More than 1,000 investors have been hit by the collapse of a company behind a £100m property scheme that aggressively marketed UK student accommodation on Facebook.
Furious retail investors from Britain, the Middle East and Asia who became involved in the scheme are pursuing complaints after being told they were in line for annual returns of 8 to 12 per cent.
A1 Alpha Properties (Leicester) Limited, the company that was supposed to be paying the investors a steady income stream derived from students’ rental fees on the properties, went into administration in February.
The investors, who put an estimated £100m into the A1 Alpha scheme, are currently not receiving any income from the project.
“In total I invested over £400,000 — [I] should be getting income . . . of close to £40,000 a year and as it stands at the minute we’re getting absolutely nothing,” said one investor, who declined to be named.
The A1 Alpha scheme sought to capitalise on the expansion of higher education in England, particularly after 2015, when the then chancellor George Osborne removed a cap on student numbers.
But the project appears to have run into trouble partly because of a glut of student accommodation in the private sector.
Only just over half of the 2,000-plus student rooms across the scheme’s 19 buildings — at sites including Bradford, Huddersfield, Leicester, Loughborough, Preston and Stoke — were occupied in February, according to one person familiar with the situation.
Nicholas Spence and Derek Kewley, former directors of A1 Alpha Properties (Leicester) Ltd, blamed the company’s insolvency partly on an excess of student accommodation as well as construction delays at some of its sites.
Investors in the A1 Alpha scheme were invited to buy leases on rooms in new and refurbished student accommodation.
The developer prospectus for the project said investors purchasing leases on the rooms could look forward to “sector leading yields of 8-12 per cent”.
The marketing of the student accommodation, run by Emerging Property, an estate agent, included Facebook advertisements and a showroom in Dubai.
Investors in the scheme paid between £50,000 and £75,000 for 250-year leases on the student rooms.
They were told they would not have to secure rental fees from students using the rooms: instead this would be done on their behalf by A1 Alpha Properties (Leicester) Ltd.
Investors complained about the way the A1 Alpha scheme was managed by Mr Spence and Mr Kewley, and some said they had overpaid for the student room leases given they were not currently receiving any income.
David Yang, a former fund manager from Taiwan who invested in the scheme, said he could not believe what had happened, adding he was unable to access the rooms he had bought leases on. “I spent £310,000 to buy four rooms in [the] UK . . . and now I even cannot have my keys,” he added.
Some of the retail investors involved in the A1 Alpha scheme have put much of their life savings into it.
One used the £52,000 lump sum she received on retiring early as a nurse on a lease at the scheme’s Bradford site. When she went to visit the site, she was concerned that she was unable to see the room.
A salesperson reassured her, said the investor, who declined to be identified. “He said . . . ‘You really don’t need to worry about your unit being tenanted, because even if your unit remains empty for 10 years, you will still be paid, because it is contractual’,” she added.
The investor, who suffers from ill health, said she had felt reassured by how she thought she was buying into a business rather than an individual property. “Now I don’t sleep at night,” she added.
Another investor said: “A lot of people put all their retirement money in there, and they’re now in financial hardship.”
The investors hope the A1 Alpha project will eventually provide returns, albeit at a lower rate than was advertised.
Mr Spence, 47, and Mr Kewley, 46, resigned from their roles as directors of A1 Alpha Properties (Leicester) Ltd in November. The two men said in a statement that the company had been through some “extremely difficult circumstances in 2018 and early 2019”.
These problems included some student rooms not being occupied owing to delays with new buildings being completed. “However, we remain of the view that the situation was and is recoverable,” added Mr Spence and Mr Kewley.
The statement also highlighted “increased supply of new competing accommodation flooding the market”.
“These issues that we’re facing . . . aren’t just ours, it seems to be happening nationwide from what we can see,” said Mr Spence and Mr Kewley, who listed their correspondence addresses as Leicester and Gateshead respectively at Companies House for A1 Alpha Properties (Leicester) Ltd.
A report by EY, the accounting firm, warned in 2017 that provision of student accommodation may have reached saturation point in some local markets. “The number of UK students available to fill private sector beds has declined,” said Fergal O’Reilly, an EY partner.
Quantuma, the administrator for A1 Alpha Properties (Leicester) Ltd, is planning to restructure the scheme by breaking it up on a site by site basis, with the aim of providing investors with returns in the future. Quantuma declined to comment.
Andrew Crump, managing director at Emerging Property, said his company was “trying to help Quantuma in their efforts to return all affected properties to a profitable status”.
