Investors who put Sipp money into a series of luxury overseas resorts have been thrown another curveball as rental payments have stalled.
In a letter sent to investors on August 28, Cape Verde commercial property developer The Resort Group said rental payments had been delayed due to “certain loan commitments” it had to honour and lower revenues during the summer months, which is low season in the country.
The Resort Group stated this was the first time it had missed a rental payment since 2011 and reassured investors they would “definitely be paid any outstanding amounts due” and that payments would be “staggered” over the coming weeks.
The issue affects UK investors in the Tortuga, Dunas and Llana Beach resorts, some of whom have already seen returns fall short of their expectations.
FTAdviser reported last year that some UK investors had not received the returns they thought they had been promised, and as a result their Sipp fees were eating into their investments, threatening to erode their pensions.
Chris Bryans, senior partner at Richmond Wealth who also runs a claims management company, criticised the company’s reasoning for the delays.
The company had told investors in its letter: "The reasons for the delay are a combination of factors that have unfortunately had a knock-on effect across The Group.
"As is to be expected, we always experience much lower revenues from our hospitality operations in the summer months due to the low season, and we are a quarter or so late in being paid.
"Moreover, there are certain loan commitments which we have to honour, which have similarly had an effect on the cash balance within the business."
Mr Bryans questioned part of this rationale, stating: “Why are ‘certain loan commitments’ relevant? The management firm TRG is supposed to be collecting rent and passing it on to investors."
A spokesperson for The Resort Group said: “The Resort Group has not used the rental returns to pay off loans.
“Clients are paid in advance of receipt of any monies due, given that tour operators have a time delay on the payments that are made based upon the cost incurred on the company.”
The spokesperson said all client yield payments would be brought up to date by the end of September and that some payments have already been made.
They explained receipts from the company’s tour operators were typically received within 30 to 120 days, which meant they were staggered.
“We endeavour to pay investors in order of priority as soon as the funds are available rather than waiting for the entire fund to be available before payment,” the spokesperson said.
Founded in 2007 by CEO Rob Jarrett, a former banker and financial consultant at Prudential, the Resort Group owns a series of luxury resorts in Cape Verde.
The group sold luxury hotel rooms to UK investors through Sipps, either as whole entities or fractional ownership in a company.
The company changed the way it charged some investors the annual ownership fees earlier this year.
Whereas the fee for administering fractional investments was previously deducted from the rental income, it is now charged as a separate fee and deducted from the client’s pension fund.
The Resort Group said this was because “a change in the regulatory requirements” meant clients had to pay for compliance directly to the administrator of the companies in which they were invested.
There has previously been interest from the UK regulator in the investments, many of which are held in Sipps administered by Rowanmoor and London & Colonial.
The Financial Conduct Authority wrote to TRG investors to ask for information on their investments in 2017 and FTAdviser understands that probe is still open. The FCA has declined to comment.
The Financial Services Compensation Scheme, meanwhile, has previously paid out on some TRG claims made against now-defunct advice firm CIP Life & Pensions, but not on others due to issues with valuations.
Rowanmoor, which administers many of the Sipps that hold TRG assets, would not say whether it planned to intervene on behalf of its clients.
But a spokesperson said: “Over recent months we have been working closely with The Resort Group to resolve the situation for and on behalf of our pension members.”
carmen.reichman@ft.com
