An offshore property scheme which is still advertising for investment opportunities has sparked 2,430 claims at the Financial Services Compensation Scheme, FTAdviser can reveal.
The FSCS said the claims, linked to Cape Verde-based property scheme The Resort Group, involve 51 financial advisers.
The claims, the majority of which involved either Sipps or pension transfers, involve failed firms including Active Wealth, TailorMade Independent, and DFM and Sipp provider Greyfriars. But by far the largest share of the claims (1,015) have been brought against CIB Life & Pensions.
By June the lifeboat scheme had paid out £5.9m to investors. To date the body has paid claims related to £36.1m of investments made in fractional ownership property but could not confirm the exact compensation amount for these products as claims are often a mix of multiple products.
The body pays out a maximum of £85,000 per person on such claims.
Meanwhile the Financial Ombudsman Service is also processing hundreds of TRG-related claims against active firms.
A significant number of complaints are understood to relate to claimed due diligence failings at Sipp provider Rowanmoor.
Still advertising to investors
TRG is unregulated and still trading, and as such would not qualify for FSCS protection. However, as the products were sold by UK regulated advisers who have subsequently failed, the FSCS has agreed to accept claims.
TRG consists of five hotel developments in Cape Verde, which are still operating.
According to its website investors can still invest in both fractional shares and rooms, with advertised returns of up to 18 per cent over a three-year period.
Like many hotel groups TRG has been impacted by the coronavirus pandemic, which has led to a drop in valuations, but the resorts are due to re-open over the coming months, according to the firm.
Even before the virus struck, many investors were struggling to sell their hotel rooms, or fractional shares in hotel room ownership, and so were struggling to recoup the money for their pensions.
As the company is still trading the FSCS has adapted the way it calculates perceived losses - it values fractional shares at nil, while rooms can be independently valued by a certified company, although these are then sense-checked against the value of similar properties on a property listing website.
In many cases investors have received some rental income, which has been deducted from the compensation paid. But the FSCS told FTAdviser it did not think this impacted the overall figure materially.
Chasing for payments
Despite thousands of investors bringing claims in relation to the failed investment, many are still being chased for payments by TRG and the manager of the fractional shares that constitute many investors' assets.
TRG's hotel developments in Cape Verde were sold in the UK over the past decade in two different ways - whole hotel rooms and fractional shares in rooms. The group also offers a range of corporate bonds.
FTAdviser has seen letters to investors requesting payment of management fees and expenses dating back to April 2021, with 9 per cent penalty charges plus administration fees applied for those who have missed their payment since then.
For one investor this has amounted to outstanding balances of £500 over the space of five months.
Investor returns have also been hit by the fact they have received no rental payments for more than a year, as the resorts were closed during the coronavirus pandemic.
According to correspondence with investors in the fractional shares, rental income payments are anticipated to resume by the end of Q1 2022, assuming a full re-opening of the resorts in Q4 2021.
This will include any backlogged payments due up until the closure of the resorts, which "in many cases will be significant", although they will be net of any payments owed by the investor.
If investors do not settle their expenses fully, "it is highly likely that you will not receive any income for some considerable time, as the outstanding expenses are settled and funds retained against future expenses," the investors were told by Fractional Property Solutions Limited in a letter in September.
Meanwhile investors continue to pay Sipp fees as the asset is still considered active.
Rowanmoor declined to comment. TRG did not respond to a request for comment.
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.
NOTE: We claim no right or title to this article which appears in FT Adviser. Author Carmen Reishman.