Bulk sale of failed DeTrafford Sky Gardens flats starts at £6m

Roger Hannah is advertising the opportunity to acquire 36 apartments and 17 car parking spaces, after the Manchester scheme went under this year leaving behind debts of £39m.

Situated in the Castlefield neighbourhood, the 166-apartment Sky Gardens was the fourth DeTrafford project to enter administration within this past year. The other three are St George’s Gardens, City Gardens, and Wavelength.

BPO was appointed as the administrator for the special vehicle for Sky Gardens in January.

The bulk sale comes at the order of BPO to help recoup money for creditors. The 36 apartments on the market are a mix of single-floor units, duplexes, and triplexes. All require snagging work, some require reconfiguration, and others are subject to UN1 notices on titles.

Agent Roger Hannah is accepting offers of £6m or more for the long leasehold of the property, which equates to £265.09/sq ft for the apartments and £20,000 per car parking space.

In an administrator’s report, BPO outlined how DeTrafford Sky Gardens collapsed.

The report begins with the formation of the DeTrafford Sky Gardens special purpose vehicle in 2014. The SPV is owned and controlled by Gary Jackson. The project was largely funded by a £28m loan facility from Daiwa.

Challenges facing the project included the administration of main contractor Pochin Construction in August 2019. A new contractor, DT Construction, then found issues with the design of the building. This led to delays and increased costs. The Covid-19 pandemic further slowed construction.

DeTrafford introduced a marketing incentive for the sale of the apartments that provided owners with up to two years of guaranteed rental income. DeTrafford entered into an agreement with NPP Residential to lease these units in order to offset the cost of the rental guarantees to the unit owners.

However, many of these apartments were not let. This led to owners not receiving all the payments due to them under the rental income guarantee. “Substantial arrears began to build up”, the report stated.

DeTrafford then entered negotiations with another investor to buy the remaining 36 apartments – the ones currently for sale by Roger Hannah. While this deal was being worked out, a winding-up petition was presented by a creditor with an outstanding debt of £120,000.

“The company was unable to negotiate acceptable payment terms, had insufficient funds ot settle the petition debt, and insufficient time to complete a refinance”, the administrator’s report continued.

This led to funder Daiwa, through agent CBRE, to appoint administrators to the scheme.

Daiwa is owed £25m according to the administrator’s report, of which it is expected to receive £8.5m. None of the other creditors are expected to recover their investments, including Maslow is owed £11m. Unilateral notice holders are owed £249,000. Unsecured creditors are owed £2.4m.

Read the administrator’s report on Companies House.