Eastlake Developments Limited in Administration High Court of Justice, Chancery Division, Birmingham District Registry Case No. 8226 of 2015 Joint Administrators progress report for the period from 12 June 2015 to 11 December 2015 8 January 2016 PricewaterhouseCoopers LLP Benson House 33 Wellington Street Leeds LS1 4JP Telephone: +44(0)113 289 4000 Fax: +44(0)113 289 4460 www.pwc.co.uk/edl 1
Contents Section Pages 1 Joint Administrators first progress report for the period from 12 June 2015 to 11 December 2015 3-7 2 Statutory and other information 8 3 Receipts and payments account 9 4 Analysis of the Administrators remuneration and disbursements for the period 10-14 5 Expenses incurred in the period 15 6 Form 2.24B 16 The following abbreviations are used in this report: IR86 Insolvency Rules 1986 the Administrators Roger Hale and Robert Lewis the Company Eastlake Developments Limited the Group Six associated companies including Eastlake Developments Limited LPH Lewis Property Holdings Limited in Administration LIE Lansdown Industrial Estate in Cheltenham PBS Principality Building Society Joint administrators progress report for the period 12 June 2015 to 11 December 2015 2
1. Joint Administrators first progress report for the period from 12 June 2015 to 11 December 2015 Introduction We write to provide an update on the progress of the administration, covering the six month period from appointment on 12 June 2015 to 11 December 2015. We are required to provide certain statutory information pursuant to Rule 2.47(1)(a) to (d) IR86, which is included in Section 2. Details of the steps taken during the administration and the outcomes are set out below. Background The main operations of the Company were the ownership and management of residential and commercial properties across England and Wales. The Company is one of six associated companies (together the Group ). They are not a formal group but have common shareholders and directors amongst them. The other main trading company in the Group was LPH, which was placed into administration on 26 February 2015. Approval of the Administrators proposals On 4 August 2015 the Administrators circulated to creditors their proposals for achieving the purpose of administration. The proposals were approved by creditors without modification on 14 August 2015. Working capital funding The administration of the Company has been funded by PBS as secured creditor. The administration has received 100,000 from PBS to fund its working capital requirements. This cash injection was fundamental to the administration as cash at bank held on appointment was not sufficient to fund the expenses of the administration (e.g. salary payments and insurance). These funds have since been repaid to PBS. Asset Realisations Lansdown Industrial Estate ( LIE ) LIE is an industrial estate in Cheltenham which comprises 44 units and was subject to joint ownership between the Company and LPH. To ensure an orderly disposal of this asset, the Company entered administration to enable the sale to be conducted under the control of the Administrators on behalf of both LPH and the Company. Following our appointment it was identified that the serviced office agreements at LIE were held by an associated company rather than by the Company (which owned the property). Further to legal advice, the arrangement was regularised and the associated rental income was secured by way of a deed of assignment. LIE was sold to GDL (Cheltenham) Limited on 30 June 2015 for total consideration of 8,100,000. The deed of assignment mentioned above was also transferred to the purchaser. This consideration is in line with the agent s valuations. The proceeds were attributable 90% to LPH and 10% to the Company in line with the split of the registered title of land. Total consideration received by the Company in relation to LIE was 810,000. Joint administrators progress report for the period 12 June 2015 to 11 December 2015 3
1. Joint Administrators first progress report for the period from 12 June 2015 to 11 December 2015 Bolt Street, Newport The Company s interests in Bolt Street consist of 11 residential houses which were let and managed by Roberts & Co prior to our appointment. We continued to use Roberts & Co to manage the properties and act as sole selling agents following our appointment and I am pleased to report that an offer has been accepted with completion expected in early 2016. Roberts & Co is managing the sales process and a further update will be provided in our next report to creditors. Total rental income to 11 December 2015 in relation to Bolt Street was 28,768. Regent Court/Randstad Court Regent Court is a five floor office block in Luton with two occupying tenants, one floor of which is currently vacant The leases the Company had entered into with these tenants expired prior to our appointment, and we are liaising with both tenants as regards ongoing lease arrangements. Total rental income to 11 December 2015 in relation to Regent Court was 116,292. We have continued to use the existing managing agent, Jessop & Co, to manage the property and administer the service charge. The Company rents car park spaces from an adjacent property owner and lease payments totalling 37,500 have been made in relation to continuing use of the Regent Court car park. The car park spaces were sub-let by the Company to various tenants and other third parties prior to our appointment. The underleases in respect of the two current tenants expired prior to our appointment and we will liaise with our agents regarding ongoing sub-lease arrangements. We have appointed Jessop & Co as our selling agents for the property and are considering a number of disposal strategies at this stage. Maxet House, Luton Maxet House consists of a number of serviced offices in Luton. Following our appointment, it was identified that the tenancy agreements at Maxet House were held by an associated company rather than the Company. Further to legal advice, we have sought to regularise the arrangement and secure the associated rental income by way of deed of assignment. A number of expressions of interest and offers were received following marketing by Jessop & Co whom we had appointed as selling agents. A sale for 1,525,000 to Maxet House Properties Limited was completed on 2 September 2015. This consideration is in line with the agents valuations. Total rental income received in relation to Maxet House prior to the sale was 27,928. Inter-company balances At the date of our appointment, Eastlake Stevenage Limited and Lewis Investments Wales Limited owed the Company 4.8 million and 4.2 million respectively. The prospect of recovery of these intercompany balances is nil as both Eastlake Stevenage Limited and Lewis Investments Wales Limited were placed into creditors voluntary liquidation on 2 June 2015, with MB Insolvency as the liquidators and there is no dividend anticipated to unsecured creditors. Cash at bank The cash held in the Company s bank accounts on appointment totalled 21,961. These funds have been released into the administration. Joint administrators progress report for the period 12 June 2015 to 11 December 2015 4
1. Joint Administrators first progress report for the period from 12 June 2015 to 11 December 2015 Employees Following our appointment, we established that there were three employees of the Company with either service contracts or contracts of employment. One employee was transferred to GDL (Cheltenham) Limited following the sale of LIE and a second employee transferred following the sale of a LPH property The remaining employee was retained to assist the Administrators with the disposal of the assets within the Company and LPH. In addition, we continued with the services of a former employee who had been made redundant by the Company and retained on a rolling, monthly contract prior to our appointment. The employment/services of both of these individuals was terminated with effect from 30 September 2015 and the Company has no remaining employees. Investigations and actions The Administrators have complied with their obligations under the Company Directors Disqualification Act 1986 and Statement of Insolvency Practice No.2. Receipts and payments account An account of the receipts and payments in the administration for the period from 12 June 2015 to 11 December 2015 is set out in Section 3. Expenses statement A statement of the expenses incurred by the administrators in the period 12 June 2015 to 11 December 2015 is included at Section 5. The statement excludes any potential tax liabilities that may be payable as an expense of the administration in due course because amounts due will depend on the position at the end of the tax accounting period. Administrators remuneration The Administrators remuneration has been approved on a time costs basis by PBS as the Company s secured creditor. The time costs incurred in the period covered by this report are 280,526. This includes time in relation to both fixed and floating charge matters. This amount does not necessarily reflect the amount that will be drawn as remuneration by the Administrators for this period in due course. In accordance with the requirements of Statement of Insolvency Practice 9, a full analysis of the Administrators time costs and Category 2 disbursements for the period 12 June 2015 to 11 December 2015 is provided in Section 4. Details of work, which would normally be undertaken by the Administrators own staff, that has been subcontracted in the period covered by this report are provided in Section 4. To 11 December 2015, the Administrators have drawn remuneration of 100,000. Joint administrators progress report for the period 12 June 2015 to 11 December 2015 5
1. Joint Administrators first progress report for the period from 12 June 2015 to 11 December 2015 Creditors rights Creditors have the right to ask for more information within 21 days of this report as set out in Rule 2.48A of the Insolvency Rules 1986. Any request must be in writing. Creditors can also challenge fees and expenses within eight weeks of this report as set out in Rule 2.109. This information can also be found in the guide to fees at: www.icaew.com/en/technical/insolvency/creditors-guides Pre-administration costs The unpaid pre-administration costs which were incurred prior to the appointment of the Administrators, but with a view to the Company entering administration were approved for payment on 3 November 2015 by PBS as the secured lender. These costs totalled 42,538 and have been paid. Outcome for creditors Secured creditor PBS s lending to the Company as at the date of administration was in the region of 10.7 million and is secured by a debenture dated 30 June 2004. This security gives PBS fixed and floating charges over all the Company s assets. To date, 1.81 million has been distributed to PBS however we don t think the realisations made will be sufficient enough to repay PBS in full. Preferential creditors (employees) We don t think there will be any claims from preferential creditors based on what we currently know. Unsecured creditors The prescribed part is a fund that has to be made available for unsecured creditors. It s paid out of net property. Net property is floating charge realisations after costs, and after paying - or setting aside enough to pay - preferential creditors in full. But it only has to be made available where the floating charge was created on or after 15 September 2003. The amount of the prescribed part is: 50% of net property up to 10,000; and 20% of net property above 10,000; but Subject to a maximum of 600,000. There is unlikely to be a dividend for the unsecured creditors under the prescribed part or otherwise as we currently estimate that all floating charge realisations will be applied in meeting floating charge costs. However we cannot confirm the value of net property, at this stage as this is dependent on future realisations. Further details will be provided in due course. Ending the administration Following disposal of all of the assets of the Company, the Administrators envisage that the administration will be brought to an end by filing notice under Paragraph 84(1) Schedule B1 of the Insolvency Act 1986 with the Registrar of Companies, following which the Company will be dissolved three months later. Joint administrators progress report for the period 12 June 2015 to 11 December 2015 6
1. Joint Administrators first progress report for the period from 12 June 2015 to 11 December 2015 Next report The Administrators anticipate that they will circulate their next report to creditors at the earlier of the conclusion of the administration or in approximately six months. Yours faithfully For and on behalf of the Company Roger Hale Joint Administrator Roger Hale and Robert Lewis have been appointed as joint administrators of Eastlake Developments Limited to manage its affairs, business and property as its agents. Both are licensed in the United Kingdom to act as insolvency practitioners by the Institute of Chartered Accountants in England and Wales. The joint administrators are Data Controllers of personal data as defined by the Data Protection Act 1998. PricewaterhouseCoopers LLP will act as Data Processor on their instructions. Personal data will be kept secure and processed only for matters relating to the administration. The joint administrators are bound by the Insolvency Code of Ethics which can be found at: https://www.gov.uk/government/publications/insolvency-practitioner-code-of-ethics. Joint administrators progress report for the period 12 June 2015 to 11 December 2015 7
2. Statutory and other information Court details for the administration: High Court of Justice, Chancery Division, Birmingham District Registry Case 8226 of 2015 Full name: Eastlake Developments Limited Trading name: Eastlake Developments Limited Registered number: 03078869 Registered address: Benson House, 33 Wellington Street, Leeds, LS1 4JP Company directors: Melanie Hall, Bryan Lewis, Marlene Lewis, Guy Lewis Company secretary: Melanie Hall Shareholdings held by the directors and Melanie Hall (23%), Bryan Lewis (27%), Marlene secretary: Lewis (27%), Guy Lewis (23%) Date of the administration 12 June 2015 appointment: Administrators names and addresses: Mr Roger Hale and Mr Robert Lewis, both of PricewaterhouseCoopers LLP, 1 Kingsway, Cardiff, CF10 3PW Details of any extension(s) to the initial Not applicable period of appointment Changes in office holder: Not applicable Appointor s / applicant s name and Eastlake Developments Limited, The Lodge, Parc address: Maes Ffynon, Itton, Chepstow, NP16 6BD Objective being pursued by the Administrators: Division of the Administrators responsibilities: (C) realising the Company s assets to pay a dividend to one or more secured or preferential creditors In relation to paragraph 100(2) Sch.B1 IA86, all of the functions powers and duties of the Administrators may be exercised by all or any of the Administrators. Proposed end of the administration: Estimated dividend for unsecured creditors: Estimated values of the prescribed part and the company s net property: Whether and why the Administrators intend to apply to court under Section 176A(5) IA86: The European Regulation on Insolvency Proceedings (Council Regulation(EC) No. 1346/2000 of 29 May 2000): Dissolution Nil Nil Not applicable The European Regulation on Insolvency Proceedings applies to this administration and the proceedings are main proceedings. Joint administrators progress report for the period 12 June 2015 to 11 December 2015 8
3. Receipts and payments account 12 June 2015 to 11 December 2015 FIXED CHARGE REALISATIONS/RECEIPTS Rental income - Maxet House 27,928.20 Sale of Lansdown Industrial Estate 810,000.00 Sale of Maxet House, Luton 1,525,000.00 2,362,928.20 COST OF REALISATION/PAYMENTS Agents' fees (26,986.50) Insurance (13,329.47) Lease/hire payments (1,854.00) Legal fees & disbursements (14,182.83) Office holders post-appointment fees (50,000.00) Rent - head office (3,633.33) Repairs and maintenance (1,318.00) (111,304.13) Distribution to chargeholder - PBS (1,810,000.00) NET FIXED CHARGE REALISATIONS 441,624.07 FLOATING CHARGE REALISATIONS/RECEIPTS Balance at bank 21,961.10 Bank interest 504.85 Refunds 587.90 Rental income - Bolt Street 28,768.33 Rental income - Regent Court 116,292.15 Third Party Funds 260.00 Working capital funding 100,000.00 268,374.33 COST OF REALISATION/PAYMENTS Bank charges (75.00) Employee related costs (846.00) Irrecoverable VAT (19,217.80) Legal fees & disbursements (3,181.17) Office costs, stationery and postage (120.00) Office holders pre-appointment fees (42,537.50) Office holders post-appointment fees (50,000.00) Office holders expenses (262.87) PAYE, NIC & pensions deductions (18,531.51) Rent - Regent Court - car park (37,500.00) Statutory advertising (76.72) Telephone, fax etc (422.50) Utilities and rates (10.57) Wages and salaries (35,742.24) Working capital funding (100,000.00) (308,523.88) NET FLOATING CHARGE REALISATION (40,149.55) VAT control account (28,078.34) Balance at Bank (held in current account) 373,396.18 Joint administrators progress report for the period 12 June 2015 to 11 December 2015 9
4. Analysis of the Administrators remuneration and disbursements for the period Office holders charging and disbursement policy Time charged to the administration is by reference to the time properly given by the Administrators and their staff in attending to matters arising. It is the Administrators policy to delegate tasks in the administration to appropriate members of staff considering their level of experience and any requisite specialist knowledge, supervised accordingly, so as to maximise the cost effectiveness of the work performed. Matters of particular complexity or significance requiring more exceptional responsibility are dealt with by senior staff or the Administrators themselves. All staff who work on these assignments (including cashiers, support and secretarial staff) charge time directly to the assignment and are included within any analysis of time charged. Each grade of staff is allocated an hourly charge out rate which is reviewed from time to time. Work undertaken by cashiers, support and secretarial staff is charged for separately and is not included in the hourly rates charged by partners or other members of staff. Time is charged by reference to actual work carried out on the assignments in 6 minute units. The minimum time chargeable is 3 minutes (i.e. 0.5 units). Hourly rates Specialist departments within the Administrators firm also provided expert advice. These teams included Tax, VAT and Pensions. These rates do vary but the figures below provide an indication of the maximum rate per hour. Set out below are the relevant maximum charge-out rates (before VAT) per hour worked for the grades of the Administrators staff actually or likely to be involved on these assignments. Time is charged by reference to actual work carried out on the assignment. There has been no allocation of any general costs or overhead costs. In common with all professional firms, the scale rates used by Administrators may periodically rise (for example to cover annual inflationary cost increases) over the period of administrations. Administrators' staff /hour Specialist departments /hour Grade 12 June 2015 to 30 June 2015 1 July 2015 onwards Partner 795 825 1,075 Director 480 490 1,085 Senior manager 415 425 915 Manager 330 340 600 Senior Associate (qualified) 250 255 410 Senior Associate (unqualified) 180 185 - Associate 160 165 210 Support Staff 85 87 120 Joint administrators progress report for the period 12 June 2015 to 11 December 2015 10
4. Analysis of the Administrators remuneration and disbursements for the period Disbursements policy Our firm s expenses policy allows for all properly incurred expenses to be recharged to the case. Disbursements are charged to the assignment as follows: Category Policy 1 All disbursements not falling under Category 2 are recharged at cost 26.92 2 2 Photocopying - At 5 pence per sheet copied, only charged for circulars to creditors and other bulk copying. Mileage - At a maximum of 71 pence per mile (up to 2,000cc) or 93 pence per mile (over 2,000cc). 10.95 225.00 Total for the period 12 June 2015 to 11 December 2015 262.87 Summary of legal and other professional firms The Administrators have instructed the following professionals: - Service provided Name of firm / organisation Reason selected Basis of fees Legal advice Eversheds LLP Expertise Time costs Valuation of business and assets Jessop & Co Expertise Time costs Insurance Marsh Ltd Expertise Value of assets insured Amount paid to date ( ) 17,364.00 26,986.50 13,329.47 All third party professionals are required to submit time costs analyses and/or narrative in support of invoices rendered, in order for the Administrators to consider whether they are reasonable in the circumstances of the case. Joint administrators progress report for the period 12 June 2015 to 11 December 2015 11
4. Analysis of the Administrators remuneration and disbursements for the period Analysis of time costs for the period from 12 Jun 2015 to 11 Dec 2015 Aspect of assignment Partner Director Senior Manager Manager Senior Associate Associate Total hours Time cost Average hourly rate Strategy & Planning - - 6.55 1 0.40 20.55 1 0.55 48.05 12,180.00 253.49 Secured creditors - 6.00 21.65-2.20 0.20 30.05 12,601.25 41 9.34 Trading - - 0.05 4.55 83.1 0 7.1 0 94.80 18,086.00 1 90.7 8 Assets 1 4.50 1 2.00 1 60.05 1.7 0 3 1.20 0.50 219.95 98,296.75 446.90 Inv estigations - - 2.1 5 1.90 1 7.35 0.20 21.60 4,914.00 227.50 Creditors - - - - 5.7 5 1.60 7.35 1,389.75 1 89.08 Accounting and treasury - - 5.50 0.25 20.25 27.50 53.50 10,915.75 204.03 Statutory and compliance 3.00 1.50 1 2.00 1 5.55 66.45 3 8.1 5 136.65 32,380.75 23 6.96 Tax & VAT - - 24.35 84.45 3 9.45 1 04.50 252.75 7 6,464.60 409.1 6 Employ ees & pensions - - 8.83 28.3 0 55.95 2.40 95.48 25,606.00 268.1 8 Total for the period 17.50 19.50 241.13 147.10 342.25 192.70 960.18 292,834.85 324.60 Joint administrators progress report for the period 12 June 2015 to 11 December 2015 12
4. Analysis of the Administrators remuneration and disbursements for the period The following table explains the key elements of our work, as summarised in the table of time costs, by grade of staff and area of work Area of Work Strategy & planning Secured creditors Trading Assets Investigations Creditors Accounting and treasury Statutory and compliance Work undertaken includes: Compliance with internal case acceptance procedures Preparing budgets and cost monitoring Agreeing case strategy and holding update meetings Liaising with secured creditor regarding strategy and relevant sales Reporting to secured creditor Requesting fee approval from secured creditor Establishing trading controls for ongoing rental portfolio Rental income coding and reporting Responding to tenant queries Setting up agreement with managing agents Instructing utility agents Supplier queries in relation to ongoing supplies Sales process for LIE, Bolt Street and Maxet House Marketing properties Assessing potential purchasers Legal advice in relation to realisations Liaising with agents regarding sale of properties Property inspections Site visits Deed of assignment for serviced offices Lease regularisation Organising insurance cover Preparing the CDDA report regarding the directors of the Company Completing investigations into directors actions prior to administration Compiling and analysing responses from directors to directors questionnaires Responding to creditor queries received by post and telephone Opening bank accounts Setting up accounting system Bank reconciliations Dealing with pre appointment bank accounts Accounting for receipts and payments into the administration accounts Preparing and sending initial notices of appointment Requesting and filing statement of affairs Preparing and circulating proposals Arranging appointees bonding Updating case records Appointee & manager reviews Responding to enquiries Preparing six monthly progress report Joint administrators progress report for the period 12 June 2015 to 11 December 2015 13
4. Analysis of the Administrators remuneration and disbursements for the period Employees & pensions Tax & VAT Assessing employee strategy Communication with employees Assessing the implications and complying with TUPE Making pension scheme checks Reviewing the Company's tax position Tax advice on sales Reviewing VAT and TOGC clauses in SPA's Reviewing the Company's VAT position Preparing and reviewing monthly post-appointment VAT returns, including partial exemption calculations. Preparing and notifying options to tax to HMRC in respect of UK property interests, including follow up queries from HMRC Discussions and advice in relation to the Company's partial exemption position to secure maximum recovery of VAT on office holders' fees Correspondence with HMRC to request a quarterly VAT stagger Correspondence with Paul Jessop to discuss the correct VAT position in respect of Randstad Court service charge account and advice in respect of compliance requirements Joint administrators progress report for the period 12 June 2015 to 11 December 2015 14
5. Expenses incurred in the period Below is a summary of the expenses we have incurred in the period from 12 June 2015 to 11 December 2015. Expenses Administrators time costs Administrators disbursements Legal fees and disbursements Paid ( ) Incurred not yet paid ( ) Total ( ) 100,000.00 180,526.25 280,526.25 262.87-262.87 17,364.00 2,345.00 17,364.00 Statutory advertising 76.72-76.72 Agents fees 26,886.50 790.00 26,986.50 Insurance 13,329.47-13,329.47 Total 157,919.56 183,661.25 338,545.81 Joint administrators progress report for the period 12 June 2015 to 11 December 2015 15
Rule 2.47 Form 2.24B The Insolvency Act 1986 Administrator s progress report 2.24B Name of Company Eastlake Developments Limited Company Number 03078869 In the High Court of Justice, Chancery Division, Birmingham District Registry Court case number 8226 of 2015 (a) Insert full name(s) and address(es) of administrator(s) We (a) Roger Hale and Robert Lewis, both of PricewaterhouseCoopers LLP, 1 Kingsway, Cardiff, CF10 3PW Joint administrators of the above company attach a progress report for the period from to (b) 12 June 2015 (b) 11 December 2015 (b) Insert dates Signed Joint Administrator Dated 8 January 2016