A residential development company set up to establish a £1bn business on the back of permitted development rights is racing to restructure its debt.
Magna Global, set up by Chris Madelin and Oliver Mason in 2014, had ambitions to grow to a £1bn developer within three years. But after acquiring a portfolio of office-to-residential assets across the South East and development rights to a plot of land in Dubai for a 450-bedroom hotel, it is now trying to renegotiate loans and shore up the business.
Accounts for Magna’s main vehicle, Magna Investments X, show a loss of just over £1m, with subsidiary company MIX 2 showing net liabilities of more than £985,000.
Investors in the business, which has raised more than £20m through the issue of loan notes to fund its development projects, have been told that they will not receive further interest payments on their investments and run the risk of losing all their capital.
Documents seen by EG reveal some £29.6m of debt held across four of Magna’s 12 special purpose vehicles. That includes £17.5m against Magna Asset Management (Absolute), which owns Magna Vita, a 109-flat scheme in Frimley, Surrey, bought by Magna as an office-to-resi conversion in 2016. That site has been in the hands of receivers at Stanley Capital Advisers since 20 December after Fortwell Capital called in its loan. Allsop is currently marketing the property for £18m. Pre-Covid, Magna had valued the asset at £22.5m.
The group’s second biggest debt, according to the documents, totals £7.6m and is held against Magna Property Development FZE, an offshoot of Cayman Islands-registered M&M Holdings. That SPV is to develop 450-bedroom hotel on Al Marjan in the UAE. Magna has acquired the rights to a plot on the man-made island and says it needs £111m of investment to develop it out.
Magna also has a £3.5m charge over a site in Woking, where it said it has had “a positive pre-application meeting” with the local council to create two residential towers of 33 and 27 storeys. Funds of more than £94m will need to be raised to finance the development, according to the Magna documents.
‘We are doing all that we can’
In a YouTube message to investors on 17 September, Madelin said: “We are doing all that we can to turn around and fix what we can with our business. We’ve reduced overheads drastically, we’ve been cutting costs, negotiating with some of our creditors and negotiating with other lenders and making sure that our door is still open for business even despite the very tough economic times we are in.”
Magna is seeking support to restructure its loan notes, around £4m of additional funds to complete the construction of certain projects and to bring in a “new professional team” to help manage its assets through to completion.
“The ability to continue to trade is conditional upon the support of loan noteholders,” reads a presentation to investors. “If an insufficient number of noteholders support any proposed resolutions, the group will cease to operate, which will result in the forced sale of assets. It is projected that in this scenario, noteholders would lose a significant proportion of their capital invested, possibly all of it.”
Before the pandemic, Magna estimated the value of its assets – Magna Vita in Frimley, a dilapidated shop in Maidenhead, Berkshire, with planning for 12 flats above, the Woking Gateway project and the proposed UAE hotel – at around £42.5m. It currently values its net assets at -£2.6m.
In the YouTube video, Madelin added: “I want to assure investors that we have some very good projects, but we do need your continued support and we need to work together to help us deliver on the projects we have. That will give us the best possible chance to get your much valued investment returned to you.
“Oliver and I set out with very good intentions. We set out with a vision in 2014 to build Magna successfully into a large real estate developer. We had some early successes and then some good wins and we moved to Mayfair and continued our journey with further results before embarking in 2017 on more of a global approach. It is with the help of yourselves from 2018 onwards, other equity partners, banks, various lending institutions, that we’ve been able to do this and get to where we are.”
“We are doing everything we can to get through this,” Mason told EG. “We will not give up. We are confident that we are going to get a majority support. What we are proposing is the right thing to do. The best way out of this is to have a resolution and develop out the pipeline.”
Madelin added that the group had a high percentage of support from loan noteholders and investors and was confident the business would be able to “rebuild”.
“Time generally heals,” said Mason. “If we can hold on to things long enough, we will come out of this.”
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