The Acorn Property Group and Landhouse Development Ltd. jointly secured planning permission from South Somerset District Council in March 2017 to build up to 68 homes on the A359 Cuckoo Hill, at the north-eastern edge of Bruton.

The Cubis Bruton development (also known as Longcroft) has been subject to numerous obstacles, with Acorn having to step in after its initial contractor, WRW Construction Ltd., entered administration in July 2021.

In the face of a £4.6m loss on the site, the Bristol-based company has been accused by Landhouse of “phoenixing” its accounts – a manoeuvre which enables companies to avoid paying creditors by transferring assets from one company to another.

Acorn has strongly denied that any phoenixing took place, confirming it will bear the full brunt of the financial loss and is committed to delivering the remaining homes within the site – as well as another development elsewhere in the town.

Special Purpose Vehicle

Phase one of the Cubis Bruton development was carried out using a special purpose vehicle (SPV) – a legal entity set up for a specific project to isolate risk to the companies involved.

The phase one SPV, Acorn (Bruton), entered administration on January 20, 2024, with its records showing it was £4.6m in debt.

The SPV’s assets for the remaining three phases of the development were transferred to a new SPV, Acorn (Bruton) 2.

Landhouse has contended that this action from Acorn amounted to “phoenixing” in order to get out of a profit share arrangement (i.e. one in which the profits from the new homes would be shared between the two parties).

To this end, Landhouse is currently in the early stages of legal action against Acorn for alleged breaches of contract, claiming this “phoenixing” was undertaken to allow Acorn to make a profit on the later phases without paying Landhouse what it was owed.

Robin Squire​​​​, Acorn’s regional managing director, said he “strenously denied” these allegations, stating that SPVs were standard procedure for this type of housing project and that no “phoenixing” had taken place.

He also stated that Acorn was expected to make a loss on every phase of the development, on top of the £4.6m it had already lost on phase one.

Mr Squire said: “Phase one is in administration, with a loss of £4.6m. Full audited documentation of which has been provided to Landhouse’s solicitors.

“The entire loss was borne solely by Acorn, and all creditors, lenders, contractors, and the professional team were paid in full; the only remaining issue is the Landhouse claim, which is in dispute.

“While we cannot comment extensively due to the potential for legal proceedings, it is worth noting that no litigation has been initiated, despite more than a year passing since the initial claims.

“The agreement with Landhouse Development Ltd. is a profit share agreement. The losses on phase one of this development alone are £4.6m; as there was no profit with the contracted SPV, then clearly no profit share can be paid.”

Mr Squire said that Landhouse had turned down his offer to visit their Bristol office and “run through the accounts line by line” to resolve the matter.

He added: “I can confirm that Acorn does not ‘phoenix’ its accounts to avoid paying its creditors.

“All groups of companies go through periodic restructuring exercises for all sorts of reasons, and after legal and accountants’ advice and with the approval of lenders.

Loss expected

“We expect to make a significant loss across the entire scheme. The challenges to the development industry over the last five years are well reported.

“Phase one had two significant issues which alone would have impacted on the profitability of the site.

“First, WRW Construction Ltd. (the main contractor) went into administration and were subsequently dissolved owing millions of pounds – a significant portion of that being owed to us.

“This meant we had to step into this contract and finish phase one at considerable cost. We had to pay the debts incurred by WRW or alternatively bring in new contractors at a premium.

“Our second significant issue was that the initial funders Urban Exposure PLC collapsed, and the site needed to be refinanced. Both of these issues are on public record and provide some context to the initial losses.”

Mr Squire added that the combination of Brexit, the coronavirus pandemic, and rising interest rates further exacerbated the situation.

He said: “We have had three ‘black swan’ events – beginning with Brexit, which led to huge build cost inflation over the last four to five years.

“This was then amplified by Covid, which led to a global shortage of materials, and there was then more recent significant increases in interest costs.

“Our funding is exactly like a tracker mortgage and the funding costs on phase two have risen hugely as interest rates have risen. This has led to build cost shortfalls and delays which in hand increase losses.

“The sensible thing would have been for us to walk away from this site, but we remain committed to finishing it.”

Acorn secured permission in November 2024 from Somerset Council to construct a new development of 60 homes south of Brewham Road, within walking distance of Bruton railway station.

Mr Squire said that he would create an SPV to deliver this site if Acorn were to proceed with its delivery – with work having to begin within three years of the Section 106 agreement with the council being signed.

He said: “While I’m not willing to discuss our plans for Brewham Road in detail, if developed it would be developed under a separate SPV. This is standard industry practice for nearly all SME developers.”