The Northern Echo has revealed, after digging into Land Registry documents, that Carlauren Group has sold a total of 37 apartments in Windlestone Hall for over £6 million. None of these apartments have yet been built.
Windlestone Hall, near Rushyford, remains covered in scaffolding with smashed and boarded up windows, however dozens of investors have already paid between £84,690 and £407,165 for studio apartments.
According to Land Registry, a total of 37 studio apartments were sold between January 2018 and March 2019 for sums totalling £6,047,710. The property is part of the Carlauren Group, founded by Sean Murray in 2015, which announced a multi-million pound makeover of Windlestone last July.
Work was due to be completed by the end of this year, however Carlauren is yet to secure planning permission from Durham County Council.
Carlauren says it intends to submit plans for outline permission “in the near future”, until which construction is “on temporary hold”.
Carlauren acquired Windlestone Hall from Barclays, who had foreclosed on the property, just before it was due to be auctioned off.
The sum was not disclosed (and I have been unable to find it on Rightmove) but until Carlauren made an offer Barclays couldn’t refuse, it was due to be auctioned with a guide price of £400,000. It had previously been advertised at £850,000. A news article from 2017 suggests the sum Carlauren paid was certainly in six figures.
A property developer, who does not wish to be named at this stage, said he had made substantial six figure bids for both the hall and land.
He said: “I made three offers and I have upped it each time and I am not going any higher.”
So, to recap, Carlauren bought Windlestone for something under £1 million, divided it into retirement flats in their own heads – flats which are yet to be built or even approved – and sold 37 studio apartments for just over £6 million. As planning permission hasn’t even been obtained yet, Carlauren has flipped a six-figure pile in the north into a £5 million profit simply through the power of a brochure for an unregulated investment security.
A Carlauren brochure for the Windlestone Hall properties offers fixed returns of 10% per year for the “managed service” option, or a variable return of up to 14% per year for the “investor as landlord” option (where the return depends on studio occupancy).
Carlauren investors have recently been told that their returns will be unilaterally reduced, although this is apparently temporary.
After Carlauren COO Andrew Jamieson told care home staff at Tyndale House that Carlauren was unable to pay their wages because “there is no money in the banks… all gone, all gone, all gone”, a Carlauren investor update (signed by Jamieson and CEO Sean Murray) attributed Jamieson’s outburst to male hysteria.
Andrew was under a great amount of stress that day which is evident in the cruel publication that was sent to not only the local papers but local TV news stations as well. This can only be described as utterly disgraceful; all employees were paid their wages from the profitable hotel business Andrew has created for all our benefit.
It also stated that the “there is no money” comments and the reference to six or eight winding up orders related to the care business only, which Carlauren has now closed.
The money he was referring to was that of Carlauren Care division which had lost in excess of £700,000 over the years and could not continue at the alarming rate which the Hotel chain continued to support it.
The investor brochure states that Windlestone Hall will offer an indoor swimming pool, a hair and beauty salon, a cinema and fine dining.
When and if Carlauren will bring this vision into reality given its numerous distractions remains to be seen.
As I have commented previously, the obvious problem with all such “vertical landbanking” investments (where the scheme acquired an asset – hotel, care home, Baltic forest, whatever – parcels it up into units, and sells the units to investors for an aggregate of considerably more than X, on the promise of a future return) is that the incentives for such schemes are heavily front-loaded.
By acquiring Windlestone for less than £1m and selling the units for more than £6m, Carlauren has made an instant £5 milion + profit – money it can in theory use to bringing its vision of swimming pools, tennis courts and pedicures for well-heeled greybeards to fruition.
However, its incentive to see the project to completion, in respect of those rooms sold under the “Managed Service” option, is limited to any profit it can make over and above the 10% per year return it has promised to investors plusthe other costs of running the facility.
And, of course, any rise in value from the freehold, but there is a limited number of buyers for a resort which comes with obligations to pay leaseholders 10% per year.
This does not mean that Carlauren intended to collect its £5 million profit and then simply sit on it. But lending money to a property developer for a future return of 10% per year should they complete a project is inherently high risk. If Windlestone Hall remains nothing more than a magnet for Durham’s local budding Jackson Pollocks, all it means is that risk will have come to pass.
The fact that Carlauren had already seen most of the money it expected to make out of the project on day 1 merely emphasises how much risk had been loaded onto the investors.