Target failure doomed Gateway

Gordon Berry, The Courier, 19 October 2000

The ill-fated Gateway development in St Andrews - currently being offered on the open market at a fraction of its £9.4 million construction cost - came to grief because of the spectacular failure of an overseas membership drive.

Creditors have been toId that by March 31 this year only £43,951 worth of memberships had been sold, despite the target at that date being £1.5 million.

The figures are revealed in a report given to unsecured creditors in advance of a meeting held last week in Edinburgh by receivers Grant Thornton.

The report by joint-receiver Matthew Henderson states that the major single casualty will be secured creditor Lloyds TSB Scotland, which is currently due over £5 million—a figure which is increasing as interest is added.

The building was intended to be the home for the newly-formed St Andrews Golfing Society. Among the facilities are four bars, restaurants, a health and fitness club, and conference facilities.

In the run-up to the planned opening, the US was targeted as a major source of potential members, but it became clear - in spite of denials from the company - that all was not well.

Receivers were called in and the property advertised only a few weeks before the Open Championship was held in St Andrews, but even that shop window has not, as yet, produced a buyer.

The asking price for the whole building has now been set at offers over £2.5 million, and Mr Henderson said in his report that there would be a shortfall in the return to the bank. He added that the claims of preferential creditors involving Inland Revenue PAYE, Inland Revenue NI-NIC, and employees’ arrears of wages and holidays were likely to be met in full.

But there is a bitter pill for unsecured creditors, who at the time the report was written were due an estimated £3,419,840.

After making allowances, said Mr Henderson, the final figure was likely to be £2,831,071, but based on present information there was “no prospect” of any return to these creditors.

The development has been built on land owned by the University of St Andrews and leased to St Andrews International Ltd for 99 years.

Included in the plans for the building was a prestigious museum and first port of call for the university, with the museum and exhibition fittings estimated at £800,000.

That sum was to have been incurred by St Andrews International on behalf of the university, and treated as five years’ rent in advance.

Mr Henderson said that the total cost of the project had been revised from £8.9 million to £9.43 million, and that funds up to £1.483 million had been required from operations.

“The initial prospectus envisaged sale of 2000 memberships prior to March 31, 2000, generating approximately £1.5 million net of VAT. This income net of operating overheads was to be the source of the last tranche of cash required to pay for the development.

“As at March 31, 2000, actual sales of memberships had generated £43,951. The directors partly, but not exclusively, attribute this to the difficulties of selling memberships prior to the completion of the building.”

Mr Henderson said that during May and June this year the directors had sought to obtain the funding to ensure completion of the Gateway and the start of trading operations.

He said that throughout this, contractors Miller Construction had continued to support the company and ensured completion of the building works.

The day after the creditors meeting in Edinburgh, Grant Thornton announced that the property - which had been advertised for sale back in July at “sensible offers” - was being placed back on the market at offers over £2.5 million.

It was made clear that negotiations would be be continuing with two interested parties while other prospective buyers take a look at the building.

Yesterday, a spokeswoman for Lloyds TSB Scotland made no comment about the level of loss the bank is certain to incur.

She said that the bank had worked very hard with the directors of the company to find a solution, but unfortunately the failure to generate membership led to difficulties.