Three months after Durham High School closed its doors for the final time, the future of its 13.77-acre site on South Road may be about to become clearer.
The administrators have announced that prospective purchasers for the land and buildings must submit their best and final offers by 29 October, following what the selling agents describe as considerable interest in the property. The potential value of the land and buildings could be significant, leading the local MP to describe the closure of the school as a “land grab”.
The sale brings into focus some rather uncomfortable questions about the financial circumstances surrounding the closure of one of Durham’s oldest schools.
The local MP claims the total value of the land could be £10 million. Sanderson Weatherall report that the last valuation was £5.5 million. When I applied Durham County Council’s land values to the total developable land, I got to approximately £6 million. The price the administrators achieve for the land will ultimately be an important factor in determining whether GGE makes a profit or a loss.
With the site now being offered to the highest bidder — or, more precisely, whichever bidder the administrators choose — we may soon discover what the property is actually worth.
But we now have some new information. The administrators, FRP, are obliged to publish proposals for the disposal of the assets, along with a statement of how much money is owed to creditors. Their original report was published late and lacked crucial details about how much GGE was owed. A revised statement was published this week, giving us considerably more information.
| Category | August report | September report | Change |
|---|---|---|---|
| Company creditors | £838,837.11 | £931,422.01 | +£92,584.90 |
| Consumer creditors | £299,233.30 | £335,035.22 | +£35,801.92 |
| Secondary preferential creditors | £270,819.00 | £319,752.00 | +£48,933.00 |
| Total | £1,408,889.41 | £1,586,209.23 | +£177,319.82 |
We now know from the administrators’ proposals that GGE put £2.2 million into the school. We also know that the school’s land and buildings changed hands for approximately £2 million in December 2024, despite having previously appeared in the school’s accounts at a substantially higher valuation.
This means that GGE appears to have put at least £4.2 million into Durham High School.
There is a possibility that the £2.2 million includes the original £2 million purchase price, but that would require a financing arrangement which we have found no evidence of in the accounts or administrators’ reports. It would also mean that GGE had provided only £200,000 in additional funding over approximately 18 months, despite the school previously losing around £1 million annually. Unless its financial performance had improved dramatically, that seems unlikely.
GGE is also claiming approximately £800,000 in insurance and management fees, but it is not clear what these represent. They could be expenditure incurred by GGE, unpaid charges or some combination of the two. We simply don’t know, so I have excluded them from the investment calculation.
Using our latest estimate that Galaxy Global Education (GGE) and its owners committed £4.2 million to Durham High School, we can begin to examine whether the sale of the property is likely to leave them with a profit or a loss.
But there is a complication. The proceeds from the sale do not simply go back to GGE. They must first pass through the administration process, and the school has substantial debts to other creditors.
The overage agreement
When GGE bought Durham High School, the charitable trust which previously owned the property put in place an overage agreement entitling it to 50% of the uplift in value following planning permission, reducing to 30% and then 20% over seven years.
We haven’t seen the deed itself, so the precise calculation remains unverified. For the purposes of this analysis, I have assumed that the overage is calculated on the increase above the original £2 million purchase price.
This is important because the difference between a 50% and a 20% overage payment is substantial.
GGE has publicly rejected the allegation that it acquired the school for its land, saying its additional investment exceeded the value of the property assets. The emerging financial evidence gives us a way of testing that claim rather than simply accepting or rejecting it.
The first question is how much money the sale could generate after the overage payment.
What would the land sale generate?
For consistency with our previous investigation, I have assumed £500,000 in administration, legal and selling costs. This is an estimate rather than a figure supplied by FRP.
The following table shows how much would remain from the property sale after those costs and the overage payment, assuming the overage is triggered.
All figures are in millions of pounds.
| Sale price | 50% overage | 30% overage | 20% overage |
|---|---|---|---|
| £4m | £2.50m | £2.90m | £3.10m |
| £5m | £3.00m | £3.60m | £3.90m |
| £5.5m | £3.25m | £3.95m | £4.30m |
| £6m | £3.50m | £4.30m | £4.70m |
| £7m | £4.00m | £5.00m | £5.50m |
| £8m | £4.50m | £5.70m | £6.30m |
| £10m | £5.50m | £7.10m | £7.90m |
These figures are not estimates of GGE’s profit. They represent the amount potentially available from the property sale to meet creditors’ claims and, if sufficient money remains, provide a return to the owners.
There is also an important qualification. The overage may only become payable if the relevant planning trigger occurs. An unconditional sale without planning permission could produce a different financial outcome, although any continuing overage liability would presumably affect the price a purchaser was prepared to pay.
Nevertheless, the calculations illustrate just how important the overage agreement could be.
At a sale price of £6 million, the difference between a 50% and a 20% overage payment is £1.2 million. At £10 million, it rises to £2.4 million.
What about the creditors?
The revised administrators’ report identifies approximately £1.59 million in the three categories of creditors listed above, an increase of £177,000 on the original report.
However, the school has assets beyond the land and buildings, and the proceeds from their disposal will also be available to the administrators.
FRP expects preferential creditors to be paid in full, with other creditors receiving at least some payment towards their claims.
This is where the distinction between GGE’s investment and its position as a creditor becomes important.
The £2.2 million advanced by GGE appears to be an unsecured claim. That means GGE will receive a distribution alongside other unsecured creditors, rather than simply being entitled to recover its money from the sale of the land.
The original £2 million property investment is different. That represents the owners’ investment in the business. Only when creditors have been paid in full can any remaining surplus be returned to shareholders.
In other words, GGE could receive a substantial payment from the administrators without recovering its entire £4.2 million investment.
Equally, if the property sells for enough to settle all the school’s liabilities, including GGE’s creditor claim, any remaining surplus could ultimately return to the owners.
This makes calculating a precise break-even sale price more difficult than it first appears. We would need to know the final value of the other assets, the admitted creditor claims, the costs of the administration and the precise operation of the overage agreement.
What we can do is examine the likely scale of the proceeds.
At a £5 million sale price, the property would generate approximately £3 million after the assumed costs and a 50% overage payment. At £6 million, that rises to £3.5 million.
Those sums would make a substantial contribution towards settling the school’s liabilities, but they would not automatically allow GGE to recover its £4.2 million.
At £10 million, the net proceeds would rise to £5.5 million, potentially enough to repay creditors and leave a surplus for the owners, depending on the final liabilities and the value of the school’s other assets.
The outcome changes considerably if the overage falls to 20%. At a £6 million sale price, the property would generate £4.7 million after estimated costs and overage, compared with £3.5 million under the current 50% arrangement.
The timing and terms of the sale could therefore have a considerable effect on the eventual financial outcome.
What does this tell us about the land-grab allegation?
I think these figures strengthen the alternative explanation we identified in September: that Galaxy Global Education invested heavily in an attempt to rescue an economically unsustainable school and may lose a substantial amount of money.
The property was previously valued at approximately £5.5 million on a subject-to-planning basis. Sanderson Weatherall estimated that only around 60% of the 13.77-acre site was developable, and our own calculation using Durham County Council’s historic land values produced a similar estimate of approximately £6 million.
If the property sells for something close to those valuations, the administrators will have a substantial sum to distribute to creditors, but it is far from certain that GGE will recover its investment.
Indeed, the owners could lose a considerable amount of money.
Even if the site achieves the £10 million suggested by Mary Kelly Foy in Parliament, the 50% overage arrangement would absorb approximately £4 million of the proceeds under our assumptions. After estimated administration and selling costs, £5.5 million would remain from the property sale, together with the proceeds from other assets, to settle the school’s liabilities.
That could leave a surplus for GGE, but it is by no means guaranteed.
There is another important distinction. The fact that GGE might eventually make money from the sale of the property would not, by itself, prove that it acquired the school with the intention of closing it. Equally, the fact that it invested substantial sums does not establish that every decision it made was in the school’s best interests.
The last time I wrote about Durham High School, I concluded that both sides’ claims were unlikely. GGE claimed the closure was the result of VAT changes. The local MP claimed it was a land grab.
My own conclusion was more prosaic. The private education market in Durham has been contracting for years. Durham High School was losing pupils long before Labour announced VAT on school fees. Its financial problems were structural rather than the consequence of a single government decision.
Markets do not guarantee the survival of individual businesses. They provide a mechanism through which businesses compete, succeed, fail, merge and sometimes disappear. That process can be painful, particularly when the business is a school with a history stretching back more than a century. But the age of an institution does not make it economically viable.
Indeed, there is something rather strange about politicians who spend much of their time praising the virtues of markets but seem surprised when those markets produce outcomes they dislike.
The question is not whether Durham High School should have been allowed to fail. It is whether its owners behaved responsibly, whether its creditors have been treated fairly and whether the proceeds from selling its assets will be distributed according to the law.
And that brings us back to the land.
The administrators’ sale process may finally establish what the property is worth. It will not, by itself, establish what motivated GGE to acquire the school. But it should provide a much firmer basis for judging whether the owners stand to make a substantial profit or suffer a substantial loss.
For now, the evidence suggests that GGE committed considerably more money to Durham High School than the original £2 million purchase price. Whether it ever gets that money back remains an open question.
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