The dire state of the secondary property market was brought to the fore this week as Mapeley’s giant regional portfolio went into receivership.
As revealed by EGi, the Fortress Investment Group-owned company declined to inject fresh equity in order to cure the severely underwater £170m securitised loan, prompting special servicer Hatfield Philips to call time on the 1.33m sq ft office portfolio.
Jones Lang LaSalle’s Robert Baldwin and Jemma McAndrew have been appointed as LPA receivers, and will work alongside Tom Laidlaw’s Cordatus Partners managing the 18 assets.
The aim is to improve the value of the portfolio and sell it ahead of the July 2015 loan maturity.
It is expected to be broken up and sold over time.
A separate receiver is to be appointed for a further two properties in Scotland, completing the 20-strong portfolio built up by Mapeley in 2004 and 2005 and securitised in the DECO 6 transaction.
At the time of purchase, valuations by CBRE and Knight Frank put a figure of £244m on the properties. They were valued at just £74m last January – a 70% fall.
With debt of £170m, this reflects a loan-to-value of 230%.
One of the main drivers of the plummeting value was related to the departure of the sole tenant at the portfolio’s highest-valued building – the 250,000 sq ft Delta Point office in Croydon.
Its value had fallen by 83% from £58.6m at origination to £10.2m.
The widespread fall in property values in the recession, and the short leases at many of the buildings, has resulted in the portfolio’s value dropping across the board (see box).
Hatfield Philips said in March that it was “reviewing, with its valuer negligence counsel, the basis for potential valuer negligence with regard to the origination valuation”, but has not provided any update on its position.
Devaluations across the board
The portfolio also includes:
Chesser House, Edinburgh, which has fallen in value by 77.5% from £28.45m to £6.4m
Hercules House, SE1, which has fallen by 49% from £24.35m to £12.4m
Kings House, Reading, fallen by 56% from £17.2m to £7.5m
Touthill Close, Peterborough, fallen by 89% from £14m to £1.6m
