Small investors who sank millions of pounds into the TV property guru Kevin McCloud’s eco-friendly housing ventures have been told they could face losing up to 97% of their money.
For 20 years the star of Channel 4’s Grand Designs has lectured the nation about how to create their dream home – but his own property empire has turned into a nightmare. Between 2013 and 2017, McCloud wooed investors with a string of fundraising schemes that promised returns of up to 9% a year from his Happiness Architecture Beauty (HAB) homes businesses.
But it now emerges that small investors who put £ 2.4m into one of the bonds are on course to lose between 74% and 97% of their money in a worst-case scenario.
Another set of investors, who sank £ 1.9m in one of the HAB companies in 2013 and were told to expect dividends of at least 5% by the end of 2016, say they have not received a penny and have been “fobbed off”.
In an extraordinary parallel with his TV series, in which those with grand designs are routinely beset with budget overruns, construction problems and relationship bust-ups, McCloud has admitted that he went through “a great deal of heartache and pain” as he tried to find ways to keep the main HAB company viable amid project delays, “systemic faults” and large debts.
“I stand shoulder to shoulder with those who have lost money,” McCloud said when contacted by the Guardian. “I will of course do everything in my power to improve the current situation.”
In March, McCloud personally apologized for “delays and problems” at one of his flagship schemes in Kings Worthy, near Winchester, Hampshire, following a newspaper report.
McCloud himself also faces a demand for repayment from a restructuring company that has taken control of part of his empire.
As recently as 2017, McCloud urged the public to “hurry and join our community of like-minded investors”, and highlighted returns of 8% to 9% a year for those signing up to the multimillion-pound “minibond” scheme.
But one investor, who put in several thousand pounds, said: “The ethos of HAB (happiness, architecture, beauty) appealed to me, and I had respect for Kevin McCloud's integrity after years of watching Grand Designs and hearing his views on the power of architecture to change people's lives … I'm disappointed that what I saw as an idealistic project seems to be collapsing on a sour note, with the original directors having departed and investors seemingly left to bear the entire financial burden of a failed enterprise. ”
A representative of one investor, who pumped money into a crowdfunded campaign in 2013, said: “None of the 650 investors have received a penny in dividends or have even been allowed the opportunity to sell their shares in order to reclaim any of their investment … Many are left feeling angry and betrayed. ”
McCloud, 60, has presented the Channel 4 series Grand Designs since its launch in 1999, and it has triggered many spin-offs, as well as bringing architecture to mainstream television. One of these spin-offs, Kevin’s Grandest Design, is due to screen on 28 August. Separately, McCloud set up HAB Housing in 2007 “to challenge the way identikit volume housing was built in the UK”.
McCloud has repeatedly turned to the public to help fund a series of eco-friendly developments. In 2013, HAB Housing reportedly broke the then world record for crowdfunded investment with 650 people putting in £ 1.9m. Then came the January 2017 mini-bond scheme, which raised £ 2.4m for HAB Land. Later that year, McCloud announced that he was looking to raise up to £ 50m through another bond for private investors.
During the past few days, the January 2017 bond investors have received a letter from HAB Land Finance which stated that “after final completion of the projects at both Kings Worthy and Cumnor Hill [in Oxford], the net return available to bondholders would be expected to range from £ 606,000 (best case) to £ 69,000 (worse case) which, in each case, is equivalent to 26 pence and 3 pence for every £ 1 of bond monies invested. " So they would either lose 74% in the best case, or 97% in the worst case. As a result the company has proposed a restructuring of the bonds whereby investors would not see any of their cash back until 2024 at the earliest.
The letter says HAB Land would be unable to continue to trade without a further injection of funds. Meanwhile, a separate letter from McCloud to the 2013 crowdfunding investors sent out in July states that “the numbers” were “serious”, adding: “HAB Housing currently owes just under £ 1.6m to HAB Land … We have fought to remain in business and to protect our investors' interests. Our view is that without the support, variously, of HAB Land Ltd and Kevin McCloud, the business would not be here. ”
It added: “Unfortunately, there is no reasonable prospect of liquidity for these shares. By way of warning, we do not expect significant income into the business for several years. ”
McCloud said he “remained convinced in the vision of HAB”. But he added: “In terms of the financial side of the business, I am less experienced than many around me, and I wish I had been less reliant on the executive team over the years – in whom I placed my trust and took counsel from . I placed my faith in past management in the belief the business would be run well and that decisions would have been above board and fully compliant.
“I’ve learned that business is really tough and that, even if you have an inspiring vision, skilled team and strong backing, other circumstances can pull the rug from under you.”
McCloud added: “I am HAB Housing’s largest single investor and have supported the business financially for 12 years. I will of course do everything in my power to improve the current situation but I cannot discuss anything else at this point because we are, importantly, trying to find a resolution with both the mini-bond investors and the company. ”
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