The Candy brothers and Kaupthing have defaulted on a $365m (£202m) loan for a development in Beverly Hills, and the brothers have abandoned one of their flagship London projects.
Nick and Christian Candy, who rose to prominence in the boom by outbidding the market for a string of high-profile sites, have walked away from the 3-acre Middlesex Hospital scheme as part of a settlement with nationalised Icelandic bank Kaupthing.
Christian Candy’s CPC Group has written off its £14m equity investment in the Fitzrovia site, branded Noho Square, and relinquished all liabilities for the £200m of debt loaned to the jv by Kaupthing. The brothers have made around £10m in incentives and fees on the scheme. “In reality, our share was worth nothing,” Nick Candy admitted on Thursday. “The value of the site was less than the senior debt.”
In return, Kaupthing hopes to relinquish its liabilities on the Beverly Hills scheme by handing its 60% stake to the Candys. But this half of the agreement must be approved by the scheme’s creditors. They should have been repaid earlier this month.
A default notice for the $365m loan, originated by Credit Suisse, has been filed in the past few days with the Los Angeles County registrar. The move marks the first step towards foreclosure.
It is understood that the Candys now have six months to secure new funding before the banks take back the 8-acre site.
Nick Candy said that there was no recourse from the loan to the rest of CPC. But he said that the situation was “one of the reasons” for agreeing to exit Noho Square.
He added: “We are very confident that we will sort out a refinancing.”
Three weeks ago, the brothers claimed that they would take full control of both jv projects because Kaupthing’s UK administration and nationalisation in Iceland breached those agreements.
CPC has invested $100m in the Beverly Hills scheme, which it bought with Kaupthing for $500m in 2007. Some of the equity has been wiped out.
The Noho site was bought for £175m in 2006, but its value has also fallen in the downturn.
Sale planned for Noho Square
Kaupthing will now sell the former Middlesex Hospital site north of Oxford Street as part of a disposal of all its equity stakes. The credit crunch thwarted efforts to secure construction funding for a 900,000 sq ft scheme designed by MAKE. Rival developers have been circling for months, with Stanhope working up less expensive proposals. But CPC Group hopes to buy back the site. Kaupthing said on Thursday: “Going forward, we shall be selecting a jv partner from a shortlist that includes CPC.”
