Small investors who sank millions of pounds into Grand Designs presenter Kevin McCloud’s property business can expect to lose almost all their money – from a scheme he promoted as offering annual dividends of eight per cent.
Those who followed McCloud’s personal advice in January 2017 invested a combined £2.4m into his firm but have now been told they can expect to lose up to 97 pence in the pound.
Meanwhile a separate group of 650 bondholders who invested £1.9m in 2013 have been warned there is ‘no reasonable prospect’ of being able to sell their holdings, despite the firm anticipating no ‘significant income’ into the business for ‘several years’.
The presenter, who said he was the largest single investor in the firm, said he would do ‘everything in [his] power to improve the current situation’ adding he was working to ‘find a resolution with both the mini-bond investors and the company.’
But a representative of one investor said many had been left ‘feeling angry and betrayed.’
Writing to potential investors in 2017 Kevin McCould (pictured) wrote: ‘Our investors will be able to see potential returns … as well as gaining a good financial return’
For more than two decades McCloud has been one of the country’s best-known design experts, fronting Grand Designs on Channel 4 since 1999, in which he meets clients to discuss their often elaborate plans for their dream home.
The series has been sold to 145 countries from Australia to Canada and has spawned multiple spin-offs plus a popular live event held annually over 10 days in London.
In 2007 McCloud founded development firm HAB (Happiness Architecture Beauty), saying ‘HAB’s mission is to make homes that lift the spirits, that are a pleasure to live in and a joy to behold.’
The company’s website claims it was set up ‘to challenge the way identikit volume housing was built in the UK’, and the company has expanded rapidly with developments across the country.
In 2013 and again in 2017, McCloud’s businesses raised money by issuing ‘mini-bonds’ to small investors.
In 2013, 650 people put a combined £1.9m into HAB Housing, a world crowdfunding record at the time.
And in 2017 HAB Land Ltd, the land acquisition arm of the business, raised £2.4m in a bond issue promoted as offering an ‘enviable interest rate’ of eight per cent.
In January 2017 McCloud personally encouraged investors to part with their money, writing: ‘Our investors will be able to see potential returns through social and environmental means as well as gaining a good financial return.’
He added: ‘Allow me to urge you to hurry and join our community of like-minded investors.’
But those 2017 investors have now received a letter to dash their hopes of an eight per cent yield, or even of seeing their original investment again.
Mr McCloud;s firm wrote to investors to warn them to expect to lose as much as 97p in every £1
HAB (artist’s impression of planned development, pictured) said it was set up to challenge the way identikit volume housing was built in the UK’
The firm broke a record for crowdsourced funding in 2013 but now investors can’t get their money out and may never see it again
The Guardian reported that the January 2017 bond investors have received a letter from HAB Land Finance which stated: ‘After final completion of the projects … the net return available to bondholders would be expected to range from £606,000 (best case) to £69,000 (worse case) which, in each case, is equivalent to 26 pence and 3 pence for every £1 of bond monies invested’.
It means investors stand to lose between 74 per cent and 97 per cent of their money, and as a result the company has proposed a restructuring which would prevent any investor cashing any money out until 2024 at the earliest.
The letter also says HAB Land would be unable to continue to trade without a further injection of funds, the paper reported.
McCloud claims to be the biggest single investor in his own firm and promised he was working hard to improve the situation for those who sank money into the firm
Separately, investors who broke a world crowdfunding record in 2013 by providing £1.9m in capital to HBA Housing have been told they can’t get at it.
A July letter to the 2013 crowdfunding investors warned ‘the numbers’ were ‘serious’.
It said that without support from another McCloud business and from McCloud personally, ‘the business would not be here.’
And it stated: ‘Unfortunately, there is no reasonable prospect of liquidity for these shares.
‘By way of warning, we do not expect significant income into the business for several years.’
A representative of a 2013 investor told the Guardian: ‘None of the 650 investors have received a penny in dividends or have even been allowed the opportunity to sell their shares in order to reclaim any of their investment … Many are left feeling angry and betrayed.’
Mr McCloud told the paper he wished he had been ‘less reliant on the executive team over the years’, adding ‘I placed my faith in past management in the belief the business would be run well and that decisions would have been above board and fully compliant.’
He said: ‘I am HAB Housing’s largest single investor and have supported the business financially for 12 years.
‘I will of course do everything in my power to improve the current situation but I cannot discuss anything else at this point because we are, importantly, trying to find a resolution with both the mini-bond investors and the company.’