EXCLUSIVE: Investor Buys £50M London BTR Block Hindered By International Criminal Case
Private investment firm LRC has paid £53M for a west London apartment block beset by problems, including an insurance claim that was denied because of a major international criminal investigation, Bisnow can reveal.
LRC bought the Parkview scheme in Brentford after its owner went into administration last year, according to a report from administrator RSM.
Parkview is a 100K SF office scheme that was converted into 288 apartments in December 2022. Watling Real Estate and CSquared were appointed to sell the asset at a price of about £67M for a scheme once valued at more than £100M.
RSM’s report says that 11 parties submitted bids to buy the property. A high bidder was recommended but could not complete the deal, and LRC ultimately purchased the building.
The background to the administration is out of the ordinary, according to a report from the administrators. A group of investors came together in 2017 and put up equity to convert the former office block into rental apartments. OakNorth Bank provided a £55M loan to support the process of completing the scheme and letting all of the units in 2021.
But an insurance dispute thwarted plans after a sprinkler pipe that leaked water into 40 of the flats in 2020 necessitated significant repairs. Though the ownership consortium made an insurance claim to AXA, it was rejected after one member of the consortium, former Goldman Sachs International banker Michael Sherwood, was named in a criminal prosecution by the Malaysian government relating to the alleged defrauding of one of the country’s sovereign wealth funds, 1MDB.
The criminal case was settled and the proceedings were discontinued, but AXA rejected the insurance claim for the damaged flats on the basis of the criminal proceedings. The decision was appealed, and AXA won — a result that left the owners needing to raise £3.5M of new equity, which they were unable to do.
An “acrimonious” falling-out ensued, according to the administrator’s report.
As interest rates rose, paying the interest on the loan got harder, particularly as trading at the scheme was impacted. In late 2022, OakNorth called in the administrators. It was owed £57M.
Administrators have since had to deal with a broken heating, ventilation and air conditioning system; tenants turning off their HVAC systems at the mains to try to avoid paying for heating, causing their neighbours’ systems to turn off as well; and tenants failing to pay rent, plus arrears not being recovered.
LRC has been a prolific investor in the rented residential sector across Europe. According to its website, it has a UK residential portfolio valued at more than £850M. The company was founded in London in 1995.
