Kenmore seeks exit from development operations

  HBOS-backed Kenmore Property Group is winding up its investment and development operations.   The Edinburgh-based firm said that it now planned to concentrate on managing assets owned by third parties, rather than continue a debt-based business model at a time when borrowing costs are high and asset values are falling.   The company, which manages £2bn of property in nine funds across Europe and the Middle East, is in talks with HBOS to restructure its debt to provide it with extra working capital. It will also wind up joint ventures, which include partnerships with HBOS and Lehman Brothers, within its £1.5bn development pipeline.   Kenmore’s discussions with its lender are expected to conclude next week.   Managing director Rob Brook said: “We want to restructure and bring in capital to grow the business. We are not restructuring to sell down the company but to rebuild it. This will drive us to an investment management business model. Bigger joint ventures where we have a 50% stake will not continue.”   As the value of its funds has fallen, Kenmore has come under pressure from HBOS. Last month, Kenmore stepped up asset sales from its European Industrial Fund to bring its gearing from 63% to below 61%. Its loan-to-value covenants on £280m of debt range from 70% to 85%.   Brook said the measures were a response to the speed at which trading conditions had deteriorated since the credit crunch hit last August.   “Everybody is dodging bullets,” he said. “You can’t have the asset falls and the illiquidity we have had in such a short time without saying ‘our business model has got to change’.”   The turmoil has forced Kenmore owner John Kennedy to postpone year-long efforts to sell his 70% stake in the company. Talks with Australian fund manager Mirvac about a £300m takeover collapsed a year ago.   Brook said that divestment was a “long-term ambition” for Kennedy, and the door was open to potential investors. “We will look for strategic relationships with people who want to use our platform,” he said.   patrick.clift@rbi.co.uk