CBRE and Warwick Street, formerly known as King Sturge LLP, are facing a High Court of Justice legal claim over the property valuations over the 36-strong Gemini portfolio, formerly owned by Glenn Maud’s Propinvest.
The special purpose vehicle (SPV), Gemini (Eclipse 2006-3) Plc, filed a Particulars of Claim yesterday against CBRE Limited and Warwick Street (KS) LLP with the Queens Bench Division’s Commercial Court.
In a joint statement this lunchtime, CBRE and Warwick Street said: “CBRE Limited and Warwick Street (KS) LLP confirm that they have received notice of a claim by Gemini (Eclipse 2006-3) Plc, regarding a joint valuation undertaken on a UK property portfolio in 2006.
“CBRE and Warwick Street strongly believe that the valuation, which was undertaken in accordance with industry standards and practice, reflects the market value of the portfolio at that time. They consider that Gemini’s claim is without merit and are confident that it will be dismissed if pursued in court.”
The value of the claim against CBRE and Warwick Street is not yet public information, nor is the the specifics of the claims against the two defendants, however, these details will emerge once the defendants acknowledge claim with the Commercial Court and a case management conference is scheduled.
The former Propinvest Gemini 36-strong portfolio was collectively valued at £1.23bn, during the first half of 2006, against which, Barclays Bank extended a £850.36m senior loan and a £105.24m junior loan.
Barclays Bank securitised the £850.36m senior loan issuing bonds through the Gemini (Eclipse 2006-3) Plc SPV, which almost seven years later is now legally challenging the veracity of those original valuations, which underpinned the risk dynamic of the subsequent CMBS bonds.
Over the last seven years, the value of the Gemini portfolio has collapsed by more than two-thirds – a fall of £838.45m to just £396.5m, according to a GVA valuation as at the end of March this year.
The Gemini portfolio’s dramatic value collapse – among the most severe falls among secondary UK properties since the property market crash – is set to crystalise one of the weakest recoveries to bondholders ever for a European CMBS.
The portfolio workout is projected to wipe out the entire junior loan, and class Es up to Bs in the securitisation, as well as deeply eroding the capital recovery for class As – the investment grade bonds which were originally classified as AAA by Standard & Poor’s, Moody’s and Fitch Ratings.
CBRE Loan Servicing, a separate legal entity from the defendant, is the special servicer of the Gemini (Eclipse 2006-3) CMBS, which appointed VALAD as the asset manager of the portfolio.