They were billed as the jewels in the crown of the Northern Powerhouse: a multimillion-pound series of property developments that would have brought thousands of new homes and hundreds of jobs to Liverpool and Manchester, complete with helipads, Chinese bazaars and a Banksy street art gallery. But now the plans have collapsed amid accusations of fraud – all strongly denied – leaving the cities scarred with abandoned building sites and a trail of angry investors from around the world demanding to know where their money has gone.
On Norfolk Street, in Liverpool’s trendy Baltic Quarter, stands the six-storey concrete carcass of what was supposed to be Baltic House, launched in 2015 as a “groundbreaking” development of student flats and creative live-work units. It was the first phase of the Gallery+ project, an “elegant, cool, urban and edgy” mixed-use scheme, centred around a gallery of Banksy murals that had been ripped from nearby walls. It was one of many such glamorous projects devised by property company North Point Global, marketed with great fanfare in China and Hong Kong and sold off-plan to investors with the lucrative promise of high yields, before mysteriously grinding to a halt. Three years on, the company has pulled out of its planned £360m suite of projects across the city and stopped picking up the phone, leaving buyers to believe they are the victims of a ruthless scam, fiercely denied by the developers in question.
- How Baltic House was supposed to look – and how it looked last week
“We all thought the UK was a safe place to invest,” says Florence Leung, a retired Hong Kong accountant who put a substantial chunk of her life savings into a unit in Baltic House, and has since had to return to work to make ends meet.
Along with many others, Leung said she was wooed at a lavish promotional roadshow at a hotel in Hong Kong and convinced to pay 80% of the price of a student flat upfront, with promises of 6% interest on her deposit, followed by guaranteed 9% returns in rental income once the project was finished. Months later, buyers received requests for further funds to complete the building, before North Point Global announced it was stopping work all together – and couldn’t refund the buyers’ deposits.
Groups of frustrated buyers have since raised what they believe to be serious conflicts of interest, with the same individuals simultaneously acting as directors of the development companies, contractors and independent surveyors – claims that have been denied by all parties involved.
“The UK government must take action,” says James To Kun-sun, a member of Hong Kong’s legislative council, who has been inundated with complaints from hundreds of local buyers claiming they have been victims of UK property fraud. He estimates more than 700 buyers have lost an average of HK$500,000 (£45,000) in Hong Kong alone, with many more across Asia and beyond. “People here have a sentimental link with the UK, as a place with a responsible government, democracy and the rule of law, so it is shocking that this can be allowed to happen. It seems the development industry isn’t properly regulated and politicians are willing to endorse any kind of project. In Hong Kong we reformed our system 40 years ago, so buyers’ deposits cannot be released to the developer until a project is completed.”
In 2015, then-chancellor George Osborne led a UK government trade mission to China, accompanied by the Mayor of Liverpool, Joe Anderson, to trumpet the “golden era” of Sino-British relations. They were there to sell the Northern Pitchbook, a £24bn catalogue of investment opportunities, one highlight of which was Liverpool’s New Chinatown. Devised by North Point Global, this flagship £200m development of 800 luxury flats was to stand in the shadow of the Anglican Cathedral, as a dramatic cluster of angular towers rising above a Chinese bazaar.
“We have an idea, because of Liverpool’s links to China, of a new Chinese-themed attraction to bring it all to life,” Osborne told the Liverpool Echo in September 2015, speaking on the phone from Chengdu. “I’ve just been talking to one of the Chinese investors at the Liverpool stand,” he continued. “And Joe and I were going at it as a tag team, to try and persuade him to put his money into Liverpool.”
- ‘Joe and I were going at it as a tag team’ … George Osborne, then chancellor, pictured with the mayor of Liverpool, Joe Anderson, describes how the pair promoted some of the failed property schemes in Asia
Little did Osborne know that the project he was so eagerly promoting would end in limbo, with investors out of pocket, contractors in administration and the council taking the developer to court.
“Liverpool’s reputation has been trashed,” says Cllr Richard Kemp, leader of the city’s Liberal Democrats. “Buyers were led to believe these projects were backed by the council, because of the mayor and his deputy’s promotional visits, but they were nothing of the sort. The council flogged off the land without doing any due diligence on who they were selling it to, and now we won’t see the money.”
Deputy mayor Gary Millar, meanwhile, has travelled to China and Hong Kong at least seven times in the last five years to promote investment opportunities in Liverpool, and has been pictured toasting buyers at North Point Global promotional events. He denies any wrongdoing. “I completely understand the investors’ frustration with their stalled schemes,” he told the Liverpool Echo. “However, I know I did nothing wrong.”
How they did it
This risky form of buyer-funded development (sometimes known as investor-led fractional sales) has mushroomed since the 2008 financial crisis, after which banks grew reluctant to finance property. Instead, many developers have turned to individual buyers to fund the entire cost of development, using their hefty deposits to pay for everything from marketing to professional fees and construction costs. Whereas a conventional model of off-plan development sees the buyers’ deposits (typically 10% of purchase price) held in a secure escrow account, and only released on completion of the building, this alternative form of buyer-funded development sees investors paying up to 80%, which can be spent on all manner of costs and fees before construction has even begun.
“It’s an incredibly risky form of investment,” says Clifford Tibber, expert in property law at Anthony Gold solicitors. “Very often the developments are not legitimate … Developers are bypassing banks and targeting unsophisticated individuals who are willing to throw their life savings at a chance of making big profits.”
Last year the Solicitors Regulation Authority warned solicitors not to get involved in such projects: “our view is that they involve consumer clients unwittingly financing high risk or fraudulent property development”. The SRA notice describes a process whereby “investors provide money for a ‘deposit’ which is released to the seller upon some (often spurious) condition. […] This carries substantial risks such as the money being misappropriated, the seller failing to complete the scheme or the seller becoming insolvent.”
In the last year, the SRA has taken action against eight law firms involved in such schemes and investigated cases with reported investor losses of over £100m. The northwest regional organised crime unit, Titan, is now considering a number of cases, after hundreds of buyers have come forward with similar allegations.
- The Angelgate development in Manchester. More than £30m was taken in buyers deposits before the firm went into administration
One of the most prominent is the Angelgate development in Manchester, a scheme of 344 luxury apartments launched in 2015 by Pinnacle, a company linked to former convicted conman Tony Freeman, who was jailed for 18 months in 2006 for defrauding a cancer charity and whose home was reportedly raided in July 2017 over a £3m tax fraud probe. Pinnacle said the raid was a personal investigation and nothing to do with the company, and said Freeman works for it as a consultant but denied that he has any involvement in the firm’s ownership. Once again, the Angelgate units were sold off-plan to investors, many in Asia, with more than £30m taken in buyers’ deposits before the firm was forced into administration last year.
Buyers were aghast to discover that most of their money had already been spent before a single brick had been laid. As the administrator’s report states: “It is not clear how on any basis [Pinnacle] could justify spending 40% of the funds received from buyers on sales and marketing commissions,” adding that an additional £5.1m had been paid to the contractor, despite no construction work having begun. A spokesperson for Pinnacle insists that “foundational work” had been conducted, and blames the situation on the collapse of the contractor, PHD1, which had “significantly under-valued the build”.
Surveyor David Choules, whose company Inca Management was responsible for certifying the stages of work, agrees that the developer’s fees were “considerable and outrageous”. “They changed their financial appraisal a couple of times during the project and decided to take out more fees,” he says. “But, as the certifier, it wasn’t our position to challenge that. We can have an opinion, but it’s down to the lawyers to advise.”
- Deputy mayor of Liverpool Gary Millar (left) and Peter McInnes (right) with Samson Law of Hong Kong Homes at a promotional event for Asian investors. Millar travelled to Asia seven times. McInnes has been linked to a pair of jailed gangsters
Solicitor David Roberts, the lawyer who managed the buyers’ accounts for a number of these failed schemes, says: “Our role was to administer the funds in accordance with the sales agreement, which the buyers had voluntarily entered into. Once Inca certified the expenditure, the invoices became payable and we released the money to the developer.”
Pinnacle said it was not true that commissions or fees had been used to extract money from Angelgate, adding that “absolutely no profits have been recognised from this development”. The spokesperson added that Pinnacle had never been contacted by police, and said, “If they ever were, they would fully cooperate.”
Concerned buyers have highlighted a series of connections between Pinnacle and North Point Global, and a recurring pattern of events – chief among which was their deposits being released to the developer without much sign of work taking place.
They point to a close network of individuals who crop up in different roles at a variety of companies, often all registered to the same address – the 2nd floor of the Edward Pavilion in Liverpool’s Albert Dock.
North Point Global was founded here in 2015 by Peter McInnes, who had worked with Tony Freeman to build a series of earlier Pinnacle schemes in Chester, Canterbury and Liverpool with his construction firm PHD1, before the two parted ways. McInnes – who has lived in Dubai for the last decade – was never a director or shareholder of either North Point Global or PHD1, but was described as chairman of both firms in their press releases. He has since denied chairing either company. He quickly established a buzz around the North Point brand, launching projects from North Point Pall Mall in Liverpool, with “sky gardens” and “rooftop paddle courts”, to the Element in Old Trafford, Manchester.
“He’s a very dynamic personality,” says property consultant Samuel Beilin, an associate of the company, who was also a director of PHD1, and who was previously declared bankrupt in 2010, with debts of around £1m. He now represents McInnes and the North Point Global Group. “Peter McInnes is a great promoter and he was able to convince the council that he could deliver high-quality, well-designed, mixed-use schemes on an industrial scale.” Liverpool council awarded the New Chinatown site to North Point Global in 2015, over another more established developer, X1 Ltd, despite the company having only been incorporated two months earlier.
- North Point Pall Mall pictured last week
David Choules was another founding director of North Point Global, and later chaired the company, while at the same time his firm Inca was employed to certify expenditure on the firm’s developments. Buyers have pointed to what they believe to be a clear conflict of interest, with the same person certifying work for funds to be released, while also standing to receive those funds.
Choules denies any conflict and says he has been open and transparent at all times and that his colleague handled the day-to-day certification of works. He says he resigned from North Point Global in July 2016 “to avoid any perceived conflicts.”
Off-plan sales boomed and it all seemed to be going well, until Peter McInnes made headlines in March 2017, when his name was referred to in a court case about a notorious pair of jailed Liverpool gangsters, Stephen and Peter Clarke, in a hearing at Preston Crown Court. “He fronts companies, runs them until accounts are due and then scraps them and then moves on,” said DC Duncan Watson, financial investigator for the Cumbria constabulary, said of McInnes, adding that he didn’t know how someone like this “could be taken on by a council”.
McInnes has fiercely denied the claims, saying he had not been represented in court to respond to the allegations, and that he had never been arrested, questioned or charged over money laundering in relation to any matter. Beilin bats away the accusations of criminal behaviour, but says such associations shouldn’t be surprising: “Liverpool is a small place. Behind every developer there’s a former relationship, friendship or businesses agreement with someone who isn’t totally savoury.”
“The council is often attracted to partners who they think will be beneficial to them in the short term,” he adds, “but who turn out not to do them any favours in the long run. They really thought McInnes could deliver, but perhaps they didn’t do as much due diligence as they could have done in investigating the financial capacity of North Point Global.”
Liverpool City Council insists that proper due diligence was undertaken and that the developer was chosen on the basis of the ability to conclude a commercial deal in a timely fashion, the quality of the scheme submitted, and evidence of a wider strategy for the regeneration of the Chinatown area.
Once buyers’ deposits had been secured, the New Chinatown project quickly began to unravel. As with Angelgate, it turned out that PHD1 had grossly undervalued the construction costs of the ambitious designs. The firm went into administration in April 2016, with debts of over £14m, including £7.8m owed to subcontractors. The building work on North Point Global’s sites was then taken on by the BILT group, which had been established just two months earlier. All the BILT firms went into liquidation one year after they were formed, with combined debts of £1.8m. Subcontractors told Construction Enquirer that they were not paid for their work.
In July 2017, North Point Global announced it was halting work entirely and would seek to dispose of all of its sites, blaming the situation on adverse media coverage and the behaviour of the Liverpool City Council, which had publicly stated that it had reported the developer to the National Crime Agency. A spokesman for North Point Global said in a statement: “It would be wholly unrealistic to return to site on any of their projects as they consider that the brand has become tainted and damaged beyond salvage.” They insist that the company has never been contacted by the NCA or any other law enforcement agency.
Most of its building sites have stood untouched for 18 months, the concrete frames and exposed foundations standing as rotting monuments to the developer’s greed, investors’ naivety and mayoral hubris. The Banksy murals, including the 12-metre high Liverpool Rat and Love Plane, which were promised to return to public display, have been sold for £3.2m to an anonymous buyer in Qatar.
After months of uncertainty, it was announced this week that the New Chinatown site will be taken on by a new developer, which plans to resume work by the summer. “Our funding model will also be significantly different,” says Neal Hunter of Great George Street Developments. “We are engaging with major institutional investors to fund the scheme, rather than being reliant on multiple small investors.”
The other sites will be sold, with “whatever money left divided back pro-rata to the buyers,” says Beilin. Given the number of creditors queuing up, to whom North Point Global owes almost £4.2m, the chances of investors seeing their money back are slim.
“I do feel sorry for them,” Beilin adds. “Whenever there’s a failure, there’s always a tendency to look for someone to take responsibility. But, when the buyers signed those sales contracts, I don’t think they actually understood what they were signing.”
He adds bluntly: “If a Romanian property roadshow came to the UK, I would not buy a fractional off-plan apartment and if I did I would not pay more than a nominal deposit until it was built.”
Sitting in a cafe in Hong Kong’s Causeway Bay, one Baltic House buyer recalls the extravagant events where North Point Global’s projects were unveiled with dazzling models and presentations about Liverpool’s booming economy.
“We were wined and dined, and taken for celebratory banquets with Peter McInnes and Gary Millar,” says Mr Cheung. “It was presented as a council-backed project, and we were told it was a low-risk investment.” At the first promotional roadshow, Cheung was convinced to buy three units in Baltic House, followed by another three a month later. One year on, he was persuaded by promises of ever-higher yields to buy six more. “They even funded travel costs for us to come and see the site in Liverpool, so it all felt legitimate,” he says.
One Hong Kong sales agent who was involved in promoting New Chinatown, before his company withdrew from the deal over unpaid fees, recalls the lavish roadshows. “Every few months they would turn up in Hong Kong and have a big yeehaw blow-out to say thank you to the buyers,” he says.
Across town, another buyer tells how he remortgaged his home in Hong Kong in order to invest in three units in New Chinatown, Baltic House and the Element in Manchester, paying 80% upfront. “Gary Millar told us these were big, important projects for the whole country, that’s why I was convinced to go for it,” says Mr Chan, who had retired but is now looking for work again. “I loved the British system, but this experience has changed my opinion.”
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