£48m tax scheme backed by Rory McIlroy and Graeme McDowell in administration
A £48m hotel investment scheme that promised lucrative tax breaks and which won backing from sports stars like Rory McIlroy and Graeme McDowell has ended up in administration.
The golfers, along with Republic of Ireland goalkeeper Kieren Westwood and more than 100 other investors, plunged at least £50,000 each into what was promised as a tax-efficient incentive to develop the Park Regis Hotel in Birmingham.
The trio were among a list of investors behind the Park Regis Birmingham Limited Liability Partnership (LLP).
An LLP is a company structure that ensures investors aren't personally liable for any debts a business can't pay. The Park Regis Birmingham LLP was marketed to investors as a "highly tax-efficient" investment opportunity that would take advantage of the UK's Business Premises Renovation Allowance (BPRA), which offers tax breaks to re-develop derelict property.
The Park Regis LLP was set up to buy, redevelop and let Auchinleck House, a large derelict property in Birmingham as a hotel.
The partnership created to execute the scheme raised £27m of loans and £21.5m of investor capital, including an average individual investment of around £137,820. But it is understood the scheme ended up in administration because not all of the signed up investors put their promised capital in on time, causing it to default on the debt.
The scheme was taken into administration on August 17 this year, with Paul Stanley of Begbies Traynor appointed as administrator.
He has since sold the Park Regis Hotel for £23m to Staywell Hospitality, the company that operates it - and which had provided the original loans to the LLP. The sale left the LLP investors who funded the redevelopment nursing a loss.
Mr Stanley said the logic behind the tax incentive was to encourage investment that might not happen otherwise.
"This was a council or a government block that was in massive disrepair, looking like an eyesore in a run-down part of the city," he said.
"The idea is the government and the council don't want to pay for renovations so individuals are incentivised with tax breaks under BPRA to invest and regenerate this type of building."
Mr Stanley spoke of discontent among investors with one anonymous director saying he would have to make considerable lifestyle changes as a result of the failure.
The final sale price came in at £3m above the valuation put on the hotel by real estate firm CBRE.