‘No one wants to ad­mit they were fool­ish’

The Daily Telegraph - Your Money - - FRONT PAGE -

Ex­perts warn about ‘guar­an­teed re­turns’ af­ter ho­tel in­vestors have seen their in­come dry up, says Sam Mead­ows

In­vestors who spent up to hun­dreds of thou­sands of pounds on “buy-to-let” ho­tel rooms promis­ing “guar­an­teed re­turns” have seen their in­come dry up and a promised “buy-back” op­tion dis­ap­pear. Some in­vestors claim that, de­spite own­ing the rooms and in some cases hav­ing signed ren­tal in­come agree­ments, the rooms are still be­ing used and the prof­its not passed on.

Around five years ago buy­ers bought rooms at Hever Ho­tel, in the grounds of Anne Bo­leyn’s child­hood home in Kent, and Need­ham House Ho­tel in Hert­ford­shire. They were sold as cast-iron in­vest­ments with “guar­an­teed” ren­tal re­turns of 10pc a year for a decade and an automatic buy-back op­tion af­ter five years.

But such ar­range­ments are no­to­ri­ously risky and fre­quently fail. Petronella West, of ad­vice firm In­vest­ment Quo­rum, told Tele­graph Money that any boast of a “guar­an­teed” re­turn that was well above the sec­tor’s av­er­age per­for­mance should be seen as a “sig­nif­i­cant red flag”.

In­vestors in this scheme were of­fered a choice be­tween re­turns of 10pc a year or half the in­come from the room. But they soon found the pay­ments dried up.

The ad­ver­tised buy-back op­tion had been due to come into ef­fect this year, but by this time the firms in­volved had gone into liq­ui­da­tion, leav­ing in­vestors with no way out. The es­ti­mated to­tal pur­chase value of the rooms was close to £30m.

Fol­low­ing the liq­ui­da­tion the ho­tels were taken over by new man­age­ment com­pa­nies, which of­fered dif­fer­ent ren­tal agree­ments that re­moved the in­come guar­an­tee. Some in­vestors were ad­vised by their lawyers not to sign. At least one in­vestor who did sign claimed he was yet to re­ceive a pay­ment, while oth­ers said the re­turns had been neg­li­gi­ble.

Ad­di­tion­ally, many in­vestors took out “mort­gages” for half of the value of the rooms from a com­pany called Mer­can­tile In­vest­ment Hold­ings, reg­is­tered in the Caribbean is­land of Ne­vis.

In­vestors were told the mort­gage re­pay­ments would be de­ducted from the ren­tal in­come. But af­ter ren­tal pay­ments stopped be­ing made, the mort­gages fell into ar­rears and many of the rooms were re­pos­sessed.

Let­ters from Mer­can­tile to one in­vestor said the com­pany would “take steps to sell the room in order to re­cover the bal­ance owed”.

Al­though Mer­can­tile is reg­is­tered off­shore, com­pany min­utes seen by Tele­graph Money show the in­volve­ment of Paul Gould (when the com­pany had a dif­fer­ent name) and Ron­ald Popely, a former race­horse owner who had pre­vi­ously served an eight-year ban from op­er­at­ing a com­pany af­ter an ear­lier in­vest­ment op­por­tu­nity at the Hever Ho­tel failed.

Mr Gould was in­volved in the run­ning of the orig­i­nal man­age­ment com­pany, White Li­nen Ho­tel & Re­sorts, as well as the com­pa­nies that sold the in­vest­ment op­por­tu­nity: Oak Prop­erty Part­ners and Oak For­est Part­ner­ship. Mer­can­tile, the mort­gage provider, is listed as the ma­jor­ity share­holder of Oak For­est Part­ner­ship. Mr Gould de­nied be­ing in­volved with Mer­can­tile and said he was in­volved in the Oak com­pa­nies only as a sec­re­tary. He said he could not com­ment fur­ther be­cause of the pos­si­bil­ity of lit­i­ga­tion.

Mer­can­tile said: “All ac­tions taken by Mer­can­tile In­vest­ment Hold­ings were car­ried out in con­junc­tion with full le­gal ad­vice. Re­gret­fully we can make no fur­ther com­ment.”

The af­fair has had a last­ing ef­fect on in­vestors. Some told Tele­graph Money they had lost ev­ery­thing; at least one lost an in­her­i­tance, while an­other was made home­less as a re­sult of her fi­nan­cial dif­fi­cul­ties.

One in­vestor, who pre­ferred not to be named, told this news­pa­per: “This was sup­posed to be our pen­sion, but the whole scheme feels like it was made up.”

An­other said: “I was in a sit­u­a­tion where my com­pany was do­ing pretty well and I was look­ing for some­thing to in­vest in. This seemed to tick all the boxes. No one wants to ad­mit they have been fool­ish but maybe I was.”

The in­vestors claim the rooms they own are be­ing used with­out their per­mis­sion and with­out them re­ceiv­ing a share of the prof­its.

Hever Re­sort Ho­tel, one of the new man­age­ment com­pa­nies, said it be­gan to op­er­ate Hever Ho­tel on May 1 2018 and “it is too early to cal­cu­late any pay­ments due to room own­ers”. Coun­try­wide Ho­tels, the new man­ager of Need­ham, has been ap­proached for com­ment.

The buy-to-let room scheme is not con­nected to Hever Cas­tle it­self.

Rooms at both ho­tels are still be­ing ad­ver­tised for sale, mar­keted as a “share in a hol­i­day home”.

In­vest­ment Quo­rum’s Ms West warned in­vestors to be wary of bold prom­ises. “No­body does guar­an­teed re­turns and no­body gives re­turns of 10pc. That alone would send me run­ning for the hills,” she said.

“Any­thing of­fer­ing a guar­an­teed, cash-equiv­a­lent re­turn can­not be real. The only thing that can re­ally of­fer a guar­an­teed re­turn is [gov­ern­ment] bonds. Any in­vest­ment us­ing the word guar­an­teed is likely to be a scam.”

Hever Ho­tel, which is in the grounds of Hever Cas­tle in Kent, left, has a new man­age­ment com­pany that is not of­fer­ing the same ren­tal agree­ments that room in­vestors orig­i­nally signed

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