Lender Earlsfort Capital Partners and receivers at Knight Frank are being sued by a Saudi businessman over the sale of a portfolio of west London properties run as hostels and a hotel.
Lawyer Amrit Johal, a partner at City law firm Spencer West, confirmed that he had filed a claim on behalf of two companies owned by “a prominent Saudi Arabian businessman”.
The claim was filed at the end of March against ECP and two partners at Knight Frank’s corporate restructuring group, according to the High Court’s registry.
On 30 March, Johal obtained a last-minute court order blocking the sale of the properties, which are valued at around £25m. Even so, the properties were sold soon after.
The judgment granting the temporary court order outlines the background to the dispute.
According to the ruling, the properties at the centre of the dispute are 1 Barkston Gardens, SW5 (pictured), and 19 Courtfield Gardens, SW5, in Earls Court, and 1 Lexham Gardens, W8, and 3 Lexham Gardens, W8, in Kensington.
According to the judgment, the properties were owned by the claimant’s companies and were used to secure a loan from real estate finance firm ECP. The loan was for more than £20m and by March this year the outstanding sum had risen to £30m.
“The loan has been periodically in arrears and renegotiated and had standstills for the past two to three years,” the judge, Sir Anthony Mann, said in his ruling on 30 March.
“Some of the difficulties were induced by Covid; some not. In the end, the lenders ran out of patience and appointed receivers [Knight Frank]. Those receivers have now entered into a contract to sell the property.”
The ruling blocked Knight Frank from going through with the sale on that day.
Meanwhile, according to Johal, his client had found a different purchaser that, he said, was prepared to offer more than £26m for the properties, which he said was higher than the bid Knight Frank had received. The offer was made in January and, according to him, was still standing at the time of the court hearing.
Even so, Knight Frank’s purchaser bought the properties in early April.
“My clients, the borrowers, continue to pursue their claim that the £22.5m hostel sale was not at arm’s length and was an undervalue,” Johal said in a statement.
“An alternative offer, in excess of £26m, was not pursued, and the lender’s and borrower’s ‘coyness’ around the terms of the sale to the new owner fuels concern.
“Any multi-million-pound transaction has the potential to lead characters into temptation and this case requires anxious scrutiny.”
ECP declined to comment and said that all questions should be directed to the receivers. Knight Frank declined to comment.
Lexham Securities Ltd (a BVI company) and S&K Group Ltd (a BVI company) v Earlsfort Capital Partners Ltd (a company registered in Ireland) and others
High Court, Property, Trusts and Probate (Sir Anthony Mann, sitting as a High Court judge) 30 March 2023
