White Tower, one of the highest-profile European securitisations to default after the financial crisis, is heading towards court, PDI sister title Real Estate Capital reported.
White Tower 2006-3, the SPV issuer of the £1.15 billion CMBS, is suing Colliers International UK (Colliers) alleging that Colliers overvalued five of the assets in the nine-strong, £1.8 billion UK office portfolio which backed the deal.
White Tower 2006-3 claims that Colliers’ £1.2 billion valuation for the five buildings was an overvaluation in a range from 11.9 to 25 percent depending on the property and has led to White Tower suffering a net loss of £34.85 million. The case is due to open in London’s Commercial Court on 5 April.
Colliers plc went into administration in 2012 and the case will be defended by the former firm’s insurer, with the cooperation of Colliers International Group inc.
The White Tower deal was the securitisation of the £1.15 billion senior tranche in a whole loan ultimately made to property tycoon Simon Halabi via 11 different Jersey borrowers by Société Générale. There was also a circa £300 million junior loan.
The assets which are the subject of the litigation comprise large office buildings in central London including Alban Gate, which the claim says was overvalued by 11.9 percent, JP Morgan’s then HQ at 60 Victoria Embankment, which the claim alleges was 17.25 percent overvalued and Millennium Bridge House, allegedly overvalued by 25 percent.
In 2009, the properties had plunged in value, the loan had defaulted and the deal went into receivership. Special servicer CBRE ran a sales process and sold most of the portfolio to the Carlyle Group.
The bond holders in classes A through to D were repaid but the class E suffered a partial loss. The junior loan was wiped out.
The case will also be notable because it will re-visit arguments around reliance that were made in another defaulted CMBS court case alleging negligent valuation – also against Colliers – Titan Europe 2006-3, which was heard in 2014.
In White Tower, the defendant argues that the noteholders were not entitled to rely on the valuations provided by Colliers to Société Générale. It will also argue that White Tower, as the issuer, is not entitled to be the party to sue.
In the Titan case, Justice Blair found in favour of the plaintiff on all counts, including upholding the right of issuers to sue for negligence. This point was not overturned by the Court of Appeal which subsequently cleared Colliers of negligence.
Taylor Wessing is advising the claimant; Reynolds Porter Chamberlain is acting for Colliers. All parties declined to comment.