Wrap platform Novia has moved to prevent new investors buying a fund linked to a Spanish property development from its platform, after the fund significantly missed its fundraising targets.
The Marbella Resort and Spa fund had hoped to raise £40m as part of a scheme to build a spa resort in the Spanish holiday destination, but after nearly a year of fundraising it had accrued just more than £1.1m.
This has prompted Novia, on which the fund was listed, to suspend any new money from going into the product.
Novia said the company behind the fund had told it the effect of the low level of fundraising meant it “does not expect to be in a position to pay interest on the bonds or repay the principal amount of the bonds as originally anticipated”.
“The company also states there are ‘realistic prospects’ the government of Andalucía will provide further finance,” Novia said.
“Given the uncertainty, we think it appropriate to suspend new money on to the platform into this fund until the position becomes clear. We have written to advisers stating our position.”
The company behind the fund had hoped to raise £40m by issuing bonds to investors, which it would then loan to Casa Nita S.L to develop the Angsana Resort and Spa in Marbella.
It was anticipated it would take two years to build the resort and it would need to be in operation one year before income could be derived from the resort to pay interest on the loans made to it by the fund.
The bonds were set to be repaid seven years after the first loan was made to Casa Nita and would pay 7 per cent in interest, which would be paid annually.
A letter to investors from Marbella Resort and Spa plc’s Lee Smith said there was a “realistic prospect” that before December 31 next year it would receive funding from the government of Andalucía and the EU to help develop the resort.
It added this additional funding would “enable Case Nita to repay the loans and outstanding bonds [and interest thereon] that have been made to it by the [fund] to date”.
It added that to “encourage further subscriptions for bonds”, the fund will “pay a bonus” to bondholders in the form of additional interest at the rate of 12 per cent rather than 7 per cent.
Mr Smith said if the project did not get the government money, it would work with its adviser and manager “to explore ways in which the development of the resort can be completed in the event that sufficient additional funding is not received”.
