Investors in a £3.4m peer-to-peer loan organised by Lendy are likely to be out of pocket after the Grade II* listed former castle in Flintshire, North Wales sold at auction for just £1.5m.
Westbury Castle, which is in receivership, was sold off a guide price of £1.5-£2m at the latest Allsop residential auction held today at the InterContinental Hotel on Park Lane, W1.
The property was bought in 2011 for £1.5m by developer Ian Ringwood, chief executive and founder of Ringwood Property Group. Ringwood was incorporated in 2014.
Gated estate
Ringwood took the castle on as a development project, and completed works to refurbish the premises into a gated estate.
Ringwood approached Lendy about the project in 2016 at which point the flats at the castle were described as being in various stages of construction, some of which were in “shell condition” and others were “completed to habitable standard”.
Lendy stated that the purpose of the loan was for Ringwood to refinance an existing bridge. On its website it said: “The client has been refurbishing this property over the past two years, most of the works are now complete but the existing loan is due for repayment. The client will use this bridge to repay the current loan and use the six months to source term finance with buy-to-let mortgages.”
The exit strategy was to split the property title, creating individual leases and allowing Ringwood to refinance each apartment and the mansion house separately with buy to let loans.
Liverpool-based surveyors Keppie Massie were instructed to carry out a valuation, which gave an aggregated value for the house and flats of £4.9m. This includes £1.7m for the mansion house, which has been operated as holiday lets and a special occasion venue, and values ranging from £177,500 to £250,000 for the flats. The valuation was based on a normal 18-month marketing period.
Bridging loan
Lendy agreed to issue a 70% loan to value five-month bridging loan of £3.4m at an interest rate of 11%, which was drawn down by Ringwood on 3 January 2017. Some 2,426 Lendy investors put their capital into the loan.
Receivers were called in six months later, and the property was put up for sale.
According to Lendy’s updates to investors, the borrower asked for the redemption statement in March and planned on redeeming the loan a month early.
Westbury includes 12 bedrooms in a three-story 1820s mansion house. It has a west wing that provides nine self-contained flat as well as its own chapel with a bell tower.
Lendy’s spokesperson responds
A spokesperson for Lendy said that the company would be pursuing a claim against the borrower in order to recoup costs, saying: “We are disappointed that the sale of Westbury Castle at auction fell short of the original independent valuation put on the property.
“Before this loan was written, Lendy undertook detailed due diligence with our advisers, including a valuation by a RICS-registered independent property agency.
“However, the sale of Westbury Castle is just one stage in our process for recouping maximum value for lenders. Following the auction, we have acted immediately to protect the interests of our investors.
“As part of our efforts to bridge the gap between the value of the property realised at auction and the loan value, we will be pursuing a claim against the borrower (in line with the terms of the loan agreement) and we will update investors on that and other actions in due course.
“Despite our strong and sustained track record of delivering above-market returns to our investors, there are, sadly, occasional instances where a single property may not realise its full potential value for investors.
“It is for this reason that we always recommend that investors diversify their portfolios across a wide range of loans in order to manage concentration risk effectively.
“We also always recommend that investors read the full independent valuation reports on the properties they lend against and that they never commit more than they are comfortable with to any one loan.
“We are, however, very aware that investors will be disappointed at the price realised, so we would like to reassure all investors that the team will be putting every effort into recovering as close to the full capital value as possible, on top of the interest already earned.”
For an in-depth analysis of the Westbury Castle sale, click here.
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