How Liverpool’s ‘New Chinatown’ became black hole for Asian money
In a major expose, Asia Times reveals a pattern of investors ploughing money into UK developments that swallow up cash but never materialize, leaving a trail of legal writs, alleged misappropriation of funds and mounting evidence of governmental incompetence
To a soundtrack of bashing, crashing Chinese gongs, a huge, bejewelled red dragon wakes, roars and then swoops across a virtual cityscape: this was the slick 2015 marketing concept animation for Liverpool’s New Chinatown.
“With the support of the UK Government…” intoned the sales commentary, “… New Chinatown is a city within a city… It is the burgeoning energy and dynamism of modern China transplanted into the heart of a historic World Heritage City…. This is a historic moment… This is a unique investment opportunity.”
Except it isn’t.
Liverpool’s New Chinatown has been a dormant development site for months. It is little more than a patch of waste ground that is now attracting more rats and illegal waste-tippers than the hoped-for gilt-edged Asian investors.
According to the developer North Point Global’s original schedule, the project was to be delivered in three phases, from the second quarter of 2017 until the end of 2018, but now all that seems likely to be delivered are mounting legal writs, and continued allegations about misappropriation of investor funds and gross governmental incompetence.
There is also a growing reality to be faced: A widespread pattern of failed UK developments reliant on a “fractional sale” model that have been largely marketed to Asian investors.
The fractional sale model relies on investors paying deposits, and then subsequent tranches, for the purchase of units in as-yet unbuilt, off-plan projects.
The developers then use these funds to finance the on-going build and the investor is offered, in return for his or her up-front payment, a high “guaranteed” yield.
In the UK, the pattern has played out somewhat differently. There, repeatedly, deposits – sometimes amounting to a staggering 80% of the total value of units – have been swallowed into projects, typically residential or student accommodation blocks, before the developments ultimately fail.
And normally such failures occur amid a dizzying labyrinth of bankruptcies, opaquely linked businesses and company executives with track records that include insolvencies, fraud or worse.
A May 2017 Hong Kong Government report on this issue looked into UK property projects between 2014 and 2015.
It identified 30 different developments, totaling thousands of individual properties in the English cities of Birmingham, Bradford, Leicester, Leeds, Liverpool, London, Manchester, Nottingham and Sheffield, that had impacted Hong Kong investors.
In each instance, either the developer had gone into administration, the project had stalled and was now running years late on delivery, the site had been seized by a local authority, or the development had been sold on because the original developer lacked the funds to complete it.
There has been considerable coverage in the media – both in Asia and in the UK – about such cases and the complaints of investors, often individuals who have invested personal savings. Yet new failed developments keep on popping up on the radar.
There is a growing reality to be faced – of a widespread pattern of failed UK developments, reliant on a “fractional sale” model, that have been largely marketed to Asian investors
North Point Global’s marketing blurb said it anticipated spending approximately US$300 million to “transform Europe’s oldest Chinatown” into a glitzy development of 800 residential units and 14,000 square metres of commercial space that would include a Chinese market and food court, Chinese-themed roof gardens, offices for Chinese businesses, a luxury gym, restaurants and a 140-room hotel.
The plans were first shown publicly by an official UK trade delegation to China in September 2015.
UK Ministers, business leaders and civic heads – including the Mayor of Liverpool, Joe Anderson – presented US$30 billion worth of potential “Northern Powerhouse Investment Pitchbook” projects that were intended to revitalize England’s one-time industrial north.
A month later, when the Chinese president, Xi Jinping, visited the UK on a state visit, both English and Chinese media duly reported that the then UK Prime Minister David Cameron and Xi had not only viewed plans for Liverpool’s New Chinatown but that Xi had actually approved them.
The fact that he holds a degree, not in structural design or architecture, but in chemical engineering, was not flagged as an issue. Nor indeed was the fact that planning consent had yet to be granted for the project.
This was later granted to North Point Global, via its dedicated China Town Development Company – a “special purpose vehicle company” – by Liverpool City Council, in December 2015.
But no matter. “Xinhua Bu,” or New China Wharf as the marketing blurb proclaimed it would be known, became – along with images of Cameron and Xi drinking beer together in an English country pub and taking selfies with Manchester City’s superstar footballer, Sergio Aguero – another marker of the new “golden era of relations” between Britain and China.
Later in 2015, with the marketing buzz still at full throttle, The Liverpool Echo newspaper quoted North Point Global’s “chair”, Peter McInnes, as saying: “This is potentially one of the most exciting and original developments being delivered in the UK today.”
Peter McInnes would be in the news a lot in the concluding months of 2015.
When North Point Global announced its plans for what was said to be the world’s first street art museum – a repository that would display works by the famous street artist Banksy – McInnes told the Echo: “We’re delighted to be gathering together and restoring all of Banksy’s Liverpool works.”
The Echo went on to explain how a host of paintings had been “collected” from public sites around the city for the venture.
In early 2016, McInnes was in the public eye for different reasons, however. His name was mentioned in a proceeds-of-crime trial centered around two men – Stephen and Peter Clarke – who, in 2013, were convicted on gang, weapons and drugs charges and jailed for more than a combined 26 years.
The court heard from police that McInnes had run a company with one of the brothers, and also with another convicted drug dealer, and was someone who “fronts companies, runs them until accounts are due and then scraps them and moves on.”
McInnes denied all allegations and subsequently denied he was ever connected with North Point Global or its developments.
The new Chinatown was intended to sit on a patch of derelict land close to the center of Liverpool, between its iconic, Gothic-style Anglican Cathedral, the sprawling, impoverished Toxteth Estate, and the existing Chinatown.
The city’s “oldest Chinatown in Europe” mantle actually comes from another site, closer to the sea front.
This was formed in the mid-19th Century as steam service trade routes from the growing British colonies in Asia brought imports of tea, textiles and porcelain and with them Chinese sailors who began to form their own fledgling community in the dockside Cleveland Square area of the city.
At least one Hong Kong-based group has formed with the aim of taking any collective legal actions necessary to recover deposit funds
Liverpool’s Chinatown moved to its current site in the 1950s after the docks were bombed heavily in World War II.
And as it did, it started to change, from a community of sailors, to one of fledgling businesses. First laundries and drycleaners, then on to restaurants and takeaway shops, and finally to the pan-Asian cafes, artisanal noodle shops and late-night karaokes of today.
Ties with China remain strong – the city is twinned with Shanghai, and its Chinese community and Chinatown remain an important part of Liverpool life. A major revitalization of this key feature of the city was a big deal.
“Yes, we wanted the new Chinatown to succeed and we wanted to support it. The area needs something” said a leading member of the Liverpool Chinese community, who did not want to be named.
“But when we saw all the newspaper reports, about the connections, the gangsters and the court cases, yes we became cautious. Of course, we became very concerned.”
In Liverpool, North Point Global is the developer not just of the New Chinatown site but of a string of city center developments with a reported combined value in excess of US$400 million.
All of these are now halted. It is not clear, at this stage, how many investors have put funds into the projects or the sums involved but – as has happened previously with other disgruntled investors – at least one Hong Kong-based group has formed with the aim of taking any collective legal actions necessary to recover deposit funds.
Meanwhile, a locally-based group of activists and campaigners who say they came together initially over the common cause of protecting Liverpool’s green spaces from city planners, has also been spurred to action.
When they started to see recurring issues with North Point Global projects, they started an investigation. In July, they presented the city council with two dossiers, which they claim are extremely damning – both of the council’s lack of due diligence in relation to North Point Global and of its allowing the company to make New Chinatown seem like an officially-sanctioned Liverpool City Council project.
Last week they called for the city government’s ruling executive to resign and, if that doesn’t happen, have threatened to release more evidence that implicates senior Liverpool politicians.
One member of the group is Josie Mullins, a former Liverpool City councilor. “The original applicant [for Liverpool Chinatown] was China Town Development Company,” she told Asia Times.
“That entity had only been set up six months before the planning application went in. There were two other companies associated with the project. One is North Point Global, that had only been set up a few months before China Town Development,” according to Mullins.
“The other was construction company PHD1, that had no history of success on a development of this size. PHD1 then went bust over another development in Manchester [PHD1 went into administration in April 2016 over the Manchester Angelgate development, another halted project in which Asian investors have been left chasing funds], and when that happened, the council should have called a halt to New Chinatown and held an inquiry,” Mullins said.
Another member of the group is Stephen McNally. In one of the dossiers presented to the city council, he wrote that previous “construction partners [PHD1 Construction Ltd and BILT Group Ltd] have both become bankrupt, owing £11.4 million (US$14.7 million) and £1.8 million respectively. Their partner company North Point Global [and] China Town Development Ltd [have] many sites in Liverpool that are also on hold, either partially constructed or just bomb sites. North Point Global was indicated as being a PHD1 owned development arm.”
“On schemes where the Council is not responsible for direct delivery, our role is confined to working with partners to bring their development opportunities to fruition”
The group claims the information it has released has forced the council to change its tack, from initially announcing in July that it would work with North Point Global to find a solution to the development stalemate, to now acting to take the North Point Global New Chinatown site over and recover funds owed to itself.
Liverpool City Council, in a written response to questions from Asia Times, said that “culpability for this scheme rests solely with the developer and not with Liverpool City Council. Indeed, we are one of the parties seeking legal redress from the developer to recoup our losses. On schemes where the Council is not responsible for direct delivery, our role is confined to working with partners to bring their development opportunities to fruition.”
There does now seem to be a lot at stake, for multiple parties, and it is hard to gauge what will happen next.
North Point Global, which declined to talk to Asia Times, has said the mounting and “vitriolic ” allegations against it have caused it to pull out of all its projects in Liverpool.
At the same time, it looks to be preparing some kind of court battle against Liverpool City Council.
For its part, the council says it has “instructed solicitors to start legal proceedings to forfeit two leases on the city center site. At the same time, a statutory demand has been issued for the outstanding sum of £950,000 owed to the council by developers Chinatown Development Company Ltd.”
The council adds: “This legal action may include petitioning the Court to ‘wind-up’ the company, with a Court-appointed receiver put in charge of the liquidation. In this event, the Council would seek repayment and look to work with the liquidator to find a solution to the stalled site as the city council also owns the freehold and is the landlord of the leases.”
The jilted Asian investors also seem to be preparing to do battle. The activists, meanwhile, say they will not stop until council leaders have gone.
Additional reporting by Liu Hsiu Wen