Vermont seeks legal advice over funding withdrawal

The directors of Liverpool-based developer Vermont are considering legal action against the venture capitalist that placed it in administration this week to reclaim a £4m loan on a residential scheme in Salford.

Downing Corporate Finance, of London, backed Vermont's £40m Foundry Wharf scheme, set to contain 223 flats before it was mothballed due to the housing market collapse.

Downing became a shareholder in Vermont on 19 June and signed a joint venture agreement to develop a 60,000 sq ft office building at Rumford Court in Liverpool city centre on 11 August. Work was due to begin late this year or early 2009.

Under the terms of administration Vermont's directors and shareholders are not permitted to disclose details.

Sources close to the developer said the move into administration came "completely out of the blue" and was regarded as a "hasty and clumsy" attempt to extract maximum value from Vermont.

The 19 June agreement included restructuring its £4m funding of Foundry Wharf, with the debt to be settled in full by October 2009.

Vermont's understanding was that the restructuring of this debt and the funder's equity involvement would provide synergies for the business and new shareholders alike, going forward.

Downing is likely to take control of several other of Vermont's other assets; the Ribble Building in Southport with planning consent for a 96-bed hotel and valued at £7m; and another Liverpool site on the edge of the city centre off London Road with consent for 71 apartments.

The largest single asset in the developer's portfolio is the £100m mixed-use The Quarter on Sefton Street, a joint venture funded by Liverpool-based Ethel Austin Properties. The scheme, anchored by a Ramada Plaza hotel and containing 374 apartments and 13,000 sq ft of offices, is believed to be unaffected by the move into administration and is owned by a special purpose vehicle, called Sefton Street Developments LLP.

The sub-contractors working at Sefton Street have been paid and works are continuing at the site while the dispute is resolved.

The source, who did not wish to be named said: "Nobody at Vermont had any knowledge of this action and believed that they and their new shareholders were keen to explore further development opportunities. It now seems that the events of the past month or two are much less straightforward than first appeared."

Vermont was founded in 2004 by Mark Connor, chief executive, and former Charlton Homes boss Paul Bolton, who has since left to pursue other ventures. The company completed three schemes in 2006, in Warrington, Salford and Liverpool.

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