Newcastle-based developer High Street Group has sought to dispel mounting uncertainty over the status of its projects, including Middlewood Plaza in Salford, as administrators investigate the cause of a related subsidiary’s collapse.
A spokesperson for High Street Group said that the 127-apartment Middlewood Plaza private rented sector project is on track to complete next April. But question marks remain over the funding liabilities of the scheme’s delivery vehicle and how that will impact investors, according to court documents seen by Place North West.
The spokesman said: “We can’t comment on the activities of the administrators at the moment but we are in contact with them frequently and are all working together to ensure the success of the projects and the best outcome for all involved.”
“Middlewood will be our next project to complete and is due to complete in April 2021.”
Paul Allen and Ben Woolrych, restructuring specialists at FRP Advisory Services, were appointed to handle the administration of High Street Rooftop Holdings, part of High Street Group, on 30 September.
High Street Rooftop, which specialised in developing residential units on rooftops, mainly in London, collapsed after losing a High Court battle with a creditor over its failure to repay around £20m in loans from Korean backers.
The creditor, Strategic Advantage, is a Cayman Islands-registered firm that invests “on behalf of Korean blue-chip investors” via the provision of short-term loan facilities, according to documents from the court case.
Through an intermediary firm called Hypa Asset Management, Strategic Advantage invested £26m into projects run by High Street Rooftop in 2018. High Street Rooftop promised investment returns of 16.5% and that the loans would be repaid within 18 months by January 2020, the documents state.
However, the company was unable to make the payments. High Street Group chairman Gary Forrest told the court that soon after borrowing the money in July 2018, “it became clear that the rooftop developments would not proceed to completion quickly enough for the company to meet its repayment obligation due to delays in obtaining planning permission”.
Transfer of loans
Forrest suggested to his backers that £20m of the loans be redeployed to other High Street Group PRS schemes, including the £29m Middlewood Plaza being delivered by special purpose vehicle Rodus Developments, and three projects outside the North West.
Once complete, Middlewood Plaza is to contain 127 apartments, townhouses and duplex apartments across a split-height block of six and nine storeys, in Salford.
United Living, main contractor appointed by Rodus, started on site at Middlewood Plaza last February. One of the project’s backers is named in the court documents as Topland Jupiter, part of one of the UK’s largest privately owned investment firms, Topland Group.
The court documents show that by September 2018, High Street Rooftop had entered into onward lending agreements with other companies in the High Street Group, meaning that the funds owed to Strategic Advantage would be tied up in the PRS schemes and not be able to be repaid until each of those projects completed.
Strategic Advantage sought to recoup the money through the High Court case, claiming it did not agree to a longer repayment schedule. But High Street Rooftop argued against the claim on the grounds that none of the PRS delivery vehicles liable to repay the funds had defaulted on any repayment terms.
The judge ruled in favour of Strategic Advantage, concluding that High Street Rooftop was liable to repay the loans and subsequently forcing it into administration. It is now down to FRP Advisory to ensure that creditors are repaid.
During the court case, Forrest warned that “an insolvency event for one of the companies in the group is likely to have wide-ranging and serious implications for the rest of the group, which could be catastrophic for the individuals concerned, with some 300 full-time employees and 1,000 subcontractors being affected.”
‘No impact’ on group
The High Street Group spokesperson told Place North West that the rooftop subsidiary “is a non-core business that has been adversely affected by the Covid-19 pandemic.
“The board took a strategic decision to withdraw from this niche market and is now in negotiations with the administrator to reach agreement with the creditor.
“The case was three months ago and since that time it has had no impact on the wider group. The rooftop business accounts for a tiny proportion, 2%, of the operation of High Street Group, which has £1.2bn of fully funded developments underway. There are no redundancies related to this [case].”
A spokesperson for the joint administrators of High Street Rooftop said: “Paul Allen and Ben Woolrych were appointed…on 30 September 2020 and remain focused on a review of the company’s pre-appointment activities and causes of insolvency.”
High Street Group has not filed accounts with Companies House since 2017. As well as Middlewood Plaza, its other interests in the North West include Anchorage 3 and 4 at Salford Quays, which Place North West reported last December the group was buying from HIG Capital to bring forward a 130-apartment office-to-residential scheme.
Another subsidiary, High Street Residential, entered into a joint venture with developer Logik Developments in January to deliver a £100m, 355-apartment scheme designed by SimpsonHaugh architects at Arundel Street in Manchester’s Castlefield district.
The High Street Group spokesperson said: “I can confirm that both Anchorage and Arundel as well as Middlewood Plaza are still in our pipeline of projects and that everything is moving ahead as planned.”
The spokesperson added: “The rooftop business made up a tiny proportion of the larger groups activity and we are confident matters will be closed amicably in the coming months.”
- An earlier version of this story incorrectly stated that Middlewood Plaza was part of a wider masterplan for Scarborough Group International’s Middlewood Locks project. We are sorry for the mistake.