Park First collapses into administration, £120 – 190 million investor funds at risk, LCF’s administrator appointed

On Thursday 4th July the Financial Conduct Authority and Smith & Williamson announced that Park First had been put into administration.

Smith & Williamson appear to be rapidly becoming the go-to liquidator for major collapsed unregulated investment schemes. Smith & Williamson are of course also managing the London Capital & Finance administration, with two of their LCF team – Finbarr O’Connell and Adam Stephens – also appointed to Park First.

The investment

Park First promised “guaranteed” returns of 8% per year from investment in car parking spaces. It was launched in 2010 by Toby Whittaker, who in the same year launched Store First, largely the same investment model but with storage pods instead of parking spaces.

A few years after launch Store First ceased making “guaranteed” rental payments. Four Store First companies were put into liquidation in April, though the storage business continues to trade, so that customers can still access their stored property “until a longer-term solution is found” according to the Official Receiver.

Park First, by contrast, was shut down by the FCA in late 2017, who deemed Park First’s business model was an illegal unauthorised collective investment scheme.

After the FCA shutdown, Park First investors were given the option of either handing back their parking space and receiving their money back, for which they had to give Park First a year after the transfer of their parking space was completed, or to enter an alternative “lifetime leaseback” investment, which paid a return of only 2% (compared to the original “guaranteed” 8%) plus a variable non-guaranteed dividend.

The lifetime leaseback investment was apparently given the green light by the FCA as not a collective investment scheme.

At the time I wondered how many investors who were originally expecting an 8% “guaranteed” return would settle for 2% plus variable dividends. The answer appears to be not enough to save Park First from going bust. Park First has now put itself into voluntary liquidation.

Back in early 2016, a press release issued by Park First in 2016 claimed that their car parking assets had grown to £190 million. S&W say that Park First has approximately 6,000 investors. Park First spaces were sold for £20,000 each, so if they each bought one this would translate into £120 million invested. It is very likely that some investors held multiple spaces.

What has the FCA been doing?

The FCA’s version is as follows:

Park First agreed to stop operating and promoting the original schemes, although they did not accept that they had done anything wrong. They offered investors the choice of getting their initial investment back (which they described as a ‘Buyback’), or moving into a new ‘Lifetime Leaseback’ scheme, which was restructured to avoid the legal issues identified by the FCA. The Lifetime Leaseback is not a collective investment scheme and is not regulated by us. This was a better option for investors than the alternative which would have required the FCA to wind up the scheme, resulting in substantial losses to all investors.

Whether Park First’s recent collapse into voluntary liquidation represented a better outcome than winding the scheme up back in December 2017 will depend on what investors recover.

When Group First recently filed their 2018 accounts, they showed £32 million in net liabilities, a substantial contributor to which was a £111m provision for repaying Park First investors.

The FCA

allowed Park First until June 2018 to arrange Buybacks and Lifetime Leasebacks with investors. We also agreed that Park First should have time to make arrangements to pay all investors in full who wanted a Buyback.

As the clock for repayment started ticking after the buybacks were arranged, this essentially gave Park First until June 2019 to repay investors who opted for Buyback.

Park First has however been unable to raise sufficient funds to pay everyone back.

According to the administrators:

Professional advice was sought and the directors of the Companies were advised that to make any further payments to Buy-Back creditors may result in a preference of one creditor over another and hence that the Companies were insolvent and that they should be placed into administration to provide protection for the creditors.

The administrators plan to contact both Lifetime Leaseback and Buyback investors with proposals for voluntary liquidation in the coming months.

With the FCA watching over their shoulder, earlier this year Park First sold their Luton car park, with the proceeds ring fenced for investors.

We also ensured that Park First promised not to dispose of their assets, and that they ringfenced their major asset, a cark park at Luton Airport, which was not owned by the scheme, to meet Buyback payments. Earlier this year the Luton car park was sold and the FCA required the proceeds of sale – £32 million – to be held securely in a solicitor’s client account. Those funds are to be used for the benefit of investors. A further £1 million contributed by a party connected to Park First is also held securely. The FCA believes, and the directors of Park First have agreed, that these funds should be made available for the purpose of the CVAs that the joint administrators anticipate proposing.

Well, it’s a start.

Store First update; investors warned re recovery fraud

In other Group First news, there have been no substantial developments on Store First since the four companies were placed into liquidation two months ago. No substantial updates have yet been published by the Official Receiver or Companies House.

The Official Receiver did update their announcement on the liquidation in May and again in July, but this update seems to have been limited to a warning to Store First investors to beware of recovery fraud.

Park First investors have already been repeatedly targeted by recovery fraud outfits, using names like Herschel Escrow, GRL and Everton Rose. Whatever the name, the spiel is the same – the scammer claims they can sell the investor’s parking space if the investor hands over money for “legal fees” or “escrow”. This money is of course never seen again.

If Store First is any guide, Park First investors are now likely to be targeted by people ringing them up or emailing them and falsely claiming they represent the liquidators.