News

BSI Tower fee row heads for high court

News

Jess Harrold

18 December 2014

Offices

England, London, Outer boroughs

A row over a “promote” fee following the sale of the British Standards Institution headquarters in Chiswick is heading for the high court.

UK asset manager Canmoor is suing Harbert Management Corporation, claiming it is entitled to around £4m after Harbert bought the BSI Tower, at 389 Chiswick High Road, W4, for £31.3m in 2010 and sold it for £56.5m three years later.

However, according to particulars of claim filed by Canmoor at the high court, Harbert maintains that Canmoor is entitled to only £641,000.

No trial date has been set for the claim, which is being defended by Harbert.

According to the particulars of claim, under a 2008 agreement Canmoor was appointed to source potential property investments for Harbert’s European arm, and in return to receive an acquisition fee on purchase, management fees for running the property and a “promote” payment, a type of profit sharing arrangment based on cash flow including ultimate sale and calculated by reference to the amount of equity invested and internal rates of return.

They say that Canmoor introduced Harbert to the opportunity to buy the BSI Tower, which it purchased it through a Jersey-based SPV for £31.3m, with completion in November 2010.

Canmoor says it managed the property on behalf of Harbert and increased its value by £8m on the day of exchange alone, as it had successfully negotiated extending the BSI’s lease by 10 years and increasing the rent.

And it claims that, throughout the transaction, senior individuals with Harbert Europe stated to Canmoor that the promote would amount to “millions of pounds”, based on financial models provided by Harbert to Canmoor prior to the acquisition.

Canmoor alleges breach of contract on the part of the Jersey-based SPV, by refusal to pay the correct promote fee, and wrongful procurement of breach of contract by Harbert Europe and its Senior Managing Director Scott O’Donnell.

However, assessing the promote owed at only £641,000, Harbert says that interim finance used to fund the purchase was its own equity rather than external debt, which reduced the returns and therefore the fee to which Canmoor are entitled.

Harbert and Canmoor were contacted for comment, but failed to respond.

In March 2013, the BSI Tower was sold to Hermes Real Estate for £56.5m.

A row over a “promote” fee following the sale of the British Standards Institution headquarters in Chiswick is heading for the high court. UK asset manager Canmoor is suing Harbert Management Corporation, claiming it is entitled to around £4m after Harbert bought the BSI Tower, at 389 Chiswick High Road, W4, for £31.3m in 2010 and sold it for £56.5m three years later. However, according to particulars of claim filed by Canmoor at the high court, Harbert maintains that Canmoor is entitled to only £641,000. No trial date has been set for the claim, which is being defended by Harbert. According to the particulars of claim, under a 2008 agreement Canmoor was appointed to source potential property investments for Harbert’s European arm, and in return to receive an acquisition fee on purchase, management fees for running the property and a “promote” payment, a type of profit sharing arrangment based on cash flow including ultimate sale and calculated by reference to the amount of equity invested and internal rates of return. They say that Canmoor introduced Harbert to the opportunity to buy the BSI Tower, which it purchased it through a Jersey-based SPV for £31.3m, with completion in November 2010. Canmoor says it managed the property on behalf of Harbert and increased its value by £8m on the day of exchange alone, as it had successfully negotiated extending the BSI’s lease by 10 years and increasing the rent. And it claims that, throughout the transaction, senior individuals with Harbert Europe stated to Canmoor that the promote would amount to “millions of pounds”, based on financial models provided by Harbert to Canmoor prior to the acquisition. Canmoor alleges breach of contract on the part of the Jersey-based SPV, by refusal to pay the correct promote fee, and wrongful procurement of breach of contract by Harbert Europe and its Senior Managing Director Scott O’Donnell. However, assessing the promote owed at only £641,000, Harbert says that interim finance used to fund the purchase was its own equity rather than external debt, which reduced the returns and therefore the fee to which Canmoor are entitled. Harbert and Canmoor were contacted for comment, but failed to respond. In March 2013, the BSI Tower was sold to Hermes Real Estate for £56.5m.