Colliers lawyer says properties at centre of valuation dispute had “blue chip” tenants

The five properties at the centre of a multi-million-pound negligence claim had “very strong covenants”, and this should be reflected in their value, a lawyer representing Colliers International told a London court today. Securitisation firm White Tower is suing Colliers, claiming that in 2006 Colliers negligently overvalued five major London office blocks by a total of almost £177m. Patrick Lawrence QC, representing Colliers, said that the properties were let to major banks and corporations. “These were all blue-chip companies,” he said. “The quality of the covenant was excellent.” Lawrence made the comment while cross-examining William Newsom, a valuation expert at Savills. Newsom was giving evidence as an expert witness called by White Tower and has provided the court with his own assessment of the values of the properties in question. In a series of sometimes prickly exchanges, Lawrence pressed Newsom on his assessment of the value of the properties. Newsom gave a 2006 valuation of 60 Victoria Embankment, tenanted by JP Morgan, of £298.5m, compared with Colliers’ 2006 valuation of £350m.   Lawrence described the property as “a prominent waterfront building tenanted by a world-famous bank”. Newsom said it was “a lump of grey split between two public highways”. Newsom said he accepted that a good tenant was an important factor in valuations. Even so, he said that large properties with a single tenant have a “concentrated risk”. “Bear in mind that Canary Wharf lost the letting of the Lehman building in one fell swoop,” Newsom said, referring to the bankruptcy of US investment bank Lehman Brothers in 2008. Lawrence said that in 2006 nobody would have expected JP Morgan to go bust. Newsom replied that in 2002 he was asked to value Lehman Brothers’ London headquarters for a securitisation. “I raised just that point, and I was told that if Lehamns went bust somebody else stronger would take it over,” he said. “So yes, we were considering things like that then.” White Tower is seeking substantial damages for alleged professional negligence on the part of Colliers in carrying out valuations of the five properties in October 2006. The valuations were carried out on the instructions of French bank Société Générale as part of a refinancing and securitisation transaction relating to a portfolio of nine office blocks. The transaction involved Société Générale, as originator, making a secured loan of £1.45bn and White Tower, as issuer, acquiring the senior tranche of that loan of £1.15bn by raising funds through the issue of commercial mortgage-backed floating-rate loan notes, ranked in various classes ranging from A to E, which were admitted to the Irish Stock Exchange. Colliers’ overall valuation of the portfolio was in the sum of £1,832,050,000, but White Tower said its true market value was £1,655,100,000. The properties were sold during the course of 2010 and 2011 following a revaluation of the office blocks in June 2009, which indicated that the five properties in question were worth substantially less than Colliers had valued them at in 2006. The sale proceeds were sufficient to enable White Tower to repay the class A-D noteholders in full and partially repay the class E noteholders. However, the class E noteholders remained substantially out of pocket and White Tower said it is liable to them for more than £19m. It claimed that Colliers was negligent in overvaluing each of the five office blocks to such a degree that it fell below the standard of care to be expected of reasonably competent valuers. White Tower 2006-3 plc v Colliers International UK plc, Commercial Court (Burton J)