Retail investors who backed high-risk mini-bonds from Magna Group are continuing legal action after the company was this week shut down.
Magna targeted small investors with various loan notes with a minimum buy-in of £10,000, promising annual returns of 12%, rising to 18% over three years. Following an investigation by the Insolvency Service, seven companies were wound up by the High Court, including special purpose vehicles for its loan notes and companies dedicated to assets and operations.
EG has followed Magna’s downfall over the past five years, from its initial grand ambitions to build a £1bn residential portfolio using permitted development, challenges with lenders and losing all its schemes.
Yet, while investors coughed up more money and agreed to delay repayment amid loan note defaults, the Insolvency Service reveals the two founders still paid themselves £425,021, with a further £370,471 paid to a non-UK company, of which the founders were shareholders.
While the FCA has clamped down on this type of retail investment, similar loan notes pitched to more experienced high-net-worth investors continue. They too still face challenges.
In 2018, High Street Group raised £100m in a seven-year loan note promising annual returns of 12%, rising to 22% in the seventh year. High Street Group claims to be the biggest BTR company in the UK, with a £1.5bn pipeline of projects.
However, in June, amid delays in development and a slowdown in investment, the group asked investors to waive their right to draw funds, preventing early redemptions. This month, the business High Street Group plc ceased to exist, being rebranded Hadrian Real Estate. Chairman Gary Forrest is no longer with the company, replaced by Andrew Marsh, though it is notable that High Street Group has many vehicles and Forrest is still listed against other entities.
Earlier this year, EG gathered industry experts for a discussion over the mini-bond scandal that exposed inexperienced investors to risky property deals and permitted development. You can listen to the podcast, or read the feature. “They are get-rich-quick schemes offering implausible rates of interest,” said funds consultant John Forbes. “It’s not a huge volume of it, but there are those unscrupulous people who did use this and effectively defrauded people of their life savings.”
On that trend of start-ups and new moves, this week there were a number of appointments in resi. After nine years at Workspace, former head of finance Viv Frankham joined residential regeneration specialist Real as chief finance officer. Former Savills development head Dominic Grace has joined proptech platform Propster to support its expansion to the UK. And British Land has rejigged its executive team and appointed Emma Cariaga as head of residential.
Following last week’s warning by the Intergovernmental Panel on Climate Change, energy efficiency in housing and development remains at the forefront of much of this week’s news.
The government has published its Hydrogen Strategy in a bid to get 3m households to ditch fossil fields. The strategy lays out efforts to attract investment in hydrogen, an industry which it hopes will grow to £4bn by 2030. But what about the Heat and Buildings Strategy, which aims to lay out the path to net-zero carbon? Leaders in housing, energy and construction, including L&G Modular Homes, say urgent action is needed to retrofit some 29m inefficient homes.
Etopia Group’s Joseph Daniels believes MMC holds the answer. Daniels argues the Carbon Budget will be the “defining tool” that leads developers to manage emissions sustainably. He calls on every single company to take action: publish strategies and define impacts.
Modern methods of construction specialists claim to deliver net-zero carbon homes in half the time of using traditional methods. But to scale the industry, more evidence is needed, experts say. MMC providers are rallying housebuilders, planners and councils to join forces and build that case study. Patrick Bergin, chief financial officer at Ilke Homes, says: “This is an industry where the demand exceeds supply. We are very happy to share our trials and tribulations and talk jointly about how we might address them.”
They may not need to look too far, following a surge of modular plans this week. Urban Splash is bringing forward the first homes at its first foray in the South East, and Stockton-on-Tees is set for the largest MMC scheme in the North, with Canvas Homes’ housing made out of recycled steel from decommissioned North Sea oil platform piles.
View the magazine, download the app (iOS and Android) and read on for more of the week’s headlines:
What went wrong with Croydon’s Whitgift plans?
Airspace developers call for changes in fire safety
ASI residential fund tops €1bn
Gresham House secures shared ownership trio
The London Fund secures £45m Haringey backing
Quakers pick developer for iconic York scheme
Canary Wharf Group reveals plans for BTR skyscraper
Jenrick calls in TfL’s 454-home Wembley Park scheme
Harworth refused 1,000-home Ironbridge scheme
Godwin gets consent for biggest BTR scheme yet
Godwin lines up PBSA approval in Nottingham
Green light for phase one of £300m Sheffield regeneration
Balfour Beatty calls time on central London housing
Persimmon hails ‘robust’ first half
Just Group reduces exposure to UK resi risk in £334m mortgage sale
