The administrators of Carlauren Group have released their latest regular report.
There’s little of interest to report on the realisation of Carlauren’s property assets or hotel business. Nor is there any real further news on the personal bankruptcy of Sean Murray. Murray has had a £40 million asset freezing order imposed (which does not necessarily reflect the value of any assets held by him) but the administrators remain tight-lipped on whether any recoveries are expected from that quarter.
The administrators have managed to sell a private jet, a boat and a car, raising a net amount of £120,000 after accounting for fees and a loan secured on the jet.
While Covid had nothing to do with Carlauren’s collapse, which unravelled in 2019, it has complicated the administration (and not just in the “interminable Zoom meetings” sense).
Carlauren’s jet (tastefully call-signed M-URRY; investors are unlikely to recover the cost of putting a vanity licence plate on a private plane) originally found a buyer for $420k. That fell through when Covid made it impossible to transport the plane to its new owner in Nigeria. The other bidders were mostly interested in breaking the plane up for parts. Eventually the plane was sold for £292,000 but virtually all of this was swallowed up by agents fees of £62k and a secured loan on the aircraft for £217k.
And there you have the administration of a collapsed investment scheme in a nutshell (or a fuselage).
The sale of Carlauren’s boat Adamo – a “luxury motor cruiser” – originally found a bidder for €700k, but they pulled out after an inspection. The pandemic reduced interest in the boat and it was eventually sold for £396k, although port fees and other fees came in at £296k.
It’s not exactly a good time to try to sell a hotel business either.
As previously covered, Carlauren Group holds a total of £21.7 million in properties going by their purchase prices (with one unknown), despite reportedly taking in £76 million from investors.
A £40 million asset freezing order has been placed on Carlauren owner Sean Murray. Murray subsequently filed for bankruptcy. Carlauren’s administrators, Duff & Phelps and Quantuma, have been appointed as receivers and are investigating his personal financial affairs.
Eight Carlauren properties were trading as hotels, but have now all closed; three were trading at a loss, one was flooded and Covid-19 finished off the rest.
The administrators have also been busy marketing the following Carlauren assets:
a luxury motor cruiser named “Ademo”, sold for €455,000
a Hawker XS800 jet, tastefully callsigned “M-URRY”
a fleet of luxury motor vehicles, all but one of which seem to have gone AWOL.
One vehicle remains with a former member of staff and SIA have been instructed to collect and sell the vehicle, unforutnately due to the pandemic collection has not yet been possible. Investigations into the other vehicles are ongoing.
Jets (Bournemouth) Ltd, a modestly successful aircraft engineering business, which had been trading profitably since 2004 until Sean Murray decided he liked the look of it, has also been sold for the sum of £185,000, saving 25 local jobs according to the administrators.
According to Companies House the purchaser was Osama El Circy. El Circy is the founder of Future Green Investment, a Luxembourg company which describes itself as “a catalyst to spearhead a new global investment regime”. In addition to Bournemouth engineering, El Circy’s diverse investment interests include algae-based clean energy and, for some reason, running shoes.
The administrators anticipate that dividends may be payable to unsecured creditors of Carlauren, but due in part to the complexity of Carlauren’s scheme, how much is unclear.
Investors’ money was in theory to be used to do up stately buildings and convert them into care homes. The administrators lay bare the reality:
The Joint Administrators believe that the Group had invested in assets which were not integral to the business model, including software development, a travel business which included the acquisition of a private jet and luxury yachts, and private residences. The investors had significant concerns as to the reasons for the Group making such acqusitions and investments, and the sources of funding, given the Group was at this stage failing to complete renovation projects as expected and failing to provide investors with returns as expected. There were large intercompany loans between many Companies within the complex group structure.
The Group’s business model which it operated is fundamentally flawed and unsustainable which led to the Group’s failure.
By “private residences” the administrators may be referring to Western House in Poole, a 5-bedroom pad valued by agents at a cool £2.8 million. Despite being owned by Carlauren Resort 22 Ltd (and mortgaged to a bridging lender), as confirmed by Companies House records, it showed no obvious potential for commercial development as a hotel or care home.
Pages 12-13 list various freehold properties owned by the Companies, which total around £22 million based on the prices Carlauren bought them for (plus one property, Coverdale Court in Yeovil, Somerset, whose price was unknown) – considerably less than the amount owed to creditors.
Before its collapse, Carlauren borrowed money from bridging lenders including Together Commercial Finance. These had security over some of Carlauren’s freehold properties which will reduce the amount available to Carlauren’s unsecured investors.
How much investors’ money is at risk is not currently known for certain; a figure of £76 million has been mentioned by Safe or Scam, but the true extent is not known “due to the quality of the Group’s financial records”.
The administrators have asked Sean Murray to provide Statements of Affairs detailing the assets and liabilities of the Carlauren companies. While he has “been assisting the Joint Administrators” he has not yet provided completed Statements of Affairs.
A number of motor vehicles, watercraft and aircraft were owned by Carlauren Travel. Director Sean Murray’s predilection for flying around in a private jet was already known, but why a hotel and care home business would need watercraft is beyond me.
When Carlauren was taken over by the administrator, it had only £5,977 left in the bank account belonging to Heritage Hotels. All other bank accounts had been exhausted. The Administrators have been unable to secure even the £5,977 and it is believed to have been spent in the course of trading.
Carlauren invested money into “intellectual property” which include its failed and half-baked (even by cryptocurrency standards) care home shitcoin.
The administrators have pegged their fees for sorting out the complicated web of Carlauren companies at £3.3 million.
Unauthorised investment scheme
It is indisputable at this point that Carlauren was run as an unauthorised collective investment scheme. The two necessary prongs are that investors did not exercise day-to-day control (tick) and that investors’ money was pooled to pay their returns (given that Carlauren didn’t even manage to get the care homes built, therefore large numbers of investors weren’t getting their 10% returns from the fees attributable to “their” care home suite, tick).
That Carlauren was using care home properties as a basis for the scheme does not change the fact that it was by nature a collective scheme. An investment with a promise to pay 10% fixed returns is an investment in a company and not in property (which does not have a fixed yield).
Carlauren was promoted by property agents and other unregulated introducers, many of whom did not have authorisation to recommend investment in unregulated investment schemes.
Despite Carlauren managing to take in somewhere around £76 million (in the absence of a more specific figure from the administrators), and the scheme hitting the national papers when their shitcoin made it to the BBC’s Technology pages, not so much as a warning was issued to investors by the FCA, let alone an investigation into their unauthorised collective scheme.
Another regulatory triumph to boost investor confidence in the “open for business” UK.
As if this wasn’t distressing enough, on 2 July, the same day Carlauren COO Andrew Jamieson was confronted by unpaid staff, the residents were told this deadline had been accelerated to 24 hours. According to Bond Review reader cpnorfolk:
Social Services had to find emergency accommodation for the residents. My sister managed to get my mother into the care home she was due to transfer to. They were able to fit her in a week early, but it was utter pandemonium on the day and very distressing for all.
Another reader, Jps, says:
Due to non-payment of staff, the residents were put at risk. These risks were presented to senior management prior to closure yet they choose to ignore them. Residents had just 4 hours to find somewhere else to live. Staff continued to work really hard with the help of social services to ensure that this was done with as much dignity as possible. However no-one can compensate for the distress and heartbreak this caused those elderly residents and staff members.
According to ITV News, residents of sheltered housing owned by Carlauren were left without on-site support as a knock-on effect of the closure of Tyndale House. Carlauren said at the time they “have been working hard to ensure they receive the care and support required”.
The fact that the collapse of Carlauren’s unregulated investment scheme left a number of elderly care home residents as collateral damage is more than an unfortunate accident.
The purpose of the financial system is to move money from where it is to where it is needed.
The purpose of financial regulation is to ensure that it does so as efficiently as possible, with a minimum of waste. When this system goes wrong, people’s money is not used to bring economic benefit, but the opposite.
If, hypothetically, I take £5 million off a bunch of investors claiming I’m going to pay them 8% per year for investing in property development, and use £1 million to pay some architects and builders to build the skeletons of a few buildings, knowing it has virtually no chance of ever seeing completion because the scheme will run out of money long before, it is not just the investors’ £5 million which has been lost.
It is also a waste of the architects’ and builders’ time which could have been spent building something that actually had a chance of seeing the light of day.
Economists talk of “the multiplier effect”, which means that when somebody spends money to buy stuff, whoever they buy it from pays their workers and themselves, who buy more stuff, and so on. Economic activity generates more economic activity.
Unfortunately the multiplier effect also applies to economic damage.
The failure of duff investments leaves not just investors with empty pockets but abandoned building sites, wasted resources and in this case, distressed elderly residents.
The complacent idea that the collapse of unregulated investment schemes doesn’t matter because it only affects “fools and their money”, which has allowed the Government to leave UK securities law stuck in the 1920s, needs to be re-examined urgently.
A billion pounds is at risk of loss in unregulated investment schemes that solicited investment from the public and entered administration in 2019. This is not just a loss to the investors but to the UK economy as well.
A total of £76 million of investor money is believed to be at risk.
Lawyers for Carlauren investors alleged that Sean Murray transferred significant sums into his own personal account.
Murray responded that the money was accounted for and was just resting in his personal account.
Mr Murray, who represented himself at the hearing in London, previously told the court there were no missing millions and although money had been transferred to his personal account, he said it was being held in trust for the company.
In April Carlauren launched a fraudulent copyright takedown attempt on Bond Review, claiming under penalty of perjury that our articles had been stolen from a made-up Spanish-language blog (which itself consisted of stolen articles from various sources) that somehow managed to review Carlauren’s investments before they existed.
The company then descended into further ignominy as an “Ibiza-style” club on the Isle of Wight failed to open, rubbish piled up outside its properties and elderly residents were thrown out of a Carlauren care home with only hours’ notice as Sean Murray’s latest investment empire crumbled.
Reports of Carlauren’s demise in July, based on a statement from the company that said it had “instructed” administrators, were not so much exaggerated as premature.
Carlauren attempted to appoint its own choice of administrators, but with the appointment of Quantuma and Duff & Phelps, that attempt has failed.
As always we’ll bring you more when the administrators issue their report.
Carlauren reportedly takes its name from a portmanteau of Sean Murray’s two daughters. “Thanks Dad.” Perhaps to avoid further damage to the innocent, the administrators could consider a rename.
Collapsed care home investment scheme Carlauren continues to resemble Wile E Coyote after running off the edge of the canyon, somehow still moving simply by refusing to acknowledge standing on thin air.
The demise of Carlauren was prematurely reported in July after the company wrote to investors to told them it had “instructed” administrators. In reality, it had only spoken to administrators, not appointed them.
Administrators Quantuma LLP have since been appointed by investors to some Carlauren subsidiaries, but have not yet established control over the group as a whole. Carlauren is trying to block Quantuma’s appointment and have its own choice, CVR Global LLP, appointed instead. A court hearing has been set for 26th November.
Jamieson has since abandoned ship, according to The Caterer. It was Jamieson who famously spoke to staff at Carlauren’s care homes to tell them “there is no money”, an outburst he and managing director Sean Murray later blamed on male hysteria in a letter to investors. Having had to do the same job to Carlauren’s hotel staff, it appears he has finally had enough.
Back in July, Jamieson told care home staff that there would be money to pay them after the takings of the hotel business had cleared at the bank. The care home staff were later paid as promised, but the care homes were shut down at almost no notice, resulting in elderly and frail residents being given just hours to find alternative accommodation.
Having previously used money from the hotel business to pay care home staff, it appears the hotel money has now dried up as well.
According to residents of Sandown, Carlauren has even been unable to pay fees to booking.com to list its hotels, and resorted to sending its staff out onto the street with leaflets.
On the public Facebook group Sandown Hub, a resident of Sandown noticed that one of its former introducers, One Touch Property Investment (officially One Touch Solution Ltd), was apparently continuing to sell units in its care home.
One Touch clarified that it was no longer selling Carlauren investments. In the ensuing thread, it revealed that it has approached a “fraud litigation solicitor” on behalf of investors to pursue Carlauren over “misrepresentation”.
(The conversation below took place in the public domain, in a public Facebook group, but personal names have been blanked as a courtesy.)
Angry clients of One Touch queried One Touch’s own role, accusing it of taking 10% of Carlauren investors’ money in commission.
One Touch did not deny taking 10% in commission, though it did dispute a supposed accusation that it made “millions” (no investor actually mentions “millions” in the thread).
What One Touch’s company records actually show is: not a lot. The company has consistently used small company exemptions and does not publish its profit and loss account via Companies House, meaning that how much One Touch received for selling Carlauren investments is unknown.
Several investors suggested One Touch should refund to investors the commission it made from selling Carlauren investments. One Touch did not respond to these requests.
Three Carlauren entities are already in administration, with Quantuma LLP appointed as administrators: Carlauren Lifestyle Resorts, Carlauren Care and Accordiant. The latter was responsible for the committment to pay returns of 10% per year to investors.
Quantuma recently revealed, in their initial report into Accordiant, that they have applied for the wider Carlauren group into administration. As at September 2019 an initial hearing had been adjourned, and the Administrators are awaiting a hearing date.
In the meantime, director Sean Murray has been required “to give undertakings to the Court that each of the respondent companies’ assets will not be disposed of or dealt with in any way other than the ordinary course of business”.
Carlauren’s directors are opposing their application to put the wider Carlauren Group into administration and have challenged the validity of the current Administration.
Carlauren itself is adopting either an ostrich or “lights are on but nobody’s home” approach to the administration. Carlaurengroup.com now redirects to carlaurenlifestyle.com, which makes no mention of the administration.
Safe or Scam LLP, an American introducer which brings together investors in collapsed investments and insolvency practitioners / lawyers, has claimed in an open blog published on Monday 5 August that Carlauren has not appointed administrators, contrary to a statement from Carlauren in late July.
Carlauren claimed on 23 July that it had “instructed administrators”, and that “a full update with procedures and next steps will be distributed tomorrow”. A number of media outlets, including Bond Review, took this to mean that the company had gone into administration, especially against the background of Carlauren’s widely documented financial problems.
Safe or Scam however states:
This led to a number of media outlets picking up the story and reporting that Carlauren Group was in administration. It was not. As of today’s date it is still not in administration. We do not know why Carlauren Group would choose to mislead investors like this. We can only assume it was because they knew the use of the word “instructed” has no meaning in relation to an administration. The important word is “appointed” and Carlauren Group did not appoint any administrators. We can only assume this was a stalling tactic designed to prevent investors from combining to appoint an administrator. Carlauren was trying to buy time. As far as investors are concerned the only company in administration which is relevant to them is Accordiant Ltd. That company is the one which owes the rental payments.
Filings in The Gazette show however that Quantuma LLP were appointed last week as administrators to three Carlauren companies: Carlauren Care Limited, Carlauren Lifestyle Resorts Limited, and Accordiant Limited.
Quantuma LLP was recommended to Carlauren investors by Safe or Scam.
Carlauren Care and Carlauren Lifestyle Resorts are not mentioned in Safe or Scam’s blog but Accordiant is. Safe or Scam also says that Quantuma intends to place all Carlauren companies into administration.
Quantuma is representing creditors of Accordiant Ltd because that is its job and to do that effectively it must interview the people who controlled that company. Murray is not going to take their advice because the Quantuma position is that ALL Carlauren companies ought to be placed into administration for the protection of creditors and assets. We would be amazed if any administrator would ever consider taking advice from Sean Murray. He is a man who buys a private jet with investor money and thinks elderly care can be paid for with a new kind of crypto-currency he has just devised.
So in short: Safe or Scam says that Carlauren as a group is not in administration, however three Carlauren subsidiaries definitely are according to the Gazette, and the administrators’ intention is to expand this to the whole group.
Earlier in the blog, Safe or Scam alleges that Carlauren was a Ponzi scheme, whose business model was to buy properties and sell off the rooms at a 300% markup to investors, on the promise of a 10% per annum return.
Any returns the investor received, according to Safe or Scam, were funded by their own investment or those of others, rather than returns from the care home or any other business.
The model appears to be that a Carlauren SPV company buys a property for X. The bedrooms are then described as care studios and sold off to individual investors for 4X i.e a 300% mark-up. In some cases the mark-up was higher. The SPV company retains the freehold of each site along with ownership of communal areas such as restaurants, lounges, kitchens and gardens. […]
Another element of the investment was that investors were promised an unrealistic and unachievable guaranteed rental of 10% per annum. This may have been achievable if the rental was based on the true market value of the bedroom e.g £20,000, but when Carlauren described these as “care studios” and was selling them for £100,000 each the rental commitment of £10,000 per year was impossible to achieve. The only reason for selling rooms for £100,000 was to raise enough cash to give the investors some of their own money back under the pretence of it being their rental payments. Needless to say all rentals on all sites ceased a few months ago.
Carlauren Group letter to investors of 10th July 2019 states “week ending last Sunday realised the largest turnover since we began of £147,000, this equates to an annual turnover of £7.6m of which we estimate a net margin after hotel running costs of 35% (£2.67m)”. Even when using their best ever week figures and applying that as a yearly revenue estimate, they admit they are currently £5m short every year on the rental payments they owe to investors. Carlauren has never explained to investors how they were able to make the rental payments. Perhaps it is time that they did.
Carlauren would have to admit that the payments came from the investor’s own money and then later from the money paid by new investors buying into the next property. […]
It is worth pointing out that Carlauren Group has commitments to make rental payments to investors on more than a dozen sites which are still closed and non-operational. Carlauren just kept buying more and more sites for X to sell at 4X because that was their only way to raise enough money to meet the ever-growing rental commitments.
Carlauren Group’s £2.5 million pad
Research by Safe or Scam into Companies House records shows that a Carlauren subsidiary named Carlauren Resort 22 Ltd borrowed money from Together Commercial Finance, secured against various Carlauren properties owned by various Carlauren special purpose vehicles, and a £2.5 million residential property in Poole bought by Carlauren Resort 22 itself, known as Western House.
Western House is described by its former estate agents as
An outstanding bespoke built residence situated in beautiful landscaped grounds of around one acre. Located in Branksome Park, a conservation area covering several hundred acres, an area renowned for its natural beauty with tree lined avenues, indigenous pines and rhododendrons.
Complementing the sophisticated interior is a superb outdoor swimming pool, as well as east facing manicured grounds lined by mature trees providing seclusion and privacy. A short drive away are the superb water sports facilities of Poole Harbour with several yacht clubs and marinas, as well as miles of Blue Flag award winning sandy beaches.
For what purpose Carlauren Group used investors’ money to buy Western House is not currently known. But it certainly sounds as if whoever lives there has been better provided for than Carlauren’s former care home residents.
As and when the Gazette or Companies House publishes updates on Carlauren’s administration or non-administration, we’ll bring you more…
Bond Review reviewed Carlauren’s care home investment in April 2018 and concluded that the investment was an extremely high risk investment in a small unlisted company. (The promise to pay investors a fixed 10% per year made Carlauren’s opportunity an investment security in Carlauren itself, not a bricks and mortar property investment.) Contrary to claims in Carlauren’s literature that their investments “dispelled the myth” that “great investment comes with great risk”.
Carlauren’s defaulting on promised payments to investors and subsequent appointment of administrators confirms that investing in a small unlisted company like Carlauren was the definition of a great risk.
Evidently this didn’t do much to put off the day of reckoning either.
Yesterday’s letter, which was reposted publicly on the Sandown Hub Facebook group, reads in full:
Dear Valued Client,
Carlauren Group today has instructed administrators. A full update with procedures and next steps will be distributed tomorrow. There is no cause for concern this step is intended to protect all studio owners, whilst updating them on the companies past financial trading by an independent 3rd party. [sic]
Sean Murray Chairman & CEO
Andrew Jamieson Chief Operating Officer
Given Carlauren’s numerous documented business problems and the fact that payments to investors have been stopped or reduced (temporarily, says Carlauren), Carlauren’s claim that “there is no cause for concern” is likely to ring hollow with investors unless the administrators come up with good news.
At time of writing there is nothing about the firm’s administration on the carlaurengroup.com website.
Safe or Scam, a US-based introducer between investors and insolvency practitioners / solicitors, has been contacting investors urging them to appoint their own administrators with Safe or Scam’s help rather than allowing Carlauren to do so.
SoS estimates that Carlauren raised £88 million in total from investors.
Carlauren raised funds via unregulated introducers including Property Wealth Limited and Armchair Invest (aka Kernow Property Group Ltd).
More to follow as and when details of the administration enter the public domain.
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.
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.