The developers behind an 11-storey apartment building in Manchester owed nearly £50m when they entered administration, it has been revealed.
The Spinners Way development, named St George’s Gardens, was completed towards the end of 2020 and features 138 flats.
A total of 127 of the one and two-bedroom flats have already been sold. Administrator BDO is currently seeking buyers for the remaining units. The company owns the last 11 apartments which are valued at around £2.8m in total. It also owns a ground floor commercial unit at the development which is valued at £150,000.
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The firm, St Georges Gardens Ltd, is part of the massive DeTrafford Group. But, DeTrafford will not be impacted by St Georges Gardens going into administration on September 5, the MEN understands.
Now, a newly-filed document with Companies House has revealed how St Georges Gardens Ltd fell into administration and how much it owed to creditors. The company was incorporated in April 2015 and is owned and controlled by DeTrafford CEO Gary Jackson.
The firm is a special purpose vehicle (SPV) which was created for the development of St Georges Gardens. The business does not have any employees.
Documents show another company, Maslow, was owed around £11m when St Georges Gardens Ltd entered administration while Daiwa Capital Markets Europe was owed £29.9m.
The papers also show that unsecured creditors were owed more than £4.2m. BDO said that, based on current information, it does not anticipate that there will be enough funds to distribute to unsecured creditors.
The BDO document confirms that £2.4m was owed to St Georges Gardens Ltd by DeTrafford Construction Limited, £93,000 by DeTrafford Great Jackson Street Limited and £150,000 by DeTrafford Wavelength Ltd, which is in administration.
On the events leading up to the firm entering administration, BDO said: "During the Coronavirus pandemic, the company faced a number of delays, cost increases and supply change issues, which negatively impacted the business and the wider DeTrafford group.
"In addition, the wider DeTrafford group had previously faced severe delays relating to a separate development following the failure of the main contractor, which resulted in Signiant resources and management time being incurred to resolve the position.
"In addition, there were a number of errors with the design of the building which required correction, which led to construction delays and further increased costs.
"The Coronavirus pandemic also resulted in an inability to show units to potential purchasers and as such resulted in a fall in demand for the completed units during the periods of national lockdowns."
BDO was jointly engaged by the company and its main creditor, Maslow, in September 2020 to carry out a review of its short term cash flow forecast, its creditor position and costs to complete the development.
That review identified that the company "may not be able to repay the debt" due to Maslow when its loan facility matured "due to difficulties in disposing of the residential units".
The Maslow facility, a £26.3m loan it provided in November 2018, expired in January 2022 and penalty interest began to accrue due to late payments.
BDO was again engaged in June this year to monitor sales of the remaining apartments, which would allow the company to complete a proposed refinance of the loan facility.
However, a winding-up petition by a creditor with a debt of £81,000 was presented and St Georges Gardens Ltd was "unable to negotiate acceptable payment terms, had insufficient funds to settle the petition debt and insufficient time to complete a refinance".
BDO added: "Accordingly, Maslow sought to appoint administrators to the company to take control of the assets and protect its position".
The news comes after investors in a £99m DeTrafford project to build more than 400 apartments in Salford Quays were warned they might not receive their full deposits back after the company behind the scheme entered administration.
Kroll was in August appointed to oversee DeTrafford Wavelength Ltd, the business through which the 26-storey scheme, featuring 421 apartments, was expected to be built.
However, no work has ever started on site since planning permission was granted in December 2019 and the company was forced into administration because of overdue debts.
Kroll is now seeking to meet certain planning conditions by December 6 in order to avoid permission lapsing which has been described as "value-destructive".
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