The company behind an apartment building on the edge of Manchester city centre racked up almost £40m in debt as it collapsed into administration, it has been revealed.
The business was behind the 13-storey Sky Gardens development in Chester Road which includes 166 flats. BDO was appointed to oversee the process at DeTrafford Sky Gardens earlier this year.
In a newly-filed document with Companies House, BDO revealed that secured creditor Daiwa was owed £25.1m while Maslow was owed £11m. Other secured creditors were also owed £249,000. Unsecured creditors were owed £2.4m, the document also shows.
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BDO added that it's estimated that Daiwa will be the only creditor to receive any or part of their money back. That is currently forecast to be just £8.5m.
Background
The company was set up in 2014 and is owned and controlled by Gary Jackson, DeTrafford's founder and chief executive. The special purpose vehicle was created for the development of the apartment block in Chester Road, Castlefield.
The property includes 166 flats, two commercial units and basement car parking. It does not have any employees.
When BDO was appointed, 36 of the apartments had not been sold. In December 2016, Daiwa provided a loan facility of £28m to the company to fund the development.
How the company entered administration
In August 2019, main contractor Pochin Construction was placed into administration and ceased to trade. DT Construction, an associated company, was then appointed as the main contractor which was then required to hire a new team and deploy resources from other projects.
BDO said: "Construction identified further errors with the design of the building which required correction, which led to further delays and increased costs. During the Coronavirus pandemic, the company faced a number of delays, cost increases and supply chain issues which negatively impacted the business and the wider DeTrafford group.
"It also resulted in an inability to show units to potential purchasers and the availability of funding for prospective purchasers was consequently impacted by the general negative effects of the pandemic. These factors resulted in a fall in demand for the completed units during the pandemic.
"In addition, the wider DeTrafford group had previously faced severe delays relating to a separate development following the failure of the same main contractor, which resulted in significant resources and management time being incurred to resolve the position."
Shortly before BDO was appointed, DeTrafford Sky Gardens entered into negotiations with a third-party investor to purchase the remaining 36 apartments, the parking spaces and the two commercial units.
However, a winding up petition was filed against the company by a creditor with an outstanding debt of £120,000. The hearing was due to take place on January 31, 2023.
BDO added: "The company was unable to negotiate acceptable payment terms, had insufficient funds to settle the petition debt and insufficient time to complete a refinance. Accordingly, Daiwa sought to appoint administrators to the company to take control of the assets and protect its position."
Assets
BDO said the total sales value of the 36 unsold flats was £9.96m prior to its appointment. It added that its property agents estimate that if a bulk sale of all the units was completed, "the total amount realised may be subject to a significant reduction".
BDO said: "The company received an offer for a bulk sale of the remaining units before the appointment of the joint administrators, which is currently being explored. There has also been additional interest since our appointment."
The two commercial units are leased to Tesco and a pizza restaurant and have an estimated value of up to £2.3m.
The wider group
It was the fourth DeTrafford company to enter administration after St George’s Gardens, City Gardens and Wavelength.
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.
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