Hatfield Philips faces the prospect of legal action over the enforcement of a CMBS loan secured by three South East shopping centres owned by Stockland and Apollo Global Real Estate Management, CoStar News understands.
Stockland and Citi Property Investors (CPI), the former real estate investment management subsidiary of Citigroup, acquired three UK shopping centres financed by a £35.2m Deutsche Bank whole loan back in July 2005, which was spun into the bank’s UK DECO CMBS conduit programme thereafter.
CPI was sold to Apollo Global Real Estate Management, the real estate investment management group of Apollo Global Management, in November 2010.
The outstanding £32.3m CPI Retail Active Management whole loan includes a £2.5m junior loan, which was bought in the secondary markets by Firedog Moss, a special purpose vehicle owned by the co-founders of Ellandi, which is threatening legal action against Hatfield Philips over the disputed sale of the properties.
Firedog Moss is understood to be contesting the rationale for disposing of the secondary shopping centres – Waterbourne Walk in Leighton Buzzard, Gravesend’s Thamesgate Shopping Centre and Wellington Way in Waterlooville – arguing a disposal in the current market would fail to return best value to all debt investors.
Litigation action is a common feature of the CMBS work-out industry, mostly unsuccessful. But the process can often delay the disputed strategy. Special servicers are empowered to make investment decisions without the unilateral consent of all noteholders and junior lenders, subject to transaction documentation.
Firedog Moss is understood to have attempted to broker a restructuring which was not accepted by Hatfield.
Hatfield’s enforcement rationale is thought to be premised on what it considers to be the best return to investors on a net present value basis.
Matthew Richard Nagle and Julian Marshal Clarke of Savills were jointly appointed as LPA receiver and managing agent over the shopping centres on 27 June 2011, following the administration of the vehicle owned by Stockland and Apollo.
The loan defaulted on its LTV covenant after the properties fell in value from £44.0m in July 2005 to £30.5m five and a half years later, in December 2010.
Hatfield instead agreed a consensual receivership strategy with Stockdale and Apollo, which continues to work on new leases not only increasing occupancy levels but working towards its asset management strategy, according to April’s quarterly investor report.
Deutsche Bank, the CMBS master servicer, wrote: “The data room has been set up and the title deeds have now been cleansed – ready for the sale process – once it starts. In turn, the asset management strategy to re-gear leases and increase the unexpired lease length of the subject properties continues.”
The five largest tenants across the three shopping centres are: Wilkinson, Waitrose, Lloyds Bank, Poundland and Poundstretcher.
All parties declined to comment.