An airport car park investment scheme which raised £230m from thousands of people who poured in their pensions and life savings is at the heart of two legal cases that accuse the directors of making false and misleading statements to attract investors.
The Financial Conduct Authority announced on Thursday it had started proceedings against Park First Limited, its senior managers and other connected companies following the collapse of what it said was an “illegal collective investment scheme”.
In a separate case, investors are suing the same people, claiming they “fraudulently misrepresented” the nature of the scheme.
Park First sold leaseholds for 6,290 airport car parking spaces at Glasgow and Gatwick, and told buyers it would rent them back and pay returns of up to 12%, generated by the holidaymakers who used them.
But after sales were stopped by the FCA in 2017, payments slowed or stopped, and the company put some of its businesses into administration.
Investors are taking legal action against related companies and the directors, saying that the spaces were overvalued, the demand for them was overstated and that the company is now trespassing on their land.
Patrick Lawrence, a lawyer representing investors, said his clients were “suing to recover their pensions, savings and inheritance monies”.
And while investors are out of pocket and have set up a crowd-funder to pay for their legal action, the ultimate owner, Toby Whittaker, has taken large dividends from the parent company, Group First Global.
The company has denied making fraudulent representations to investors and said that all monies received could be accounted for.
Group First Global began to advertise investments in the Park First scheme in 2012. The firm bought land in Glasgow and near Gatwick airport and divided it into individual plots which were marketed on a leasehold basis for £20,000 each, directly and via agents.
Brochures for prospective investors heralded “a new commercial property opportunity designed for today’s astute investor that we believe is low risk and highly profitable”.
Investors were told that they could lease back their space to Park First for six years, and that it would let it to drivers and pay returns starting at 8% in the first two years, then rising to 10% for two years, then 12% in the final two years of the deal.
The brochure referred to a break clause after two years “by agreement” between both parties.
Investors typically received the first two years’ payments without problems, but then faced delays, or were told that the contract was being cancelled.
The FCA started to look at the scheme in 2015, and in December 2017 told Park First it was in breach of the Financial Services & Markets Act, and that investors had a right to their money back.
Park First offered them two choices: they could either sell back the parking space and receive a refund, less the amount they had received in rent, or they could sign up to another leasing scheme which offered a return of just 2% a year.
Many investors were unhappy with the options, particularly when it emerged that the company wanted those who were selling back their spot to sign over the deeds and wait up to a year for payment.
Then in July this year Group First Global put four companies into administration, blaming the cost of reimbursing investors.
All payments were suspended, as administrators moved in to work out what could be returned.
The way that the car parks were structured raised questions about how investors would be paid after the original guarantee period.
The court filing details how some of the car parks worked on a “meet and greet” basis, whereby holidaymakers left their cars with a valet who took it to the Park First land and parked it nose to tail with other cars, rather than in designated spots.
Others operated on a pay-to-access basis, where the driver paid in advance for a code to get into the car park, then left their car in whichever spot they wanted. Both models meant that Park First was not collecting payments for individual plots, and could not accurately allocate money to individual investors.
Investor Hanif Younus told the Guardian he had once tried to visit the four Gatwick parking spaces that he invested in for his sons.
“I got there and it’s an open plot – there are no lines are the floor. I asked the woman running it where my place was, and she said she didn’t know – that there were no spaces.”
Like some other investors, he received the first two years’ payments straight away, along with 5% cashback from the agent who sold him the investment.
Since signing the leaseback scheme he has received one small payment. “The spaces are being let out but we don’t know who is getting the money,” he said. “I don’t know what four places I own, or if I really own anything.”
In 2009, one of Whittaker’s previous property businesses, Dylan Harvey was wound up, owing more than £6.5m to investors.
More recently, a scheme based on storage units was wound-up by the secretary of state for business over concerns that investors were given misleading information.
Store First scheme sold individual rooms in self-storage centres on the same basis as Park First – investors were told they were getting a 25% gain in value on day one on store pods costing from £3,750 to £22,500, then promised the same level of returns over six years.
But after two years most were told that the company wanted to exercise its right to break the contract.
In April,
after several days of hearings, it was agreed that three Store First companies would be closed and one would continue trading and collect rents to distribute to investors.
One investor who spent £22,500 on two units in Barnsley said that he has had very little back. The Store First units have brought in only £775, less than 1.4% a year, rather than the 10% that was originally promised.
And this has been offset by costs – on top of the ground rent charged by Store First, he has received a demand for more than £300 in business rates from Barnsley borough council.
“At the moment the investments are costing me money,” he said.
Group First Global, which is based on a business park in Burnley, was set up in March 2006. In its last set of accounts it declared a turnover of £15m.
Whittaker, the sole shareholder in the company, has been paid almost £5m in dividends since 2012.
Park First said it was “surprised that the FCA has chosen to commence legal proceedings at this time when the FCA is aware of the material steps that Park First has been taking to restructure its car parking schemes for the benefit of investors.
“The proceedings are unmeritorious and will only disrupt the steps that Park First is presently taking.”
In response to the investors’ legal action, Ruth Almond from Group First Global said the Park First investments were all legitimate.
She added: “In order to minimise operating costs and thereby maximise income for the benefit of investors, some of the car parks have been closed. This means that Park First does not incur costs such as business rates in operating these car parks.
“This does not have any impact on investors.”
