More than £40m was owed to creditors when two of the companies behind a planned £94m development in Manchester collapsed into administration, it has been revealed.
The two businesses were connected to DeTrafford's Gallery Gardens scheme in Castlefield which has planning permission for a 19-storey and 13-storey tower with 366 apartments in total.
The Gallery Gardens scheme had been earmarked for land at the corner of Hulme Hall Road, Chester Road and Ellesmere Street and has been approved by Manchester City Council in 2020.
READ MORE: Click here to sign up to the BusinessLive North West newsletter
However the two companies, DeTrafford Gallery Gardens Block A Ltd and DeTrafford (Regiment) Limited, fell into administration earlier this year, with business restructuring partners Kerry Bailey and Lee Causer at BDO appointed to oversee the process.
No information has been provided on the future of DeTrafford Gallery Gardens Block B Ltd while no work has taken place on site since permission was granted. The wider DeTrafford group is not impacted by the administrations of the two companies.
How much did the companies owe?
According to a new document filed by BDO with Companies House, creditors were owed more than £40m when the businesses entered administration.
The largest creditors included Daiwa which was owed a total of £25.1m while Maslow was owed £11m - both via a cross guarantee.
However, BDO said only Daiwa is expected to receive any money back, an estimated £1.2m.
Unsecured creditors of DeTrafford (Regiment) Limited were also owed £7.2m while the unilateral notice holders were owed £2.1m.
The background
Both companies are special purpose vehicles created for the development of residential apartment blocks in Manchester city centre known as Gallery Gardens.
They own two parcels of land at the former Manchester Regiment Hotel and at the Till & Whitehead Warehouse, at the junction of Ellesmere Street and Hulme Hall Road in Castlefield.
The proposed development comprises two blocks for 366 apartments in total.
Planning approval was granted in May 2020 but no work has ever started on site.
BDO said it understands that 84 apartments have been pre-sold, with a total of £2.1m having been received in deposits and reservation fees.
How did they fall into administration?
During December 2016, Daiwa provided a loan facility of £28m to an associated company, Sky Gardens.
The companies provided additional security to Daiwa in relation to the debt due to Sky Gardens by way of a cross guarantee.
In December 2022, a winding-up petition was presented against Sky Gardens by a creditor with an outstanding debt of £120,000.
BDO said Sky Gardens "was unable to negotiate acceptable payment terms, had insufficient funds to settle the petition debt and insufficient time to complete a refinance".
BDO added: "It is anticipated that Daiwa will be reliant upon the cross guarantee provided by the companies to recover some of the anticipated shortfall in Sky Gardens.
"The companies were unable to repay Daiwa when it made a formal demand for repayment of its loan and debts due under the cross guarantees. Accordingly, Daiwa sought to appoint administrators to the companies to take control of the assets and protect its position".
The wider group
The companies are the latest DeTrafford firms to collapse into administration after 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.
Earlier this month, 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.
READ MORE:
Sales rise at Jaguar Land Rover after 'gradual improvement in chip supply constraints'
Bruntwood SciTech secures £100m in green funding to aid expansion plans
Long-serving DPD boss Dwain McDonald succeeds DeliveryApp founder as CEO
Aer Lingus set for Liverpool John Lennon Airport return after seven years
