Britain's wealthiest landowner in trouble

Britain's wealthiest landowner in trouble



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It’s a strong sign that the current property slump is turning serious when a multibillionaire duke faces debt problems.

The Duke of Westminster is said to be in advanced talks about how to prevent his property fund business – worth £2 billion – from breaching bank covenants.

Grosvenor, the duke’s private investment company, has confirmed that it is negotiating with its banks. The company has about £13 billion of property under management but taking out a £48.8 million provision on a £1 billion shopping centre development in Liverpool has wiped £140 million from its balance sheet.

The head of Grosvenor’s UK fund management business, Mervyn Howard has attempted to calm the situation and reassure investors: “At the end of the second quarter of 2007 we alerted investors to the level of debt. We said it was at the upper end of the scale. We reported to them that we were concerned at this level of debt and we needed to redress it.”

Mr Howard went on to say: “We can understand investors’ frustration at the performance not just of our funds but of all property funds.”

Shareholders are allegedly disgruntled that property managers didn’t listen to advice to reduce the company’s borrowings 18 months ago. One shareholder revealed: “They didn't see how bad it was getting because they didn't have the experience.”

The Duke of Westminster inherited one of the most valuable property portfolios in the world; however he has kept up the family tradition of refusing to sell any buildings and instead, Grosvenor has started to borrow money and invite wealthy institutions and families to co-invest in commercial ventures.

One property insider commented on the news: “Will the duke go bust? No. Is he in trouble? Yes. He has borrowed money and bought badly. Anyone funning funds is having a terrible time.”

 

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