Plymouth city centre’s ghost block of empty student flats is being sold to an unnamed buyer for £11m - but it will probably have to pay millions of pounds to repair the building and the deal will still leave about £30m of debts unpaid.
A progress report by joint administrators at business consultants BDO LLP has revealed that a deal has been struck to buy the Crescent Point, the huge double block of student flats in Notte Street which have never been lived in.
An unnamed purchaser has already paid a deposit and contracts will be exchanged in February 2022. But the new owner, who has not been named because a non-disclosure agreement has been shaken on, has consented to carry out repairs to defects in the towering buildings, which could run into millions of pounds to fix.
The Crescent Point saga
And the sale price will leave ICG Longbow, the lender which financed construction of the blocks and now has the freehold, out of pocket by more than £20m. And there will also be no money to pay a further £8m owed to unsecured creditors.
A BDO progress report for the six months to November 2021 said: “Based on the agreed purchase price for the property, the joint administrators anticipate that ICG is likely to suffer a significant shortfall, following realisation of the property.”
Administrators were appointed in November 2019 when Plymouth (Notte Street) Ltd, which built the Crescent Point towers, went out of business.
In the summer of 2021 ICG was approached by a potential purchaser and, after negotiations, contracts were exchanged in September 2021 with a non-refundable 25% deposit of £2.75m was paid to the joint administrators and subsequently forwarded to ICG as the initial repayment of money it is owed.
The sale is due to complete on February 1, 2022, with the outstanding £8.25m being paid to Guernsey-domiciled ICG, which has a fixed and floating charge over the entire property and the undertakings of Plymouth (Notte Street) Ltd.
However, ICG is actually currently owed £34.8m, plus ongoing interest, after seeing the debt, which was £28m in November 2019, grow due to interest accruals, fees, and loans made to Plymouth (Notte Street) Ltd of more than £3.5m.
Meanwhile, the total of claims from unsecured creditors now stand at £7,848,568 - and they are unlikely to be paid at all.
The progress report said: “Based on present information, regrettably there is unlikely to be sufficient asset realisations to enable a distribution to be made to the unsecured creditors.”
The administration has been extended until November 2022. BDO’s bill is now at £720,521, which exceeds its estimate of £453,881, because of extra work needed to identify the amount of repairs needed to put the building right. BDO and ICG have already agreed for the joint administrators to be paid £517,102 towards the cash owed.
Crescent Point was valued at £30m in December 2019, but BDO said that was based on the assumption it is fully occupied at the going market rent when sold as a going concern.
It left ICG in the unenviable position of having to either pay for expensive repairs or sell the building at a knockdown price. It appears to have opted for the latter with the unnamed purchaser now having a licence to undertake remedial work at its own cost.
READ MORE: Have you seen our South West newsletter? Sign up here for free!
The Crescent Point towers, two separate buildings of 12 and 15 floors in Notte Street, have never been occupied. The block, which cost more than £20million to build, was supposed to open in September 2018 but didn’t due to a legal row when it emerged some of the rooms were built too small.
It was constructed to house 348 students, but none have moved in and no businesses have rented the ground-floor commercial space either.
The company which owned the freehold, Plymouth (Notte Street) Ltd, part of the London-based Harouni Group, went into administration in November 2019.
The building, only completed in 2018, has serious defects which will require remedial work the costs of which “will potentially amount to several million pounds”.
The defects came to light when BDO brought in commercial property experts at JLL to give Crescent Point a thorough inspection before it could be marketed.
Meanwhile, a legal battle has been raging between Plymouth (Notte Street) Ltd, the company which managed the block Mears Ltd, and construction firm JR Pickstock Ltd, over the alleged defective works in respect of the property.
The case is being heard in the Technology and Construction Court, in the Queen's Bench Division of the High Court and has been stayed until March 1, 2022.
A separate claim by Plymouth (Notte Street) Ltd against engineers Harixon was discontinued in March 2021. Other legal cases have been decided too. In 2019, Mears Ltd v Costplan Services (South East) Ltd, Plymouth (Notte Street) Ltd, JR Pickstock Ltd was heard by the Court of Appeal.
How to contact William Telford and Business Live
Business Live's South West Business Reporter is William Telford. William has more than a decade's experience reporting on the business scene in Plymouth and the South West. He is based in Plymouth but covers the entire region.
To contact William: Email: william.telford@reachplc.com - Phone: 01752 293116 - Mob: 07584 594052 - Twitter: @WTelfordHerald - LinkedIn: www.linkedin.com - Facebook: www.facebook.com/william.telford.5473
Stay in touch: BusinessLive newsletters have been re-designed to make them even better. We send morning bulletins straight to your inbox on the latest news, views and opinion in the South West. Get our breaking news alerts and weekly sector reviews too. Sign up now - it's free and it only takes a minute. To sign up for Business Live's daily newsletters click here.
And visit the Business Live South West LinkedIn page here
Mears took court action after it emerged 56 rooms were more than 3% smaller than they should have been, and the only way to put them right would have been to demolish the building and start again. But the court found against Mears and said that while there was a breach of contract, it was not deemed “material”.
Other legal cases, involving Plymouth (Notte Street) Ltd and the companies Costplan, a quantity surveyor, and civil engineers Ramboll, have been discontinued and settled, respectively.
