the fiscal benefits of landowning, it will be a staggering surprise. Political parties don’t usually set out to alienate their big donors.

Read the report for Calon Cymru Network here. This post is in the author’s personal capacity, and is not connected in any way with Calon Cymru Network.

PDR

 

Punitive Universal Credit Threatens to Obliterate Self Employment

The contempt in which UK government ministers must hold farmers is clear from their crazily punitive Universal Credit.

Take the example of farmers who raise livestock or grow arable crops. They do not have regular income. Yet Universal Credit assumes they do.

The ‘benefit’ replaces Working Tax Credit, Child Tax Credit, Housing Benefit, Jobseeker’s Allowance, Employment and Support Allowance and Income Support. The first three have been relevant to the self-employed, like farmers, builders, painters and decorators and taxi drivers. Self-employment is a major feature of rural West Wales, and tax credits have been vital to households with low and fluctuating income. In Carmarthenshire 11% of all people aged 16 to 74, one in every nine, is self-employed. The figures are higher still in Pembrokeshire (13.5%) and Ceredigion (14.4%).

Universal Credit is due to come to Carmarthenshire in March 2018, and to Pembrokeshire and Ceredigion in May. Self-employed claimants have to submit an online form every month, detailing their net income. The particularly cruel part is the Minimum Income Floor, which assumes that everybody has a work income equivalent to at least 35 hours a week at the National Minimum Wage. That’s £7.50 for people aged 25+, so times 35 is £262.50 a week, £1,137.50 a month. So even if you earn nothing in a month, the government will assume you have earnt £1,137.50.

This applies to every month of the year – no allowances for any days off, or ill.

For farmers who receive income only a few times a year, for builders who are paid on completion of large jobs, for taxi drivers with fluctuating receipts, for small business owners in the seasonal tourism industry, the Minimum Income Floor is a denial of social security, and even more discriminatory because in those months when income does arrive, for example from sale of sheep, cattle, or potatoes, or visits from holidaymakers, claimants will rarely receive any Universal Credit at all because their monthly total will be too high!

Government argues that people with incomes below the Floor should just do more work, or persuade clients to pay them monthly instead of at the end of a contract – but how does that function when, for example, you are taking your sheep or cattle to a market? You don’t know who is going to buy them!

The self-employed do many essential but currently low-income jobs – what is more essential than producing food? – yet the new ‘benefit’ penalises them severely.

The Ulster Farmers’ Union is making a big fuss about the iniquities of Universal Credit, and in December 2016 published ‘Universal Credit in Northern Ireland: Punishing the Self-Employed’ in collaboration with the organisations Rural Support and Advice NI.

The Universal Credit for the Self-Employed “system is utterly blind to claimants with variable or seasonal income”, says the Ulster report. “The over-riding effect of the Minimum Income Floor will be to persecute hard-working, self-employed people for not having a regular income stream.”

Accountants Dodd and Co in Penrith, Cumbria, told Farmers Weekly[1] that they act for about 1,000 farmers, 30% of whom have been claiming tax credits, and who will be punished by Universal Credit.

Some people may propose that if claimants can’t earn an even monthly income, they shouldn’t be self-employed. They’d probably be the first to shout, though, when there are gaps on the supermarket shelves, when they can’t find a builder to repair the roof, or a taxi to take them to the station.

The Resolution Foundation reckoned in October 2016[2] that the median self-employment income was £240 a week, £1,040 a month. That’s an average figure which is less than the current Minimum Income Floor.

And across the UK, 4.547 million people are self-employed.

Someone in government wants to obliterate self-employment, not to mention wreaking havoc across the countryside.

 

[1] ‘Introduction of Universal Credit will punish self-employed’, Farmers Weekly Interactive, February 8 2017.

[2] ‘Typical earnings of the self-employed lower than 20 years ago’, press release October 18 2016.

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

Tenby’s prominent Carmarthen Bay Hotel , looking out to sea from above North Beach, changed hands earlier this year and had its name altered to the Fourcroft 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, previously 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 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 (previously the Carmarthen Bay Hotel)
  • Llandudno Bay Hotel, Llandudno
  • The Queens Hotel, Llandudno

The three Llandudno hotels, the Fishguard Bay and the Fourcroft, 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.

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