Investor Buys Second BTR Block From Administration In £110M Play
Private investment firm LRC has bought a £58M north London build-to-rent asset out of administration, the second such deal it has undertaken in the space of a year.
LRC acquired Bradstowe House, a 177-apartment scheme in Harrow, from administrator Interpath Advisory for more than the £58M guide price, according to a statement from selling agent Savills.
The nine-storey building totals 134K SF, with an average occupancy length of 2.9 years. Knight Frank advised LRC.
Bradstowe House was built by Irish developer Comer. Construction began in 2008, but it stalled for several years after lender Bank of Ireland pulled funding during the credit crunch.
A new £23M loan from Investec restarted construction in 2013. Nord and PGIM refinanced the project in 2015 and 2016.
The scheme is nearly fully leased and being managed on a fee basis by Greystar, Interpath said in an administration report. It produced net operating income of £156K to £214K between October last year and March this year, according to the report.
In late 2023, LRC also bought the Parkview scheme in Brentford for £53M after its owner went into administration a year earlier, according to a report from administrator RSM.
Parkview is a 100K SF office project that was converted into 288 apartments in December 2022. Watling Real Estate and CSquared were appointed to sell the asset for about £67M. It was once valued at more than £100M.
The background to the administration is out of the ordinary, according to the administrator's report.
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 in 2021 to support completion of the scheme and letting all of the units.
But an insurance dispute thwarted plans after a sprinkler pipe that leaked water into 40 of the flats in 2020 necessitated significant repairs. Although 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. The prosecution related to the alleged defrauding of one of the country’s sovereign wealth funds, 1MDB.
The criminal case was settled and discontinued, but AXA rejected the insurance claim for the damaged flats on the basis of the criminal proceedings. That 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. In late 2022, OakNorth called in the administrator. It was owed £57M.
The administrator has since dealt with a broken heating, ventilation and air conditioning system and tenants turning off their HVAC systems at the mains to avoid paying for heating, also causing their neighbours’ systems to turn off. Some tenants have failed to pay rent, and the administrator has struggled to recover arrears.
