Buyers who put down deposits to secure flats in a planned landmark £99m Salford Quays scheme have been told they might not get all of their money back after the company behind the development went into administration.
Planning permission had been granted in December 2019 for a 26-storey building which would feature 421 apartments.
However work never started on site and advisory firm Kroll was appointed to oversee DeTrafford Wavelength Ltd in August because of overdue debts. The wider DeTrafford Group is not impacted by the administration of DeTrafford Wavelength Ltd.
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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".
According to a new document published by Kroll on Companies House, DeTrafford Wavelength Ltd had collected c.£10.8m in deposits from investors buying the around 300 apartments off plan. It also owed lender Whitecraigs £4.1m and £235,618 to unsecured creditors.
Kroll said it is currently taking steps to obtain sufficient information about the deposits to undertake a review and take legal advice on the correct position and treatment of the money and investors.
It added: "At this stage it is too early to confirm the outcome of the review, although we are aware that investors may also have the benefit of a [National House-Building Council] NHBC insurance product which may provide a level of protection for the amounts paid.
"The joint administrators have entered into communication with the NHBC with regards to the position but would also advise individual investors to discuss their insurance product direct with the NHBC."
Kroll added that, based on company records and the joint administrators' experience of similar administrations, it is "likely that realisations will be sufficient to allow a distribution to certain investors but this may not be equivalent to the full value of their initial investor.
"The precise distribution to be made will be dependent upon the value obtained for the property."
Kroll added that it is "likely that realisations will be sufficient to allow a distribution to Whitecraigs but this may not be equivalent to the full value of the balance outstanding".
It also said it is unable to confirm any dividend prospects to unsecured creditors. It added that any payment will be "dependent upon the outcome of the asset realisation strategy identified, the level of claims admitted and the costs of the administration".
The DeTrafford group has operated for more than 30 years and has delivered over 641 homes in the last three years, with an approximate sale value of £176m.
DeTrafford Wavelength Ltd was the company through which the purchase of the land and buildings at Navigation House in Salford could be completed.
Planning permission was granted in December 2019 to knock down the existing three-storey Navigation House and to deliver the scheme. However, no work has taken place since then while some 300 have been sold off plan.
DeTrafford had put the scheme up for sale in March this year but no buyer was secured.
On why the company entered administration, Kroll said: "As a result of the global pandemic the company encountered a number of challenges which resulted in trading losses.
"These challenges, and the global economic position at the time, made securing additional funding to commence the development difficult to achieve.
"Such challenges included (1) contractors entering administration, together with OSA design faults (2) additional interest costs (3) a sale slow down due to Brexit and (4) staff expansion and dispansion costs.
"The site was subsequently placed on the market and a firm of independent agents were engaged to handle the sale.
"It was hoped a buyer with sufficient funding to deliver the development could be found. However, no formal offers were received by the agents.
"The joint administrators do through understand, from the director, that interest remains in the site.
"Whilst this interest was being progressed the company received a winding up petition for unpaid investor liabilities totalling £725,000."
The property is subject to planning permission pre-conditions that must be met by December 6, 2022, including the safe demolition of the existing commercial building.
Kroll said it is working with the director and existing planning consultants to meet the conditions so that the permission can be preserved. However the firm said it may require additional third-part funding.
Kroll said: "If such planning permission was to lapse, the joint administrators are advised that this would be value-destructive and therefore would likely result in a worse outcome for the creditors of the company due to a reduced sale price for the property.
"Accordingly, the joint administrators consider that the provision of third-party funding would benefit and be in the best interests of the creditors or the company and ultimately result in an increased sale price for the property."
DeTrafford has been contacted by the Manchester Evening News for comment.
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