No Deals Over Drinks: Defendant Counters £158M Royal Dock Legal Claim
The defendant in a £158M legal claim over the purchase of a huge development site in east London has said it never formed a joint venture or had an exclusivity agreement with the U.S. hedge fund that is suing it.
DPK Management, the asset management company set up by former amateur jockey David Maxwell, has filed a defence in a claim brought against it by Baupost, the Boston-based hedge fund.
Baupost claims it had a joint venture agreement or exclusivity agreement with DPK to buy and then develop part of the 35-acre Royal Albert Dock site in London’s Docklands. Its legal claim, filed in March, said that DPK brought in another investor at a late stage of the process and bought part of the site in early 2023. As a result, it missed out on up to £158M from developing a 4.7M SF scheme on the site and then selling it.
But in a defence filed earlier this month, DPK said that no joint venture had ever been agreed. The two parties had a formal joint venture and exclusivity agreement to buy property assets from car dealership Pendragon in 2013. They pursued other deals together since, including the purchase of flexible office company Argyll Club, which completed in 2019, and a deal to buy Dolphin Square in 2015, which did not come to fruition.
In those latter deals, there was no formal joint venture or exclusivity agreement, DPK said in its defence, adding that was the case again with Royal Albert Dock.
“A potential joint venture between DPK and Baupost in relation to the RAD site was proposed and discussed, but its terms and scope were not agreed and it was not entered into,” DPK's defence said.
As for the claim in Baupost’s filing that a “handshake agreement” on a joint venture had been reached between DPK’s Maxwell and Baupost Managing Director Scott Dunn at a restaurant in Lisbon in September 2022, the defence said no such agreement had been made.
“Mr Maxwell and Mr Dunn were both drinking alcohol at the September meeting and Mr Maxwell therefore did not consider their discussions to be commercial negotiations regarding the terms of the potential joint venture (and he expected that Mr Dunn shared that attitude, which accorded with Baupost’s general approach to the mixing of doing business and drinking alcohol as Mr Maxwell understood it),” the document stated.
The Royal Albert Dock scheme has a long, roller coaster history. In 2013, the Greater London Authority picked Chinese firm ABP as the developer for a project to be built on a 35-acre site in London’s former docklands in the east of the city.
A 4.7M SF office-led scheme with a projected end value of £1.7B was conceived. The aim was to target Chinese occupiers and strengthen the then-strong ties between the UK and the growing economic superpower. A ceremony to sign the development agreement for the site was attended by Chinese President Xi Jinping and then-British Prime Minister David Cameron in 2017.
The first six buildings in the 21-building, 700K SF first phase were completed in 2019. But by then, relations between China and the UK had cooled, and the tenants didn’t come. As of 2020, just one building had been leased. Then the pandemic hit, hindering further leasing efforts — the same year a £62M slice of a £188M loan against the development was due to mature.
While ABP secured a refinancing, the first phase of the scheme went into administration, the UK equivalent of Chapter 11 bankruptcy, in February 2022, with partners from Deloitte appointed to manage the process. That July, partners from PwC were appointed liquidators to other parts of the scheme’s corporate structure.
DPK completed a deal earlier this year to buy part of the site, though some of the existing buildings have not yet been sold. DPK also bought the company that owned heating and cooling systems under the site, which its defence said gave it leverage if it either bought and developed the whole site or if another party bought the site.
Baupost did not respond to a request for comment. DPK could not be reached for comment.
