'Business as usual' for City Sentral firm despite £24m debts
THE private firm behind the city's planned £350 million City Sentral shopping complex has debts of more than £24 million.
Independent auditors say there is 'significant doubt' over whether Realis Estates can continue without threat of liquidation.
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City Sentral: An artist's impression of the development.
The Birmingham-based firm made losses of £11 million last year.
Its debts of £24.2 million are payable on demand – meaning creditors can request repayment at any point.
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The company's liabilities outstrip the total value of its assets by £15.3 million.
Figures are revealed in the company's newly-published accounts for 2011.
Auditors say the level of debts 'indicate the existence of a material uncertainty which may cast significant doubt about the company's ability to continue as a going concern'.
The company's debts have this month been sold by Lloyds Bank to Oaktree Capital.
Realis said the debt sale should not affect its financial situation and it is in talks with the Oaktree Capital over repayment.
In a statement, the firm said: "The fact is that regardless of what the accounts say, as previously stated, we continue to invest heavily in progressing City Sentral."
Nobody at Stoke-on-Trent City Council, which is promoting the shopping centre as evidence of its 'Mandate for Change' regeneration plans, was prepared to comment on the auditors' findings.
But the authority indicated its officers are in contact with the company and have full confidence over its solvency.
Opposition leader and independent councillor Dave Conway said: "We need explanations. The council promotes this shopping centre in all of its promotional literature but as soon as it looks like bad news, they don't want to know.
"I have big concerns. You don't need to be an economist or anything like that. It is written there in black and white."
As well as funding about a third of the city council's new Hanley bus station, Realis is expected to deliver a giant shopping complex on the site of the former East West precinct.
City Sentral, which is due to open in 2015, is planned to provide 80 shops and restaurants, a multiplex cinema, an 80-bedroom hotel and 1,000 parking spaces.
It is considered the centrepiece of ambitious plans to transform the city centre.
The Sentinel can also reveal that an unknown party has had part of the land on which City Sentral is due to be built independently valued.
Property consultant Lambert Smith Hampton inspected the site and produced valuation documents over the summer.
Duncan Mathieson, managing director of Realis Estates, denied enlisting the consultant and said Realis 'has no intention' of selling the land.
Mr Mathieson said the audit report offered only a 'snapshot' as the City Sentral project progresses: "The plan remains as it has been since we took out the loans – to repay the debt.
"We have already met with Oaktree. In the meantime, it is business as usual.
"In the current economic climate, it would be difficult to find an auditor's report on a special purpose vehicle in property development that didn't include a caveat of this sort.
"The valuation of the asset can only be a snapshot of the position at a specific moment in time and, with a development such as City Sentral which is moving forward all the time, is therefore rather fluid."
Comments
by Redtone
Monday, October 15 2012, 4:07AM
“If you owe the bank £1,000 you stay awake all night worrying about it. If you owe the bank £24.2 million the bank manager stays awake all night worrying about it.”
by RegenMan1
Sunday, October 14 2012, 9:45PM
“@ I_Norris
What odds on the council receiving its contribution from Realis for the bus station?
And when?
Good job the council has been putting money back into its reserves over the past two years of generally unneccesary cuts - might need to draw it back very soon indeed.”
by RegenMan1
Sunday, October 14 2012, 9:41PM
“The company had, on 31 December 2011, 'assets' of £23.6m and 'debts' of £39m. Thus if the company were to close down tomorrow, there will be a shortfall of £15.4m.
Of the £39m, the company has given security for bank loans and overdrafts totalling £24.3m leaving £14.7m of other creditors. It depends who these other creditors are and their priority status - presumably they are unsecured and will be last in the queue if the company goes belly up. With secured loans of £24.3m and assets of £23.6m, potentially not too much of a loss there (less than the city council has poured, potentially, down the Port Vale drain).
Before the situation can be properly commented upon the financial health of other companies within Almira Holdings, and their financial relationship to Realis (SoT) Ltd need to be known and understood. Some trading losses are good (for tax reduction purposes). As the accounts are abbreviated there is no information on cashflows / trading activity.
It appears that the value of properties held by the company reduced from £33m to £23m between 2010 and 2011 – not good, I wouldn't like to think my house had declined in value by that proportion over one year! Commercial property values plummeted at the time of the credit crunch but have generally recovered a little since. It may be that £10m worth of property has been transferred to the holding company – in which case I hope Lloyds Bank had some decent parent company guarantees in place!
Previous reports have always stated that Realis have 'invested over £30m in City Sentral', from now on that must be read as £23m (and falling?)!
One question is why has Lloyds Banking Group decided to sell on the debt, and at what discount to Oaktree Capital? Perhaps this is merely part of their own restructuring, having invested heavily (and badly) prior to the financial crisis / property crash.”
by I_Norris
Sunday, October 14 2012, 9:31PM
“Strandedhere: the development agreement between Realis and Sity Council says Realis are to pay £4.5M - £5.5M on completion of Bus Station.
Maybe thats why the bus station has been seen a delay, to give Realis a bit more time drum up some money?
Part of Development Agreement is here on whatdotheyknow http://tinyurl.com/97xoxjq”
by strandedhere
Sunday, October 14 2012, 8:16PM
“Experience suggests than if (when) this goes the way of birds flying off after pecking open the milk-bottles the council will go to court losing a further 5 million odd on costs.”
by Mr_Jingles
Sunday, October 14 2012, 6:24PM
“What a fiasco, the council is "fiddling while Rome burns".”
by Tinkersid
Saturday, October 13 2012, 10:20PM
“Update from Raelis Website :- they now taking all the credit for all the development of the undersized New Bus Station.
Look at all the other developemnts they have been involved in from their website and there is NOT a single one that they have completed on their own, all others have been joint venture developments with other developers.
Also many of their developments are miniscule compared with something like The Potteries Shopping Centre. Don't think they have any serious worries over on the other side of Hanley!!!
Very pretty pictures on the Hotlinks on the right of their Homepage. Nice little corner shop with a couple of apartments above!!
And even that was a joint venture !!”
by Tinkersid
Saturday, October 13 2012, 10:07PM
“Nothing new here the pervious potential develper for the site went in to liquidation taking along their grandiose plans too.
Google - Realis, to see what little they have ever actually done for any area. Seem to be experts on Land Banking and Selling On, potential development sites but they have caught a serious cold in the present economic climate.
They are left with swathes of land which have more than halved in value since they took options on them. ****y Sentral is one such site!!”
by meirhayflyer
Saturday, October 13 2012, 2:28PM
“i just cant beleive we put up with these idiots that serve them selves and not us. It time for the electorate of stoke on trent to rid our selves of the fools. I suggest we get the district auditor in on this, if only i knew how to do it , i suspect corruption on grand scale going on here. Think how did a company with a poorly funded get this contract??? when westfield group didnt????”
by stokeatheart
Saturday, October 13 2012, 10:40AM
“only so many people these back handers can pay for and why was this not given to a stoke on trent based company (local jobs for other people)”