EDEN-Redruth Investment - Detailed Case Study
I produced this document in March 2023. I am a private investor in the Eden-Redruth project.
The document analyses the finances of the project and highlights Eden’s covert appropriation of a large portion of the investors’ tendered funds.
Eden Land Planning Ltd. launched the project in 2018 but certain facts pertinent to this analysis did not come to light until February 2023, hence the late timing of the document.
In 2018, Eden Land Planning Ltd. issued a prospectus called the Investors' Presentation against which they collected investment funds totalling £2,240,000. There were 22 investors.
The Investors' Presentation stated that £40,000 would be allocated for professional fees, leaving £2,200,000 for acquisition of land at Redruth, Cornwall.
The investors were thus led to believe that approximately 98% of their money would be invested in property and 2% spent on professional fees.
The investment money was paid to Eden’s lawyer, ELS Legal, who acknowledged receipt of each individual investment by letter and confirmed that "These monies" would be used to purchase land at Redruth. (Not two-thirds of these monies!)
Eden & ELS Legal completed the purchase of the Redruth land on 27 July 2018. The true purchase price was never disclosed.
To date, Eden’s quarterly reports have chronicled their failure to sell the land but provided no financial data. Eden has not divulged the purchase price or the true acquisition costs. (Note: an acquisition phase ends on completion of purchase).
In February 2023, I learned from HM Land Registry that the true purchase price was £1,475,000, not £2,200,000, leaving £725,000 unaccounted for. I immediately asked Eden to account for the deficit.
Eden at first refused to account for the discrepancy of £725,000 then stated they had been liable for stamp duty on the purchase. (Stamp duty accounts for less than 10% of the shortfall).
Eden also said there had been legal fees. But the Investors' Presentation had already allocated £40,000 for professional fees.
Eden then claimed to have been entitled to withhold a contingency fund and operational costs. This is not acceptable, first because it cannot be classed as acquisition and second, because it was not mentioned in the Investors' Presentation.
It constitutes a breach of trust to appropriate tendered funds for any purpose other than the purpose for which they were tendered, in this case, purchase of land.
To summarise, using the best available data:
Total amount tendered: £2,240,000 £2,240,000
less professional fees*: £ 40,000 £2,200,000
less purchase price*: £1,475,000 £ 725,000
less stamp duty*: £ 63,250 £ 661,750
* as per Eden’s Investors' Presentation
* as per HM Land Registry Entry CL343210
* https://propertydata.co.uk/stamp-duty-calculator 2018/19, non-residential property
Note: £661,750 is my best estimate from such information as I could extract from Eden. I am confident that it is accurate to better than 1%.
On completion of purchase, £661,750 was transferred from Redruth Eden Ltd. to Eden Land Planning Ltd. The Investors knew nothing of this. 20 of the 22 investors still don't know. Eden never divulged that only two-thirds of the Investors’ money was applied to the purchase of land.
Redruth Eden Ltd is the Special Purpose Vehicle established by Eden Land Planning Ltd to handle transactions pertaining to this project. It appears that there is no bank account associated with Redruth Eden and that the £661,750 was transferred directly from ELS Legal's client account where the investment fund had been amassed.
Eden's intention was apparently to use some of this money as working capital. However this was not mentioned in the Investors' Presentation. To use investment capital as working capital without seeking the investors' approval is most irregular.
The Investors' Presentation had predicted an early (12 to 14 months) forward sale for £3,100,000. If this had taken place, Eden would have retained all that remained of the £661,750 as well as their 30% share of the visible profit. (This is not mere speculation; the Shareholders' Agreement provides for this and calls it "dividend").
The Investors' Presentation had also predicted £25,000 for legal fees around the forward sale of the land. This modest figure clearly does not justify retention of £661,750 for 'contingencies'.
Eden continues to mislead the Investors. Eden says the site cannot currently be sold except at a loss. The implication is that to sell the site for £2,000,000 incurs a loss of £200,000 whereas in fact there would be a mark-up of more than £500,000 on the true purchase price.
Eden refuses to provide an Investors' Forum (e.g., a WhatsApp Group). Eden does not want the true finances to come to light. That is why I produced this website, in the hope that some of the investors might find it.
In July 2018 there was no Shareholders’ Agreement in place. This was first issued by ELS Legal in late September 2018, two months after completion of purchase. It therefore cannot be used to ‘justify’ actions taken by Eden two months before its existence. (An offence, once committed, cannot be retrospectively annulled).
By failing to issue the Shareholders' Agreement until two months after completion of purchase, Eden & ELS Legal effectively denied the investors the chance to consider its implications, since the acquisition and undisclosed transfer of funds from Redruth Eden Ltd to Eden Land Planning Ltd was already a "done deal".
Eden has claimed that the Shareholders' Agreement supersedes the Investors Presentation (which I have also referred to as the prospectus document). Eden's claim is untrue. The Shareholders' Agreement, Clause 29, states: "This Agreement and the documents referred to in it constitute the entire agreement between the parties relating to the transactions contemplated by those documents". The Investors Presentation is one such referenced document and is therefore contractual.
At the start of the project Eden must have known their total acquisition costs would be less than £1.6 million. The Investors Presentation figure of £2.2 million for acquisition costs was calculated to deceive, which it most certainly did.
All the above Key Facts are supported by corroborating documents (e.g., the Investors' Presentation, the lawyer’s letter, the Shareholders' Agreement, HM Land Registry Entry, quarterly reports, several emails).