YPG Investar Islington House, the vehicle delivering the 413-apartment Fabric Village in Liverpool, has entered administration after a deal to secure development funding for the project fell through due to the pandemic.
“I feel devastated about the whole situation. The pandemic has crippled parts of our business,” YPG director Ming Yeung told Place North West.
Yeung said the company had agreed an £18m financing deal with Maslow Capital prior to the pandemic but that when concerns over the impact of the pandemic grew in March 2020, Maslow pulled out.
When the pandemic hit, YPG had taken deposits for 163 of the 219 apartments in the Fabric Village first phase, known as Fab 1. Sales were suspended in March 2020, Yeung said.
YPG had earlier taken out a £3.3m bridging loan from Cynergy Bank to buy the Fabric Village site from Downing, a plot off Islington and Gildart Street.
The developer had hoped to repay Cynergy once the Maslow Capital deal had been finalised.
After Maslow pulled out, Cynergy extended its facility beyond the originally agreed period but then sought to recoup its money by appointing administrators to YPG Investar Islington House, as first charge holders.
Earlier this year, YPG had agreed another funding deal with London Wall Lending to repay Cynergy and ward off the threat of administration.
However, before that deal could go through, YPG discovered that 70 out of 163 investors held unilateral notices on the land.
UN1s secure an individual’s investment and are designed to ensure creditors are repaid in the event of administration.
With UN1s in place, a new lender’s position is riskier, Yeung explained. As a result the deal with London Wall could not complete until they were removed.
“UN1s are the death knell to development finance,” Yeung said.
Yeung set about engaging with investors to remove the UN1s in order to progress the London Wall agreement and managed to do so in 57 instances.
The director hoped that he would be able to ask the courts for more time before administrators were appointed in order to complete the London Wall deal and pay Cynergy back.
However, the final 13 UN1 holders did not agree to remove the notices, scuppering the funding deal, Yeung said.
As a result, Cynergy could not be repaid and the lender appointed FRP Advisory as administrator last week.
FRP’s David Shambrook and Phillip Reynolds will oversee the administration according to a London Gazette filing. FRP was contacted fro comment.
“I am working with [the administrators to find a solution,” Yeung said. “The majority [of investors] are still keen to see the development go forward.”
Yeung backed this up by claiming that 75% of investors had signed deeds of variation in relation to the Fabric Village project, effectively acknowledging it would take longer than originally planned to recoup their investment.
The appointment of administrators casts doubt over the future of the Fabric Village project. But there is hope for investors, whose deposits are insured, according to Yeung.
Two policies totalling around £350,000 to insure two-thirds of each deposit paid to YPG were taken out, Yeung said.
Fabric Village was granted approval in 2017 but little work has occurred at the site.
Split across three blocks reaching 10-storeys, the apartments were available from £95,000, according to the Fabric Village website.
YPG Investar Islington House was one of many special purpose vehicles set up Yeung to deliver projects.
Another, YPG One Baltic Square, sold the site of a 296-apartment scheme on Grafton Street to Nexus Residential for an undisclosed sum earlier this year. Yeung resigned from that company following the sale.
The news of the Fabric Village vehicle’s collapse follows the appointment of liquidators to contracting arm North West Development Consortium – formerly YPG Group – last year.
Liquidators were appointed after creditor McDermott Building and Civil Engineering launched a petition to wind the company up over unpaid debts.
In April, the Liverpool Echo reported NWDC owed creditors £9m and that investors in its various schemes were concerned
YPG’s other Liverpool projects include the Fabric District Residence also on Islington, the 204-home Kings Dock Mill and Hamilton Hub a £12m student scheme in Birkenhead.