The dire state of the Coal Exchange building in Cardiff – which is being held together by scaffolding – and the huge debts of its owner have been revealed in a report by administrators.
Cardiff council, which spent over £1m renovating the building before handing it over for just £1 to Liverpool property developer Lawrence Kenwright in 2016, looks set to be paid nothing when one of the city’s most historic buildings is sold.
Signature Living Coal Exchange Ltd, owned by Lawrence Kenwright, went into administration on May 6 owing at least £25 million and with just £17 in the bank.
The report reveals that the security Cardiff council has on the building appears worthless as Signature Living Coal Exchange has borrowed more than £13m from a company called Albendan, which has been given priority status as a creditor.
It means the council is highly unlikely to see its money again. Those investors who ploughed money into the hotel as “bedroom investors” are thought to be owed around £12.25 million.
The administrators report that the hotel is currently in a “poor condition” due to ongoing refurbishment and that it has been virtually impossible to obtain insurance cover since they took it on.
According to the report, carried out by Kelly Burton and Lisa Jane Hogg of Wilson Field Limited, the hotel needs a further £3.5 million to complete the works on the hotel.
The only option is to sell the hotel in its existing circumstances, the value of which will be dictated by “the appetite in the market”.
On the date of the joint administrators’ appointment, Cardiff council was owed £1,139,705, and Albendan was left owed £10,626,772. However, Albendan have a Deed of Priority which means they are ranked above the council in the order of priority of creditors. Any money raised from the sale of the hotel will be paid to Albendan.
The director of Albendan is Derek Watts who is also named as a director in SLG Cruise Limited. Lawrewnce Kenwright set up SLG Cruise Ltd in 2019 and is still listed as a director in the company.
The report states: “Based on the estimated value of the Hotel, it is envisaged that Albendan will suffer a shortfall in their indebtedness and therefore, there will be insufficient funds to make a distribution to the Council.”
Only 90 of the 200 planned rooms have been completed to date at the Coal Exchange hotel. Surveys carried out on behalf of the joint administrators have shown the building is being held together with scaffolding which is “integral to the building” and it is costing £70,000 each month in holding costs.
There are “significant health and safety risks and potential structural issues at the site”.
A number of other companies in the Signature Group have also fallen into administration in the last two months, including the company behind their flagship hotel, The Shankly, in Liverpool. In April, the unfinished George Best Hotel in Belfast which is also part of the wider Signature Living Group, went into administration.
On May 29, the George Best Hotel went up in flames in what authorities are treating as a “deliberate attack”.
In total, the joint administrators estimate Signature Living Coal Exchange Ltd owes around £25,910,580 to over 300 creditors. It is understood the hotel also owes additional money to the council thanks to “a large non-domestic rates liability that has accrued”.
Their report also says: “The Joint Administrators do not believe it will be feasible to rescue the Company as a going concern due to the extent of its insolvency and liabilities to its creditors.”
The report rules out options including a Company Voluntary Arrangement (CVA) and sale of shares, on the basis that “the Company is significantly indebted to its creditors and no outside party would wish to take on this liability”.
It adds: “Sale of the hotel building would not be enough to repay all the unsecured creditors due to the overwhelming indebtedness to its secured creditors and the costs and expenses anticipated to be incurred during the Administration.
“The Joint Administrators are therefore pursuing the third purpose of Administration, which is to realise property in order to make a distribution to one or more secured or preferential creditors of the Company.”
Such is the complexity of the arrangement under which the hotel business operated, the joint administrators said it has had to spend “significant time and costs” to fully understand the workings of the arrangement.
Stephen Doughty, the Labour MP candidate for Cardiff South and Penarth raised “serious about concerns” about the financial model and record of Signature Living when their proposals for the Coal Exchange first came to light in 2016. Responding to the new report, Mr Doughty said: “I first raised serious concerns about the past business affairs of Mr Kenwright and Signature Living, as well as with the financial model they proposed for redeveloping the Coal Exchange four years ago – and have observed with deep concern the latest developments. These issues unfortunately long pre-date the current Covid crisis.
“This will be a deeply worrying time for all those who invested in this multi-million scheme, let alone those who have lost their jobs, and it is vital that council officers now transparently and publicly outline how exactly they are working with the administrators and other investors, to secure the safety and security of a building that is key part of Cardiff and Wales’ heritage.”
The Coal Exchange is a Grade-II listed building which operates as a luxury 4-star hotel in Cardiff Bay. It was taken on in 2016 by the Signature Group, which is owned by Lawrence Kenwright. The business model of the Signature Group is to acquire complex, disused and derelict properties that are of a historical significance and bring them back to use as residential or hotel properties.
As part of the business model the company offered investors the opportunity to purchase a leasehold interest in bedrooms within the hotel. These investors are known as bedroom investors and the funds were used towards the refurbishment works. However, many reported that they never saw a return on their money.
In its first year of trading, the Coal Exchange made an operating loss of £18,224. As the refurbishment works were completed, some sections of the hotel were opened for business and in its second year the company reported revenues of £575,199.
In early 2020, half of the hotel was still being refurbished and Signature Living estimated that another £3,486,149 was needed to complete the works. Cardiff Council agreed to offer a loan of £2 million to fund these works but this was never paid.
The joint administrators’ investigations into the affairs of Signature Living Coal Exchange Ltd are currently ongoing.