Bust housing business subsidiary owes Rydon £5m, say administrators

Property firm Rydon is owed almost £5m by a subsidiary of the partnerships housing business created when it divested from contracting work in 2021. 

Founded by ex-Wates residential boss Paul Nicholls, Real Contracting Group took over Rydon’s building divisions in the South-west and South-east. 

It had aimed to become a £300m-a-year turnover builder within five years but covid and supply chain-related delays sank the business last autumn. 

The parent group and the South-west business were liquidated in November, owing £8.4m and £17.4m. 

Real LSE, the smaller but more profitable of the subsidiaries, which had posted a £1.46m profit on £19.3m income in its most recent accounts, also went into administration. 

An administrators’ report for that business, which covered London and the South-east, outlined the circumstances of the group’s collapse. 

The report, published at the end of last month, explained that Real had initially been funded by loan notes from Rydon, as well as its own income, later coming to rely on a £4m overdraft facility from the Kent-based property firm.  

Administrators Cowgills explained that the scale of losses made in the first two and a half years of trading “exceeded expectations and was being driven by unprecedented inflation”. 

This caused delays to live projects, including a 505-home scheme with Ealing council which was set to run for 10 years, as well as causing new projects to be postponed or rescheduled. 

According to the administrators, the “level of creditors became more challenging and further losses, especially in the South-west, became apparent in the last two months of trade”. 

Real had owed Rydon a total of £11.4m in funding, but this was reduced by £3m as a result of a credit bid purchase of a contract, and by a further £3.5m due to a pre-packaged sale of one of the group’s subsidiaries, Real (High Lane) Limited, to Rydon. 

The current amount owed is understood to be in the region of £4.9m. There are no outstanding liabilities to employees or HMRC, according to the report. 

At the time of its collapse, Real had two contracts that had practically completed but were in their defect liability period, five live contracts and two contracts in pre-construction stage. 

It is understood that three of the five live contracts have been terminated and, following the cessation of trade, will not be completed. 

“In a shut-down scenario, it is understood that the contracts would be difficult to sell and could potentially hold no value,” said the administrators. 

They added that clients were also “likely” to submit disputes, counterclaims and pay less notices as a result of unfinished works. 

Unsecured creditor claims total £7.2m but the joint administrators said the company had “insufficient property for a distribution to the unsecured creditors”.