Newfound in Risk of Collapse

Jayne McGivern has resigned as CEO of AIM-listed resort developer, Newfound, as the company warned of a risk of collapse, according to a report in Property Week Magazine. 

McGivern will be best known for being at the helm when Newfound called time on its involvement with the Humber Valley Resort in Newfoundland, Canada. 

Newfound, which now concentrates on its developments in the Caribbean, said that McGivren’s departure was a result of it restructuring of its operations and management to cut costs. At the time the company warned that, without new funds, it would have to ‘cease operations’.

The Property Week piece quotes Newfound as saying: ‘Unless new finance can be found for the group over the coming months, there is a risk that the Company will exhaust its cash resources, in which case it will need to cease operations.’

Further information from the article:

McGivern, a former Multiplex UK chief executive who took over last year, will remain on the board of the company but is to be replaced as CEO by Stephen Bentley, who is currently the finance director.

The day-to-day management of the company will be outsourced to a management company, and then Bentley will step down from his role as CEO and finance director to become a non-executive director.

Richard Foley has also resigned as a director, but will remain an employee of the group overseeing Newfound’s Caribbean projects.

John Morgan, acting chairman of Newfound, said: 'It is clear in the current financial market that property development companies are struggling to raise capital to fund projects. Newfound is no exception to this and the board has decided that the company needs to restructure its operations and executive management to reduce its expenditure.'

Ends.

Crazy About Newfoundland reports that McGivern is understood to be teaming up with Mikola Wilson to launch an opportunity fund. Wilson runs niche investment firm Seven Dials Fund Management. The new fund is expected to target high-yielding, income-producing assets with latent development potential and is also being mooted to take over the day-to-day management of Newfound.

Meanwhile, over at Humber Valley Resort there are signs that the 'green shoots of recovery' may be in the air. The Crazy About Newfoundland blog reports that there are two bidders vying for the assets of the resort.

The blog reports that "A management group led by a chalet owner has confirmed it has made a bid to buy Humber Valley Resort’s assets."

"The deadline for the tender call for the bankrupt resort’s properties — including the golf course, restaurants, land and other holdings — closed Friday, and the resort’s trustee in bankruptcy now has until March 16 to decide what to do with the bids. The trustee, Ernst and Young, won’t say how many bids have been received, but a bid has been made by a group led by Brian Dobbin, the man who founded the resort that went into bankruptcy in December."

"At least one other bid has also been made. A management group that includes Mike Ward and some other owners, in a prepared statement to The Western Star Tuesday, said its plan recognizes the “misguided focus” and the problems of the previous management teams, and knows what is needed to turn the resort around."

The full blog is available here. 

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Paul Coughlan's Prestige Group Nears the End Game

The Prestige Group, which describes itself as 'Ireland's Oldest Property Investment House' looks like it will be the next high profile casualty of the recession. 

The company claims to have placed €2.75bn in property investments since its inception. It has, in fact, only been involved in the overseas property market since 1998, at which stage the boom in Irish investors purchasing property in Spain was well underway. In fact the Irish mass market had, at that stage, started to move further afield to look at areas such as Portugal, Hungary and Florida in particular. 

A creditors meeting has been called for next Wednesday (March 18th) at the Stillorgan Park Hotel in Dublin. Some of the major creditors of the company include KBC (formerly IIB), the Bank of Scotland owned Ulster Bank and Bank of Ireland.

Prestige came to prominence in the early noughties when it sold huge amounts of off-plan property in Manchester and Budapest in particular. Many clients claimed, once they had received their properties, that they had been sold at very high valuations and the rentals achieved on them were far below those outlined by Prestige in its marketing documentation.

The company subsequently disappeared off the property sales radar for a couple of years and then, around 2006, a major PR push was instigated. The aim seemed to be to promote it's owner, Paul Coughlan, and the lavish 'high-roller' lifestyle he led. Toward this aim Coughlan appeared in a number of lifestyle magazines (most notably VIP but also a number of newspaper magazines) and a number of publications were invited into his lavish Foxrock home. 

In recent weeks posts have been appearing on a number of forums from frustrated investors who have not been receiving their rentals on properties purchased from the Prestige Group. There have also been rumours that he has been, to date unsuccessfully, trying to sell his luxury villa in Portugal. 

Coughlan's investment vehicle, Kaizen Property International, made somewhat of a comeback last year in the form of Touchstone Capital but this re-engagement with the overseas property market would appear to have been fleeting. The company sold apart-hotels in Germany and the UK as well as Below Market Value (BMV) property in the UK. 

The Prestige Group itself reappeared at the end of last year selling German Apart-Hotels, managed suites in Marbella and UK commercial property.

Further queries on the creditors meeting should be directed to The Prestige Group at info@theprestigegroup.com or +353 (0)1 2176300

Oceanico Group Strenuously Denies Bankruptcy Claims

Portuguese developer, Oceanico Group, run by Dubliner Gerry Fagan, has denied vehemently reports on a number of forums that it has been declared bankrupt. 

Among others, the Special Forces Military Forums carried a post from a first time poster identified as AaronQJ which said:

"Oceanico resorts in the Algarve Portugal owners of Vilamoura Golf courses has filed for bankruptcy, leaving thousands of homeowners without finished properties, it is estimated that there is a deficit in the accounts that could be as big as 2 billion euro's, due to investments in the Stanford Financial bank, when contacted by the Algarve Resident newspaper, the reporter was told the owners have left the country."

In a strongly worded reply on the same forum Oceanico stated:

 

The directors of the OCEÂNICO GROUP wish to make it clear that the recent scurrilous posting regarding Oceânico "resorts" and its alleged filing for bankruptcy are libelous and completely without foundation. The OCEÂNICO GROUP and its subsidiary companies continue to trade successfully and profitably in all operating locations, both within PORTUGAL and other areas. In PORTUGAL, the Belmar Spa & Beach Resort as well as the Amendoeira Golf Resort (phase one), featuring the Faldo and O'Connor 18 holes championship golf courses, will be completed shortly. The group is fully funded from its own resources and via its banking partners and is operating within agreed cash-flows. The group has no association, and has never had an association with the Stanford Financial Bank. The owners of the company have lived in Portugal for many years and continue to do so. Legal advice has been taken regarding the referred posting with civil and criminal action against those involved being considered.

OverseasCafe.com contacted the Algarve Resident, who said they were aware of the story and that it was completely untrue.  No member of its staff ever informed anyone that the directors of Oceanico had gone anywhere and it had no information to suggest that Oceanico was in financial distress of any description.

We also contacted Simon Burgess, Oceanico director, who said: "We seem to have upset someone, there has been a number of very nasty blogs. We are fully funded to complete our three developments in the Algarve with nearly 500 good contracts. This is going to be our best year yet, and we could not be further from bankruptcy, the Oceanico Prestige Residence Club is being launched at the end of April. We had nearly 700 enquiries in February and have inspection trips every day."

This random forum posting is a very worrying development. At a time when confidence in agents, developers and the property market in general is at an all time low, such information being wrongfully presented in the public domain could potentially cause the collapse of a perfectly viable company. 

This story shows up the problems inherent with forums and blogs, unless the information promoted on them is independently verified, it is absolutely useless. The posts, which could well emanate from a disgruntled party of some description, put in very grave danger the reputation of Oceanico and others who have had patently untrue information posted about them. 

Information on forums and blogs (such as this one obviously) should therefore be treated with an appropriate level of scepticism until the 'facts' presented can be properly verified. 

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Humber Valley Declares Bankruptcy

Those of you who have read our previous blog on the precarious financial situation at the Humber Valley Resort (HVR) near Corner Brook in Newfoundland, will not be surprised to hear that the company has officially declared bankruptcy.

Below is the announcement from Newfound NV (thanks to Crazy About Newfoundland for this):

December 2nd, 2008
Humber Valley Resort Corporation

Dear Owner,

You may recall from our presentation and earlier correspondence that, during the time Newfound has been financing the CCAA process, we also formulated a draft preliminary plan of arrangement that, in our view, gave the interested parties i.e. the creditors and the chalet owners the best result in the unhappy circumstances that Humber Valley Resort Corporation found itself in.

The plan that we had put forward asked the Government of Newfoundland to support it in 3 areas, namely;

* To assist in bringing flights into Newfoundland from the UK

* To work with the local Municipality in their takeover of running essential services on the resort

* Transferring into freehold, the amount of leasehold land that HVRC had already paid leasehold fees on, so that financing of new development could take place enabling the creditors to participate in the resultant profits.

It was not feasible to submit our proposed plan to the Court for approval, or to the creditors and chalet owners to vote on, unless we had some indication of support from the Government, in writing, to it. Conditional support would have been acceptable. The Government have had our proposal for consideration since 16 October. Whilst it is fair to say that we have had encouraging discussions, we have had no confirmation of the Government position, either verbally or in writing. Our initial requested deadline for a decision was 14 November.

I was promised on Monday 24 November that, after the Cabinet meeting of 27 November I would be informed of the decision, either way, in writing. I explained during that conversation that we had run out of time as our CCAA protection was due to expire and if I could not submit the plan then I would have no choice other than to withdraw our proposal, which would mean imminent bankruptcy for HVRC. The alternative would be for Newfound to risk a great deal more money as a creditor to HVRC and I do not have Board authority to do so. I was very careful to stress to the Government on Monday 24 November, that I wanted to and was able to continue, but was clear that close of business on Friday 28 November was our absolute deadline for a Government reply.

This was, sadly, not forthcoming. I understand, from a third party, that the proposition was discussed as cabinet but there was no resolution. Despite our best efforts, there is nothing further we can do. I am deeply disappointed, as I still believe our ideas were the best possible result in the circumstances.

In these circumstances, I am afraid that we join you all as another creditor, and confirm that HVRC will have to file an Assignment in Bankruptcy, and that bankruptcy is now imminent. I am so sorry not to bring you better news. Should you have any questions, you may, with immediate effect, address them to Mat Harris and his team at Ernst and Young. Derrick White will no longer be in a position to formally help you.

Yours sincerely,
Jayne McGivern
CEO Newfound NV

Oddly enough if you visit the Newfound website you will still find the company extolling the virtues of the Humber Valley Resort. In the investor relations section it states:

"Newfound is a creator and operator of international luxury resorts and destinations. The Company has a high quality portfolio of resort projects at Humber Valley in Canada and in Nevis and St. Kitts in the Caribbean.

Humber Valley Resort, with 2,200 acres, currently has over 200 privately owned properties the majority of which are available for rent. It is an all-season, luxury resort offering golf, world-class salmon fishing, sailing, skiing and a luxury spa.

Newfound has an integrated business model based on destination master-planning, which generates revenues from multiple sources, including freehold land sales, construction and development, services to owners, the provision of leisure activities and the operation of concessions. Newfound is building an industry leading, world-class luxury lifestyle brand offering exceptional holiday experiences in luxurious homes, situated in locations of outstanding natural beauty.

Newfound's shares commenced trading on AIM on September 26, 2006. Newfound N.V. is incorporated in the Netherlands with operations in Canada, St Kitts & Nevis, UK, USA, Netherlands and Germany. "

It is possibly time to take all this waffle off the site as the company, while it may have an 'integrated business model', very obviously doesn't have a business model that works in this day and age.

According to the Resorts section of the Newfound site:

"To date, Humber Valley Resort has sold over 400 vacation properties to buyers from the UK, Ireland, Europe, the US and mainland Canada. More than 200 chalets are completed with several others under construction. In addition, the resort has recently released a number of beautifully finished and extremely spacious one- and two-bedroom apartments. The majority of properties are available for holiday rental and benefit from first-class services and amenities including fine-quality appliances, furnishings and linens, whirlpool baths, saunas and outdoor hot tubs."

The board of Newfound are:

Jayne McGivern, Chief Executive Officer
Stephen Bentley, Group Finance Director
Richard Foley, Development Director
John Morgan, Interim Chairman
Robert Weisz, Non-Executive Director

The closure of the Humber Valley Resort is a great shame as it was a wonderful place to visit and will be a great loss to the Corner Brook area of Newfoundland. It is also obviously a time of great distress to owners of property on the resort, some of whom lived there full time, who bought into the dream only for it all to dissipate in front of their eyes.

Should this bankruptcy affect you in any way Newfound can be contacted at its Global Corporate Office:

42 Bruton Place, London W1J 6PA
Telephone +44 (0) 20 7892 8300
Fax +44 (0) 20 7892 8301
Email: headoffice@newfoundnv.com

If you are looking for updates on the Humber Valley story you'll find Gary Kelly's blog and the Crazy about Newfoundland blog to be exceptional resources.

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Lehman Brothers Collapses

Those looking for good news on the financial markets should probably keep the radio switched off and buy no papers this morning. They probably shouldn't read this blog at the moment either. We're scrabbling around looking for the chink of light that would suggest that there might be some hope of a turnaround - unfortunately we can't find it just yet.



Lehman Brothers, the fourth largest investment bank in the US, has filed for bankruptcy. It had been in discussions with a number of entities, including Barclays, about a potential bailout. Activity had become frenetic over the weekend but, in the end, nobody bit and the world famous bank bit the big one.



It just goes to show the depth of the crisis in the US financial industry (we don't want to tell you 'we told you so' but if you read our blog on the credit crisis in February, we did indeed tell you so).



The most telling comment in the Telegraph's piece on the collapse came from Peter Sorrentino, of Huntington Asset Management who said: "The fact that no one wanted to step up with Lehman means that there's no incentive to be a hero at this point. If you buy this stuff and it's worse than you thought, they'll take you out and shoot you. The only way they can restore confidence is to find the cancer and tear it out as quickly as possible." Ouch.



On the Lehman Brothers' Homepage (www.lehman.com) you'll currently find the following link which says: "Lehman Brothers Holdings Inc. Announces It Intends to File Chapter 11 Bankruptcy Petition; No Other Lehman Brothers' U.S. Subsidiaries or Affiliates, Including Its Broker-Dealer and Investment Management Subsidiaries, Are Included in the Filing." Unfortunately when we visited the link didn't work but the heading pretty much tells the story in any case. Only a severe depressive would want to read the whole filing.



There's a nice succinct blow by blow account of the last flailings of the dying monster that was Lehman Brothers on the wonderfully named 'The Bank Implode-o-Meter' blog which you'll find here.



You'll find a Telegraph report on the collapse of Lehman Brothers here. Don't read it if you want to be cheered up this overcast Monday morning.



As with all these corporate collapses we should take a few moments to remember those lower level employees who, this morning, have no work to go to and nowhere to earn money in the direct aftermath. They are the forgotten victims of the corporate misdemeanours of the past decade.

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XL Leisure Group Goes Under

We'd love to be able to bring you lots of good news on the blog, but unfortunately it's in fairly short supply at the moment. The price of oil is coming down, our inflation rate seems to be steadying and interest rates have at least stopped rising. Apart from that it is doom and gloom all the way.

XL Leisure Group, best known in Ireland for their low cost airline arm, XL Airways, has declared itself bankrupt. In a notice on its website this morning, www.xl.com, the company states:

"XL Leisure Group Plc, XL Airways UK Limited, Excel Aviation Limited, Explorer House Limited, Aspire Holidays Limited, Freedom Flights Limited, Freedom Flights (Aviation) Limited, The Really Great Holiday Company plc, Medlife Hotels Limited, Travel City Flights Limited, Kosmar Villa Holidays plc – All in Administration (the Companies)."

It continues: "On 12 September 2008, Alastair Beveridge, Nick Cropper, Simon Appell and Stuart Mackellar were appointed as Joint Administrators of the Companies by the Court. The Companies entered into Administration having suffered as a result of volatile fuel prices, the economic downturn, and were unable to obtain further funding. The Joint Administrators cannot continue trading the business and therefore all flights operated by the Companies have been immediately cancelled and the aircraft grounded. Going forward, the Joint Administrators are unlikely to be able to trade the business or operate the aircraft.

The notice concludes: "All passengers who have yet to commence their travel should make alternative arrangements as detailed on the website."

Customers currently abroad with Cruise City, Excel Holidays, The Florida Skytrain, Transatlantic Vacations, Travel City Direct, Travel City International, Kosmar Holidays, Freedom Flights or Aspire Holidays are all ATOL protected but will have to contact their holiday representative to find out what alternative arrangements for return travel and interim accommodation have been arranged. Those who have booked holidays with any of these companies but have yet to travel can claim a refund through their travel agent.

Those who booked online, or through a call centre, with XL Airlines have lost their money as the company is not ATOL protected. If you are currently abroad you will have to arrange and pay for return flights without compensation. The same goes for those who booked holidays with Medlife Hotels, it is not ATOL protected and no refunds are available.

For information from the Commission for Aviation Regulation, including claim forms for those affected by the collapse of the group, click here.

The full story is available on our own website here.

According to the Sunday Business Post, XL Leisure was the UK's third-largest tour operator after First Choice and Thomas Cook, so the effect of the collapse on the UK industry will obviously be huge.

The news will come as a heavy blow to the Irish travel business as XL was one of the rising stars of the industry. Any drops in capacity make the market less competitive and, in the longer term, will most likely lead to a rise in the cost of travelling and holidaying abroad. It is also a huge blow to airports like Knock which were serviced by the airline.

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Inside Track File for Bankruptcy

The success of Surrey based Inside Track, the agressive off-plan property investment and investment seminar company, has come to a shuddering halt. The news, reported in the Guardian yesterday, will not come as much of a shock to insiders in the industry who felt the company's 'buying off-plan to flip' model of property investment was intrinsically flawed. It was generally felt that such a model works in a rising economic cycle, just about, but comes to grief when economic conditions are less than favourable, as has been proven to be the case. Even where the company claimed property could be let for a profit these claims were often without foundation, leaving many of its clients in large negative cashflow situations.

The company was the leader of a slew of 'property investment clubs' around the UK which promoted the purchase of off-plan city centre apartments claiming to have sourced from developers for reductions of 15-20%. Accusations have recently been made that developers were merely inflating their properties by this amount in order to offer the reductions, thus falsely inflating the market and leaving buyers with properties worth less than they paid for them. So 'successful' were these property investment clubs that they were responsible for up to 30% of all UK apartment sales in 2006, but then the wheels started to come off.

It would appear that, even in the good times, Inside Track's clients were struggling to achieve the profits claimed by the company. You can see an article on one of their 'clients' who ran into trouble here.

The announcement last month that the company was to cancel its controversial 'property seminars', which could cost potential clients anything up to £15,000 if they were to go through the full seminar course, was a sign of things to come.

If you've been burned by Inside Track and want to have a good moan about it you could visit here, it'll give you plenty of opportunity to vent your spleen.

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