Case Studies: Administrative Receivership

A portfolio of 145 residential properties based in Reading with a total bank lend of £35 million. This was a complex case and we were appointed due to a technical breach rather than an arrears breach.

Work Undertaken

The properties were largely tenanted residential properties and our team took control of the rental income prior to considering the optimum exit strategy. The bank debt was serviced from the rental income which was originally circa £130,000 per month. The Bank was expecting a loss of circa £17 million at the date of appointment.

Outcome

We put plans into place for phased disposal and managed the strategy from start to finish. This process was undertaken at the optimum time to take advantage of improving market conditions and, ultimately, the Bank’s loss was eventually estimated to be circa £3 million – representing a huge positive swing for the Bank. This liability was also potentially recoverable via litigation against third party professional advisors.

The wealth arm of the Bank appointed receivers over a property which was within a short walking distance of Harrods in Knightsbridge. The property comprised a large house and an exceptionally large garden (for that area of London). The property was in the process of being developed by an individual who has since been charged with a substantial fraud.

Work undertaken

Some initial issues we encountered at the property; the property was in a state of disrepair, including substantial excavations having been undertaken in the garden. The roof works were incomplete, and water was getting into the building in several places. There were no warranties for any of the works undertaken. There were several breaches of planning, including the depth of the excavation.

BTG asked two prominent agents to value the property in its present state.  We avoided agents who had been used by the Bank or the owner as we wanted fresh thinking.  We were advised that the property was worth between £7 million and £8 million.

We carried out the following:

• secured an overdraft from the Bank and eventually borrowed £3 million
• repaired the roof so that the Council withdrew their enforcement notice
• secured the groundworks as the props which secured the excavation to the rear of the property were considerably beyond their recommended life span
• regularised the planning, with several planning applications. We were questioned on our plans at one of the planning committee meetings for Kensington and Chelsea Council
• engaged with the residents and kept them apprised of our activities and plans
• ensured that adequate public liability insurance was in place

Whilst undertaking the above, we met with several interested parties and secured several offers considerably above the valuations we had obtained.

Outcome

Once all the above works were completed, we decided to put the property on the market with a guide price of £20 million.

We secured a sale at in excess of £30 million to the delight of the Bank and at four times the initial valuations.  This has resulted in the Bank being almost paid out in full without the need to enforce its security on other properties.

Kwik Fit operates a chain of tyre fitting and auto care outlets in Kenya. Violence in 2008 following disputed elections and lack of working capital substantially hindered the business, causing trade to decline and the company entering receivership. Duly appointed as receivers we successfully traded the business for some time then concluded a settlement agreement between directors and the bank. The company was returned to its directors to continue trading with redundancies minimised. Our local and international knowledge gave us a powerful position in negotiations resulting in a successful recovery for the bank.