Prospective home owners will have to wait to see if they will receive any of the £4.4m they are collectively owed following the collapse of the company behind a Salford Quays apartment scheme.
Furness Quay Phase 1 Limited entered administration at the start of November after the transformation of the former Custom House office building stalled.
Investors first put down 50% deposits in 2017 ahead of work starting on the 44-apartment development.
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However, work came to a halt and Begbies Traynor was appointed as administrator after a number of proposals were rejected by the leaseholders.
Construction at the Salford Quays site was initially expected to be completed in 2018. In December 2021, that date was pushed back to late 2023.
On the prospect of the leaseholders getting their money back, Begbies Traynor said: "In the event that a sale of the head lease can be achieved, it is anticipated that realisations will be sufficient to facilitate a distribution to unsecured non-preferential creditors, however, due to the uncertain extent of the eventual realisations, it is not possible to provide an estimate of the rate of any eventual distribution at this early stage of the process."
The company was set up in July 2016 by Kieran Moore, Darren McClellan and Gareth Morgan as part of the Fortis Group. All three resigned in July 2022 and were replaced by Carl Roland as the sole director.
It was established to buy a 999-year long lease of a plot of land containing the vacant Custom House office building in Salford Quays. That was acquired from Furness Quay Limited, a connected party freeholder, for over £2m.
The original plan was to strip down the building to its concrete frame and use it to construct a new residential development containing 44 apartments. The new scheme would have been called Herreshoff.
All of the flats were sold off-plan in 2017 with £4.44m received through deposits. The deposits were used to pay for the lease of the site, with around £2.38m remaining for the demolition, build and professional costs of the project.
Begbies Traynor, in a new document filed with Companies House, said: "Following initial work to strip down the existing office building, it was eventually determined that the costs of the remedial works required to the current concrete frame, along with quickly rising labour and materials costs following the effects of Brexit and thereafter the pandemic, would make the planned development commercially unviable. As a result, the project reached an impasse."
Begbies Traynor added that since work stopped offers were made to the leaseholders by Fortis including being asked to relinquish their leases and turn their deposits into loans or take up a discount on a unit in a revised development.
The firm added that in September 2022, there was a proposal where the leaseholders would receive 40p in the pound back on their deposits, with Fortis then looking to refinance the site and proceed with new planning permission for a 153-flat development that would not be based around the existing frame.
Begbies Traynor said: "However, it was not possible to achieve the unanimous or even majority agreement of the leaseholders to the proposals put forward, with certain leaseholders expressly rejecting the offers, and others not engaging."
It added: "It was also clear that there had been a general breakdown in confidence in Fortis on the part of the leaseholders, who understandably felt let down having paid substantial deposits for a project that had not progressed for several years.
"The prospect of achieving a workable resolution therefore seemed unlikely, particularly given that, due to the proprietary rights created by the leases, any sale of the head lease for market value would require the unanimous agreement of all leaseholders, and further that in view of the disenfranchisement and lack of engagement from certain leaseholders, this would be very difficult to achieve."
The administration of Furness Quay Phase 1 Limited comes after BusinessLive reported in March that over £12m was owed by the developer behind a 900-home scheme in Salford Quays before it entered administration.
Begbies Traynor was appointed as administrator to Beaumont Morgan Developments in January with all 22 employees made redundant. The firm was the construction arm of Fortis Group and was based at Lancastrian Office Centre on Talbot Road in Stretford.
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