Frogmore is suing Nationwide for breach of contract over the building society’s sale of a £115m loan secured against three of its shopping centres.
Paul White’s real estate fund manager is seeking as much as £51m in damages over allegations that Nationwide breached a contract relating to the loans when selling them to Cerberus as part of the £1bn Project Carlisle.
It claims it had the right to buy back the loans at the market value of the three malls – a figure Frogmore puts at £50.8m.
The loans were originally agreed in 2006 and secured against the Port Arcades shopping centre in Ellesmere Port, Cheshire; the Belle Vale shopping centre in Liverpool; and the Broadwalk shopping centre in Knowle, Bristol (pictured).
Frogmore had drawn down around £105m of the facility by 2009, at which point tumbling commercial property values meant the outstanding balance of the loans was higher than the value of the shopping centres and Nationwide halted further drawings.
Nationwide subsequently agreed a deal in December 2014 to sell the loans as a part of a portfolio with a face value of £1bn for which Cerberus paid £680m – a 32% discount.
Immediately prior to the deal with Cerberus, Nationwide offered to sell the loans back to Frogmore for £70.2m, an offer rejected by the borrower on the grounds the figure was higher than the properties’ open-market value.
Frogmore contends that, given the outstanding balance of the loans now held by Cerberus is £102.1m and the value at which it should have been able to purchase the loans is £50.8m, it is entitled to damages of £51.3m
Frogmore chairman and chief executive Paul White said: “We are not in default of any obligations owed to Nationwide.
“Our loans are fully performing loans. This is an unusual situation where the borrower is making a claim on the lender rather than the other way around.”
Nationwide, which has yet to file its defence against the claim, declined to comment.
