Millions owed to a lender by businesses which collapsed due to the oversupply of student accommodation in Newcastle are unlikely to be recovered.

Insolvency specialists handling the administration of three companies within the Bricks Capital Group - behind the city’s 270-bed Glassworks block (main image) – say work to investigate assets and debt has been extended for another year, reports Business Live.

Newcastle Glassworks Limited, Newcastle Glassworks Management Limited and Bricks K5 Capital Ltd entered administration in July 2022 following unpaid debt owed to Hong Kong lender CIMC Financial Leasing.

The property - which was valued at £7 million in 2022, but which was not generating sufficient earnings to meet interest payments - was acquired by CIMC, which also owns the company that provided the prefabricated containers it is built with, in a pre-pack deal. It paid £1.5 million cash for the building along with a £9.2 million ‘credit bid’ using the debt it was owed.

Insolvency

The administration of the three businesses will now be extended until late July 2025, according to insolvency firm Interpath, which reports that a partial dividend to CIMC is expected, though not the £11.7 million debt in full.

The underperformance of the Glassworks block has been blamed on an oversupply of student accommodation in Newcastle. Interpath says developers and investors capitalised on the large number of students and the city’s reputation, resulting in a significant and rapid increase in supply.

“Some reports suggest that, by 2017, Newcastle had the highest rate of student housing in the entire country, with one in every 15 homes being a student property, some 10 times higher than the national average for local authorities in the UK,” it explains.

“Given the high level of supply, the group experienced significant downwards pressure on rents to attract tenants, particularly given the property’s peripheral location and relative lack of amenities.”