On 2nd August investors received their latest Carlauren Group letter.
Our review of Carlauren investments reveals mis-selling, over-pricing and false guarantees. Here is a brief recap and our comments on a number of Carlauren Group letters received over the past eight weeks.
Carlauren Group sold individual bedrooms in large properties. They described the bedrooms as “care studios” and emphasised the growing demand in the UK for elderly care services. Carlauren Group says it now has nine operational sites. None of them are providing any care services. Carlauren attempted to operate one site at Tyndale House in Yeovil as a care home and it failed miserably.
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. Here are some examples:
Rosewell Care Home bought in March 2017 for £1.3m. 51 bedrooms sold to investors on a leasehold basis for more than £5.4m. This property is still in a derelict state two years after it was purchased;
Auckland Hotel bought in June 2017 for £595,000. 24 rooms sold to investors on a leasehold basis for more than £2.5m. The hotel is operational but the Carlauren SPV company which owns the freehold was recently issued with a winding up order over an unpaid debt owed to an electrical contractor;
Ash Sutton bought in March 2018 for £752,000. 40 rooms sold to investors on a leasehold basis for more than £3.1m. Ash Sutton is still closed and the project is now being abandoned (Carlauren Group letter 2nd August 2019 states “we will be looking to purchase back these units from investors when profits and funds permit or alternatively offer the owners other portfolio locations that are performing…..”). In the same letter Carlauren makes the same statement for another of its sites – New Hacketts Hotel which is also still closed.
Carlauren has chosen not to identify any sites which “are performing”. That is because there are none. There isn’t a single site which is meeting its rental payment commitment to investors.
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 31st July states “Through the sales of studios, Carlauren raised £76m…”. Using Carlauren’s own figures we can see it has an annual rental commitment to investors of £7.6m.
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. We have yet to hear a rational explanation why Accordiant Ltd (a Carlauren subsidiary), or any other company for that matter, would enter into long-term tenancy contracts for sites such as Rosewell where it has been paying £540,000 per year to rent empty rooms in a derelict 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.
A third element of the Carlauren investment was that the contracts contained a guaranteed buy-back clause promising to pay 110% of the investor’s purchase price after five years if the investor requests it. Carlauren Group announced the abandonment of the Ash Sutton site and it cannot even pay the £3.1m back to investors. How is it going to meet its £83m commitment to buy-back the bedrooms from its other investors ?
The bedrooms in Ash Sutton were sold to investors for £3.1m and it was claimed by the promoters of the scheme that this was a genuine market price. If that is so, why doesn’t Carlauren sell the property and return the money ? The answer is because the entire property is only worth £752,000 i.e the amount Carlauren paid for it. Investors at Ash Sutton were ripped off as were all investors in all Carlauren Group properties.
Carlauren Group letter of 2nd August 2019 states “Windlestone Hall [another derelict Carlauren property] – …..we can confirm that we have provisionally concluded the buyback of £1.3m of sold units from studio owners….”. Note the use of the word “provisionally”. In other words they have not bought back any units from studio owners. None of the studio owners have received any payment. There is just a Carlauren promise to pay at some point in the future. It is all smoke and mirrors.
The Carlauren Group letters contain a lot of references to “the company” and “company performance” and the “Carlauren portfolio of companies”. Mr Murray and Mr Jameson act as if they are talking to shareholders but they are not. Investors are not registered as shareholders in any Carlauren business and they never intended to be. They each bought a specific “care studio” in a specific property, at a price they were told was fair market value, with an agreement which promised to pay a fixed and guaranteed 10% rental income to them for at least 10 years. They are not interested in any of the fanciful and hare-brained business schemes of Sean Murray. The only reason they pay any attention at all to the company’s private jet or the ridiculous Carlauren Coin idea or any other of the nonsense schemes is because they are concerned that their money was used to pay for these things, instead of being used to refurbish their closed and derelict properties. At least 12 sites are still closed, but Sean Murray chooses to go out and buy a private jet for the company ! That says a lot about the man and the total lack of capable, professional and honest management within Carlauren Group.
Carlauren Group Letter to Investors 30th May 2019 “Our estate within the Shared Ownership Model is worth over £470m….”. Carlauren lives in a fantasy world. It can’t seriously be suggesting that its estate is worth £470m. It cannot even pay a small debt to an electrical contractor to stop one of its companies being wound up. Its schemes are neither realistic nor achievable. Carlauren is making false representation to investors because it is desperate to prevent an investigation into the Group’s affairs.
Here’s another new scheme from the letter of 2nd August 2019. “The introduction of Respite Rooms, the only system in the world that allows for the real-time booking of care home beds….estimated income [will be] £54m”. What makes Carlauren think that investors care at all about the latest scheme ? Investors would just like their overdue rentals paid and their money back. Has anyone ever told Mr Murray that good quality care homes are not only full, but have waiting lists of people wanting to move in. They have no need of his new scheme. What has Respite Rooms got to do with the money that was paid for Rosewell or Windlestone Hall or Ash Sutton or any of the other closed properties ? Where has that money gone ?
Carlauren Letter to Investors 30th May 2019 “A full business plan and strategy is in place to achieve required incomes to meet rent commitments”.
Five weeks later on 10th July 2019 Carlauren writes “The Agreement signed [with Heritage Hotels which is owned by Sean Murray] will allow for occupied suite owners to be paid approximately 8% return on investment and unoccupied suite owners to be paid 2%….”. Bearing in mind that most of the Carlauren properties are closed and unoccupied, the percentage of investors receiving 8% is not high. This is certainly not meeting the rent commitments of any investor which it promised to do.
Carlauren Group Letter to Investors 15th July 2019 “to put this into perspective [the appointment of an administrator] ….. would cost the company around £350,000 per month. This is a position that we all need to avoid for obvious reasons”.
Eight days later on 23rd July 2019 Carlauren writes “Carlauren Group has today instructed administrators”.
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.
“We have many trading locations which are profitable and will be valued way more than the purchase price”. That may be true in only one or two cases if Carlauren is referring to the purchase price THEY paid. It is not true IN ANY CASE WHATSOEVER if it refers to the purchase price paid by the investors who bought bedrooms in the property. Carlauren provides no evidence in support of their statement.
Carlauren Letter to Investors 31st July 2019 [Referring to Quantuma which was appointed administrator of Accordiant Ltd] “we do not expect any impact on the trading of the Carlauren portfolio whilst we work together, we will take their advice and they ours in order we protect your assets”. That makes it sound as if the two organisations are best buddies. They are not. 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.
Carlauren Group Letter to Investors 15th July 2019 “We can tell you that no Carlauren properties held under Carlauren Group Ltd have any lending whatsoever….” Carlauren Group Ltd does not hold any properties so this statement is correct. However, a whole range of separate Carlauren SPV companies do have lending and those tend to be the companies which own the freeholds to the properties.
Here is just one example. It relates to borrowings made by Carlauren Resort 22 Ltd. The vast majority of investors have never heard of this company. It was formed on 12th February 2019. Within a few days loans were raised against the following Carlauren companies. The charges are all registered at Companies House:
CHF 1 Ltd – Hurst Manor (still closed)
CHF 3 Ltd – Auckland Hotel (in liquidation)
CHF 9 Ltd – Windlestone Hall (still closed)
CHF 14 Ltd – New Hacketts Hotel (still closed).
CHF 16 Ltd – Dean Valley Manor (one that is actually open).
In each case the borrower described in the charge document was Carlauren Resort 22 Ltd. In other words the money raised by using the above properties as security went to Carlauren Resort 22 Ltd. We wondered what that money might have been used for. Initially we assumed that Carlauren Resort 22 Ltd might have used the money to pay for the refurbishment or fitout of these five properties. We were wrong. Less than two weeks after the Carlauren Resort 22 Ltd was formed, i.e before the end of February 2019, Carlauren Resort 22 Ltd bought this very nice private residence for £2.5m.
We wonder who lives in it. Maybe it is someone who has a private jet at his disposal.
A few weeks after this purchase Carlauren stopped paying rentals to all its investors because it had run out of money. It had used its available cash to buy this house.
As you might expect with all the publicity surrounding Carlauren Group the property is now back on the market.
To read the previous blog on Carlauren Group please click HERE.