Grand Designs presenter Kevin McCloud’s housing firm at risk
LONDON: Grand Designs presenter Kevin McCloud has written to investors in his eco property firm to warn them the company may be going into a formal insolvency process.
Investors in an eco-friendly property venture launched by Grand Designs host Kevin McCloud have said they fear they may never see their money again.
McCloud launched Happiness Architecture Beauty (HAB) in 2007 ‘to make homes that lift the spirits’.
An email sent by McCloud to HAB Housing investors said that accountancy firm KPMG had attempted to call in money owed by HAB Housing.
‘HAB Housing cannot pay and could yet be forced into a formal insolvency process,’ the email was reported as saying, adding: ‘I am determined that investors should see their investment as not entirely lost.’
McCloud resigned as a director of HAB Land Ltd in 2018 and control of the company was acquired by another firm, BAH Restructuring Limited.
In October 2019, KPMG was appointed as a liquidator of BAH Restructuring Limited, HAB Land Limited and HAB Land Finance plc.
KPMG said in October that HAB Housing Limited was unaffected by those liquidation proceedings.
HAB Housing lost £1,033,362 on turnover of £336,284 in 2018.
Accumulated losses of £4,268,368 including 2018’s loss were held at the end of 2018.
Investor capital of £1,972,441 offset those losses to leave it £2,275,442 in the red.
Joint liquidator James Bennett said last October: ‘The directors have reported that higher-than- anticipated design and project management costs, coupled with delays to the delivery of the sites, resulted in the companies experiencing significant liquidity issues.’
The media quoted Robin Brookes, who put £5,000 into HAB Housing after it launched an equity crowdfunding campaign, as saying: ‘It is starting to look like I will be getting nothing back at all.’
Retired teacher Gill Mascord, who had previously invested £3,000, said that while she had not read the latest email, she felt the money was already ‘lost’.
She said: ‘I’m not expecting to get any of the money back.’
Ms Mascord said she had been aware there were potential investment risks, but added: ‘It felt less risky because Kevin McCloud was involved with it and because the principles that they were using seemed like wholly good ones.
‘I have never invested like that before and I never will again.’
Those who followed McCloud’s personal advice in January 2017 invested a combined £2.4m into his firm but have now been told they can expect to lose up to 97 pence in the pound.
Meanwhile a separate group of 650 bondholders who invested £1.9m in 2013 have been warned there is ‘no reasonable prospect’ of being able to sell their holdings, despite the firm anticipating no ‘significant income’ into the business for ‘several years’.
The presenter, who said he was the largest single investor in the firm, said he would do ‘everything in [his] power to improve the current situation’ adding he was working to ‘find a resolution with both the mini-bond investors and the company.’
But a representative of one investor said many had been left ‘feeling angry and betrayed.’
Gill Mascord, 64, from Woodplumpton, Lancashire, who pumped in £3,000 said she was ‘shocked’ to learn of the internal investigation.
She said: ‘I haven’t heard anything from Kevin McCloud at all, he certainly hasn’t written to all the investors to say what’s happening. I’m not so wealthy that I can just forget about that sum of money.’
A representative of another investor said: ‘None of the 650 investors have received a penny in dividends or have even been allowed the opportunity to sell their shares in order to reclaim any of their investment… Many are left feeling angry and betrayed.’
For more than two decades McCloud has been one of the country’s best-known design experts, fronting Grand Designs on Channel 4 since 1999, in which he meets clients to discuss their often elaborate plans for their dream home.
The series has been sold to 145 countries from Australia to Canada and has spawned multiple spin-offs plus a popular live event held annually over 10 days in London.
In 2007 McCloud founded development firm HAB (Happiness Architecture Beauty), saying ‘HAB’s mission is to make homes that lift the spirits, that are a pleasure to live in and a joy to behold.’
The company’s website claims it was set up ‘to challenge the way identikit volume housing was built in the UK’, and the company has expanded rapidly with developments across the country.
In 2013 and again in 2017, McCloud’s businesses raised money by issuing ‘mini-bonds’ to small investors.
When HAB Land Ltd wanted to raise capital in 2017 it issued a ‘mini bond’ to small investors, who put in anything from a few thousand pounds to £200,000.
In total the bond issue raised £2.4 million.
Mr McCloud personally encouraged investors to part with their money, writing the bond would: ‘directly fund our schemes and yield healthy returns that are economic, social and environmental.’
He added: ‘I really hope you feel excited to join us on that adventure.’
The five-year bond promised annual returns of eight per cent.
But in August the company wrote to propose a restructuring which would prevent any investor receiving an interest payment or cashing out any money until 2024 at the earliest.
The company also warned investors: ‘After final completion of the projects … the net return available to bondholders would be expected to range from £606,000 (best case) to £69,000 (worse case) which, in each case, is equivalent to 26 pence and 3 pence for every £1 of bond monies invested’.
It means investors stand to lose between 74 per cent and 97 per cent of their capital.
Last week the company confirmed bondholders had rejected the proposed restructuring
In 2013, 650 people put a combined £1.9m into HAB Housing, a world crowdfunding record at the time.
And in 2017 HAB Land Ltd, the land acquisition arm of the business, raised £2.4m in a bond issue promoted as offering an ‘enviable interest rate’ of eight per cent.
In January 2017 McCloud personally encouraged investors to part with their money, writing: ‘Our investors will be able to see potential returns through social and environmental means as well as gaining a good financial return.’
He added: ‘Allow me to urge you to hurry and join our community of like-minded investors.’
But those 2017 investors have now received a letter to dash their hopes of an eight per cent yield, or even of seeing their original investment again.
The media reported that the January 2017 bond investors have received a letter from HAB Land Finance which stated: ‘After final completion of the projects … the net return available to bondholders would be expected to range from £606,000 (best case) to £69,000 (worse case) which, in each case, is equivalent to 26 pence and 3 pence for every £1 of bond monies invested’.
It means investors stand to lose between 74 per cent and 97 per cent of their money, and as a result the company has proposed a restructuring which would prevent any investor cashing any money out until 2024 at the earliest.
The letter also says HAB Land would be unable to continue to trade without a further injection of funds.
Separately, investors who broke a world crowdfunding record in 2013 by providing £1.9m in capital to HBA Housing have been told they can’t get at it.
A July 2019 letter to the 2013 crowdfunding investors warned ‘the numbers’ were ‘serious’.
It said that without support from another McCloud business and from McCloud personally, ‘the business would not be here.’
And it stated: ‘Unfortunately, there is no reasonable prospect of liquidity for these shares.
‘By way of warning, we do not expect significant income into the business for several years.’
A representative of a 2013 investor said: ‘None of the 650 investors have received a penny in dividends or have even been allowed the opportunity to sell their shares in order to reclaim any of their investment … Many are left feeling angry and betrayed.’
Mr McCloud told the paper he wished he had been ‘less reliant on the executive team over the years’, adding ‘I placed my faith in past management in the belief the business would be run well and that decisions would have been above board and fully compliant.’
He said: ‘I am HAB Housing’s largest single investor and have supported the business financially for 12 years.
‘I will of course do everything in my power to improve the current situation but I cannot discuss anything else at this point because we are, importantly, trying to find a resolution with both the mini-bond investors and the company.’
