The administrators of collapsed developer Pinnacle (Angelgate) are to auction the long-stalled plot in Manchester for a guide price of more than £5m, potentially leaving the scheme’s original buyers £23.7m out of pocket.
Administrators Moore Stephens have said proposals to build out the project according to its original planning permission, a 344-home, two tower development, were “not feasible” owing to a funding gap, leaving them with no option but to sell the two-acre site.
Moore Stephens has instructed Lambert Smith Hampton on the sale at online auction with offers over £5m invited.
If the site is sold, the administrators have previously estimated buyers would receive 21.5p in the pound, while unsecured creditors were likely to receive nothing.
Speaking to Place North West, administrator Duncan Swift said Moore Stephens had found “no reason to change” their original estimates, leaving the buyers in line to lose nearly £24m.
“We had a two-stage process to see if the project could be delivered to its original specification and received several build-out proposals, but concluded they weren’t feasible,” he said.
“None of the proposals addressed how construction costs could be paid as there is quite a funding gap, and that was not bridged in any of the proposals. That’s why we have decided to bring the site to auction.”
The site has been largely empty since the collapse of developer Pinnacle (Angelgate) last year, which entered administration in September, claiming to owe £30m to its creditors.
Pinnacle (Angelgate) is a special purpose vehicle for developer Pinnacle, which continues to trade. Another of company’s businesses, Pinnacle Student Developments (Liverpool), entered administration earlier this year.
Pinnacle won planning permission for a £77m scheme on the site in 2013, but in an administrators’ report filed in December, the company was found to have spent £28.7m of investors’ money despite little to no construction work taking place.
The investigation found that construction costs on the project had nearly doubled in just nine months, rocketing from £22.1m to £43m. PHD1 was originally attached as contractor but exited the scheme in 2016, before collapsing into administration.
The developer said it had appointed Goodwin Construction as main contractor, but the company’s director Richard Goodwin told Place North West in December his firm was never formally appointed and had only agreed to carry out a pre-construction deal for £70,000.
He also confirmed his company was still owed £50,000 by Pinnacle (Angelgate), and expressed an interest in continuing the build-out of the site under a new developer.
Goodwin was one of a number of companies, including other main contractors, to express an interest in building out the site to the original proposals, and told Place his firm was “hopeful” of delivering the original scheme for £36m.
However, it is understood that other ‘top tier’ main contractors had priced the original job at between £45m and £50m.
A deadline of 17 January this year was set by the administrators and LSH for any interested party to lodge build-out proposals for the site, and while several of these were received, it is understood the project is unlikely to be brought forward in its original form due to the funding issue.
LSH added it was “likely” that any new owner would review the site’s existing plans, and “enhance the planning permission with a higher density development”.
In a statement of affairs by Pinnacle director Carl Mills, it was claimed the company’s creditors, largely overseas buyers of the apartments, are owed between £50,000 and £150,000. However, this was disputed by the administrators and it is understood the monies owed could be significantly higher as a number of creditors were not listed by Mills.
According to Mills, Pinnacle owed £17.8m to 196 creditors who paid a deposit for apartments at the development’s Block A, and £12.8m was owed to 148 creditors for Block B. The amount each creditor was owed varied depending on whether a deposit was placed on a one-bedroom or two-bedroom apartment, and the amount paid for each property.
The statement of affairs also valued the site at £9m, but the administrators said they did not know how this figure had been calculated or whether this was “based upon any agent’s valuation”.
It is understood the developer is also still under investigation by the North West branch of Action Fraud.
Interested parties will be required to pre-register to bid and provide LSH with a holding deposit of £500,000, together with proof of identity, address and source of funds to comply with UK anti-money laundering regulations. The auction is due to begin on Monday 23 April at 9am and will conclude on 26 April at 2pm.
Action Fraud and Goodwin were both approached for comment. Irwin Mitchell, which represents the buyers, was also approached.