Property scheme Dolphin Trust has written to investors blaming months-long delays with their payments on the conditions of the German property market.
Dolphin, recently renamed to German Property Group, is an investment scheme focused on redeveloping German listed buildings into luxury apartments, which promised UK investors double digit returns on their investments.
But some of the scheme's UK investors, many of whom invested through a self-invested personal pension, have been left waiting for months after their investments matured, typically after five years.
According to a BBC investigation the investments were often sold by unregulated introducers working for separate companies, who were paid 20 per cent commission and promised investors they would almost double their money if they lent their savings to Dolphin Trust for five years.
A reporter from the German public broadcaster BR visited buildings apparently listed in an investor document and found that although one was finished and another was near completion, no work had been started on the rest, despite them being owned by GPG for more than five years. About £600m has been invested in the scheme.
On June 25 Charles Smethurst, chief executive of Dolphin Capital, wrote to investors to assure them their investments were safe.
In the letter, seen by FTAdviser, he acknowledged the delays with payments investors had faced as their investments matured and owned up to the company's lacking efforts to communicate with affected investors.
But he largely blamed the German property market for the delays.
Mr Smethurst said Dolphin Trust had paid "hundreds of millions of pounds/euros to satisfied investors" and the company was currently involved in "real estate investments of 60 properties".
He wrote: "I want to apologise for the delays that are being experienced on the payment of your investment maturity proceeds.
"We fully appreciate the concern and problems that this is causing and acknowledge that our communication during this period has not been at the level required.
"I can assure you that this is due to our total focus on finding solutions to the project delays that have caused the late payments.
"We also take the security of our investors very seriously.
"Customer funds are secured on property development projects, in what Dolphin Trust believe is one of the most stable and conservative real estate markets in the world."
He added: "Regarding the progress of development properties, naturally we work hard to move projects forward as expeditiously as possible.
"However, construction and property developments can be vulnerable to delays caused by various localised factors and the average completion time for a construction/redevelopment project in Germany has steadily lengthened over recent years.
"These issues have impacted on the progress of the project you are currently secured against and this has led to the delays in being able to repay the funds at the contractual date."
However, Mr Smethurst wrote it was "very difficult" to tell when the issues would be resolved.