Keeping up with all the latest Harlequin Property news is far from an easy task for the 3,000 or so investors, to make life easier we’ve pulled all the latest updates into one easy to read package.
It’s certainly been a busy couple of weeks, with news that part of the group has applied to enter administration, a series of investor meetings, reports that the Insolvency Service are now investigation and even a feature on Radio 4’s Moneybox programme.
But let’s start with the proposed administration.
Harlequin property applies to go into administration
On the day of the Warrington investor meetings, more of which in a moment, it was announced that Harlequin Management Services (South East), which trades as Harlequin Property, applied to be placed into administration.
In statements released a few days later, Harlequin said: “There are two key goals in entering Harlequin Property into administration: securing and rescuing the company and protecting our creditors’ interests. It is a necessary action that is in everyone’s best interests.”
The statement continued: “Due to unfounded negative publicity in the public domain that has been instigated since 2011, the day-to-day UK sales business of Harlequin Property has become increasingly challenging, to the point that it is now almost impossible. Harlequin has always sought to manage its affairs professionally throughout this difficult time.”
“The underlying business model of the Harlequin group is strong and the directors are confident that, with the external finance and property completions anticipated, our investors will see significant development at our resorts in the near future.”
“Investors can be assured that the company sees no reason why these circumstances would threaten their investment with Harlequin. In fact, the measures set out above are a means of further securing their investments from external and contrary interests.”We believe the precise impact of Harlequin Property’s administration will only become evident over the coming weeks. Investors will hope the assertion from Harlequin, that it will not impact the developments is correct; we will of course provide updates as and when they are available.
Insolvency Service launches investigation into Harlequin Property
The Basildon Recorder has reported Harlequin Property is now being investigated by the Insolvency Service, which in turn has referred the case to Jo Swinson, Minister for Consumer Affairs at the Department for Business Innovation and Skills.
The Insolvency Service’s Companies Investigation Branch examines the conduct of company directors and in certain circumstances, has the power to ban them from holding the position of Company Director in the UK.
It is believed that the Serious Fraud Office (SFO) is also investigating Harlequin Property and has asked investors to complete an online questionnaire.
Harlequin last week held a series of meetings designed to give investors an opportunity to ask questions of David Ames, whilst hearing his view on the “way forward”.
The meeting we attended, at the invitation of Harlequin, was in part a bad tempered affair, with many investors clearly frustrated by the delays in completing developments, missed finance payments and poor communication. However, it was very clear Mr Ames believes he can plot a way forward for the group, which will hopefully provide investors with the return they are looking for.
It is clear though that Harlequin Property has cash flow issues, demonstrated in no small part by their inability to meet the interest payments of people who borrowed money to invest or meet the requests of investors for refunds where properties have not been completed.
A significant proportion of investors raised capital by borrowing money on personal loans or by remortgaging their home, Harlequin agreed to meet the interest payments on these loans. However these have now stopped, leaving investors having to make loan repayments from their net pay or face legal action from their lender. It’s clear from the feedback given by investors at the meeting that the suspension of interest payments is causing significant financial hardship to many, with some clearly concerned about their ability to make repayments and nervous their home could be put at risk.
Mr Ames suggested the interest payment to investors, would recommence, however when pressed by investors he was vague about the exact timescale.
Much of the meeting was taken up by Mr Ames explaining his plans for restructuring the group, which is one of the stated reasons for applying for Harlequin Management Services (South East) to go into administration. It is also clear that as part of the restructure additional finance is required. It seems that there are four key routes to raising additional finance:
1. The Irish Court Case: Harlequin Property is suing a former contractor in the Irish High Court for a reported $13 million. At the Warrington investor meeting Mr Ames was clearly confident the case will be settled in Harlequin’s favour, which he believes will not be appealed and will result in a significant settlement
2. Refinancing the group: Mr Ames introduced a corporate financier to the meeting who confirmed discussions were on-going with two or three parties interested in refinancing the group. Further details were sketchy, other than to say any deal to refinance the group would take a number of months to complete
3. SIPPs: Many investors have used their pension, in the form of a SIPP (Self-Invested Personal Pension) to invest into Harlequin Property developments. In the wake of the recent negative publicity and the plans from the regulator to increase the amount of capital SIPP providers, who allowed unregulated investments, need to hold, this source of new business has all but dried up. Mr Ames appeared confident that over the coming weeks SIPP providers would start to allow members to invest in Harlequin’s developments via their pension
4. Completions: Our understanding is the majority of investors put down a deposit of 30% of the purchase price, with the balance due on completion. It is clear Harlequin believes investors will now start to complete: “Harlequin is currently owed circa £30m from purchasers on properties that have been completed and this will provide additional revenues, above that also sought separately, in order to progress the business forwards over the coming months and years.”
Harlequin on Radio 4’s Moneybox
With the exception of the Daily Mail the national press has been surprisingly quiet on the Harlequin front, especially when we consider there are a reported 3,000 investors and somewhere between £250 and £300 million involved. However, last weekend Radio 4’s flagship money program did feature the story.
Whilst focusing heavily on the problems of investing in overseas property via a SIPP (Self-Invested Personal Pension) it also carried an interview with Erica Broughton, a leading light in the Harlequin Investor group.
Harlequin has issued a strongly worded statement, responding to criticisms levelled at them in the program.
A repeat of the Moneybox programme, presented by Paul Lewis, can be found by clicking here .
Are you a Harlequin Property investor?
If you are a Harlequin Property investor you will naturally be concerned about the recent developments. The investors we have spoken to have had mixed emotions, however all have wanted to take some form of action.
We would recommend that Harlequin investors continue to monitor the situation whilst completing the Harlequin Property Serious Fraud Office questionnaire, which can be found by clicking here and also visit the website set up by Regulatory Legal: www.harlequininvestorgroup.co.uk for more news.