Over £50m was owed by the business behind a planned luxury apartment development in Manchester as it entered administration.
De Trafford No1 Castlefield Limited had been set up as a special purpose vehicle within the DeTrafford group to construct the No1 Castlefield development, a 419-unit luxury residential development to be located on Ellesmere Street.
BusinessLive reported at the end of May that Rick Harrison and Howard Smith from Interpath Advisory had been appointed joint administrators.
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Now, a newly-filed document with Companies House has outlined how the business collapsed and how much it owed to its creditors when it entered administration.
Background
DeTrafford No1 Castlefield Ltd was incorporated in May 2016 to act as a special purchase vehicle through which the acquisition of land in Ellesmere Street, Manchester, could be completed.
The land was bought in order to build a mixed-use development of 419 apartments in five multi-storey blocks as well as 2,997 sq m of commercial and leisure space. The development was to be known as No1 Castlefield.
Planning permission was granted in July 2018 while the land was acquired in November of that year.
How did the company collapse?
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Residential units within the scheme were sold to investors off-plan in exchange for a deposit from which, together with development funding, the company could start construction.
However, construction stalled and did not progress beyond the light-industrial units on the site.
In its document filed with Companies House, Interpath Advisory said: "With construction not progressing, the company began to face increasing creditor pressure from investors who had reached their contractual long-stop dates.
"Whilst the company was able to renegotiate long-stop dates with some investors, several others wished to rescind their agreements and crystallise repayment of their deposits (and other associated fees), placing pressure on the company's available working capital.
"Faced with a lack of funds to recommence construction, the company director attempted to attract new funding.
"Ultimately, no new funding was secured and the company's financial position continued to deteriorate despite off-plan sales continuing to be taken."
How much does the company owe?
Before entering administration, 331 apartments had been sold generating over £13.4m in investor deposits.
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Funding of £9.7m was also provided by Endless Bridge in November 2018 who was due to be repaid on or before November 21, 2019.
With the company unable to make the deadline, default interest rates kicked in, bringing the balance due at the date of Interpath's appointment to over £37.3m.
Interpath said it does expect there will be sufficient funds to make a distribution to Endless Bridge but that it will "suffer a significant shortfall".
It added that there is likely to be enough money to make a payment to "certain investors" but not to ordinary preferential creditors, secondary preferential creditors or unsecured creditors.
What's happened to other DeTrafford companies?
The firm is the latest DeTrafford company to enter administration after those behind Gallery Gardens, St George’s Gardens, City Gardens, Wavelength and Sky Gardens.
The company behind St George’s Gardens, an 11-storey apartment building that includes 138 flats and was completed in 2020, owed almost £50m when it entered administration.
In October 2022, investors in the £99m Wavelength 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.
In April this year, BusinessLive reported how almost £40m was owed by DeTrafford Sky Gardens, the property company behind an apartment block near Manchester city centre when it entered administration.
It was also reported in April that more than £40m was owed to creditors when two of the companies behind the planned £94m DeTrafford's Gallery Gardens scheme in Castlefield collapsed into administration.