Dream Lodge Group enters administration.

22/1/19.

Holiday home operator The Dream Lodge Group has gone into administration following what administrators described as a “period of financial pressure.” Concerns for the health of the company’s finances were first sparked in October 2018, when it missed a deadline to file accounts and failed to deliver its “guaranteed return” payments to investors.

Late last year, the conglomerate initially appointed auditors at KPMG to pursue an “options process,” with hopes to generate more investment or secure a buyer for the business. At the time, advisers stated that they hoped to “secure a viable long-term future for the business” through one of the two routes.

The group, which operates holiday homes at nine sites across the East of England, guaranteed individual investors a set amount of personal use of the holiday parks, as well as either fixed rental income or a guaranteed profit after three years, in exchange for investments in the holiday homes of as much as £145,000. Those investors now stand to see their payments wiped out, with overall losses on investment totalling millions of pounds.

Administrators hoping for sale

Having entered into administration, The Dream Lodge Group is now being advised on its financial restructuring by Deloitte. According to restructuring partners Richard Hawes and Rob Harding, management will be considering “all options available for the company,” with “the priority being to secure a sale of the business or its constituent parts”.

Mr. Harding added that employees at the parks had been made redundant, stating: “Given the immediate funding constraints and seasonality of the business, it has been necessary to make 80 out of the 121 employees redundant with immediate effect.” Administrators nonetheless added that “where possible, all lodge parks will remain operational,” although Norfolk Park Homes – one of the nine sites  — has since confirmed that the business is “not taking any new bookings.”

Investors advised to be wary of guaranteed returns

Investments in holiday lodges are risky due to their lack of liquidity,  with investors unable to sell the properties and at the mercy of administrators in the event that the company runs into debt. In addition, due to the unique nature of each lodge site and group’s deal with investors, prospective shareholders must scrutinise contracts carefully to ensure they understand the legal nature of their rights and agreement. Financial advisers at Cervello Financial Planning state that investors should be wary of schemes offering guaranteed returns, particularly if these returns are significantly higher than the market average.

Scores of employees and suppliers will be left wondering where they are now.