West Wales News Review

Economy, environment, sustainability

Archive for the tag “Afan Valley Adventure Resort”

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 24th 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 31st 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 27th 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 6th 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.


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 14th 2016 to March 31st 2017, is controlled by Northern Powerhouse Developments Adventure Resorts Ltd, set up in September 2016 with Gavin Lee Woodhouse as director, dormant at March 31st 2017 with assets of £1, and which is turn is owned by Active Resorts (UK) Ltd, dormant at March 31st 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 31st 2017, are for a dormant company with assets of £1.

On December 5th 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 31st 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 31st 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 LtdCompass 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.


‘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 21st 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 31st 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.


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.

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