The inside story of how hundreds of investors came together to save what will become one of Liverpool’s largest student developments has been revealed.
People from all over the world with tens or hundreds of thousands of pounds invested in Elliot Group’s Aura development were devastated when it fell into administration almost a year ago.
The news caused “trauma” for 450 people from 50 countries as far afield as Australia and Hong Kong. They feared losing their money – which for some was their pensions and life savings.
But a feat was achieved by this group of people on a scale rarely seen on the UK development scene. They managed to form a consortium under the name of Aura Investors LLP, and agreed a deal for the 999-bedroom, £100m Islington project. It’s now set to open later this year under the name ‘True Liverpool’.
Hong Kong-based Paul Cheung, one of the major investors in the Erskine Road scheme, spoke to BusinessLive about how they managed it.
Mr Cheung, an ex-investment banker of 20 years, said: “When the news came out that the scheme had gone into administration, every investor was traumatised as you would expect.
“Fortunately, there were a few individuals that initiated a programme to contact all the investors within the Aura scheme.
“That initial group of people managed to contact about 450 investors basically across 50 countries. These people did not know each other, and had never met one another before.
“It was quite a huge task – we initially started off on Whatsapp, before realising you couldn’t have more than 200 people in one group – and we moved it onto Telegram and it soon became very efficient.
“Before we knew it, we had a movement here, and we were saying to ourselves ‘we all invested in this because we thought it was a good investment scheme in the first place’.
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“We had to figure out the financials, we had to figure out the legal positions of every single investor and we also needed to figure out the position of the other creditors. So it was a total financial restructuring.”
Mr Cheung said he thinks salvaging the scheme has saved investors “about £20m”.
He explained: “We all knew nothing was really wrong. What happened was unfortunately, the old developer didn’t have money to keep it going.
“So we had to think creatively. Among the 450, there was a group from the investment background who thought that there was a good chance that we could actually save this, there were others with skills such as IT and banking.
“So we structured a vehicle and we sought legal advice. We knew the investment story was good – then it was just a matter of figuring out how to purchase the asset from the administrators.
“So that’s what we did. We appointed legal advisors, and then we also had to appoint our own development manager.
“This only worked because we had the unified voice from the 450 investors, who were supportive of what this committee wanted to do.
“It wasn’t down to one or two individuals, it was the whole group committing to this.”
The mammoth efforts even involved building new software in order to communicate with everyone.
Mr Cheung added: “It wasn’t easy. Even after shifting technology. thinking about all the paperwork that’s involved in moving investors from the old contract to the new contract was a challenge. Everything was done electronically, legally, within the bounds of the UK law.”
Mr Cheung said he had not heard of a rescue deal on this scale before, but when asked if he and his fellow investors were ever fearful that they would lose it all, he said: “We were worried [about that possibility] if we hadn’t had the resources and the time to do it in.
“When the administrator came in, their priority was to try to realise the value of the assets as soon as possible, and then to pay out to the creditors.
“So we were under some time constraints as well, in terms of finding resources, finding the right structure to put the investment in, and then to make sure that investors were on board.”
Despite the challenges and Liverpool’s well-publicised struggles with stalled developments, Mr Cheung said he has not been put off by the city’s property scene.
He said: “Personally, I’m very bullish, and I’m positive about the UK’s property sector.
“The reputation of the UK education sector and the University of Liverpool being in the Russell Group that’s attracting a lot of international students also helped.
“So that’s why from day one, if we were not positive about the outlook there would be no point in salvaging this, but we knew that there was a positive story to this, that investors could continue to make money if they were allowed to invest in this scheme. So our job was really just to make the project viable again.”
Construction on the 1.14-acre former Aura scheme stopped early in 2020 after it ran into financial difficulties.
The project – along with the Infinity towers scheme in Liverpool and The Residence in Salford – fell into administration.
Aura Investors LLP completed their takeover of the Liverpool scheme in December after the High Court approved the deal’s structure.
According to Elliot Group founder Elliot Lawless, the deal came after he worked with joint administrators from David Rubin and Partners to transfer the freehold interest in the site to the consortium, as well as directly authorising the sale of a neighbouring piece of land held by the group.
Vermont, the firm originally hired to carry out work on site, restarted work in October after an agreement with the investors.
Last month, it was revealed that True Student will be the operator of the new facility, which will include ‘state of the art’ facilities such as a gym, festival zone, cinema room and sky lounge.
The firm said it expects around 550 students to move into the Erskine Street building – to be known as ‘True Liverpool’ – for the start of the next academic year in September following the completion of the first phase. The second phase is then due for completion in 2022.
Also speaking to BusinessLive was Ben Morley, managing director of True Student.
He said he had a lot of faith in the city, adding: “Liverpool is one of best student cities in the UK, now home to over 70,000 students – and it always scores very highly for student satisfaction.
“It is also one of the fastest growing student cities in the UK with total student numbers growing, driven by international student numbers outpacing the UK average.
“Covid has clearly adversely impacted all people, business and communities but we look forward with huge confidence in our business, the HEI sector and Liverpool more broadly to bounce back strongly as the fundamentals of both the city and the student market remain globally attractive and compelling with expected record applications and investment in the years to come.”
Speaking about the important of completing such a significant development despite the global pandemic, he added: “A new development on this scale in this environment is a complex project with many stakeholders and third parties responsible for a differing scope of works.
“But what is common amongst them and the UK construction sector more broadly throughout this pandemic has been an incredible ability to quickly adapt, tailoring working practices to safeguard their teams & partners, flexing programmes to meet restrictions in resources and supply but ultimately with a fantastic can do approach, spirit and tenacity to win.
“Literally building hope in the most challenging of times and something we are very proud to be a part of.”