Lloyds pulls plug on HBOS property firm

Published on Thursday 10 March 2011 12:11

A PROPERTY joint venture backed by former Bank of Scotland deal-maker Peter Cummings during the boom years has been put up for sale by Lloyds Banking Group and Scottish property heavyweight Scott Cairns.

&#149 Scott Cairns

The assets of Bonnytoun Estates, set up by Cairns with support from HBOS in 2001, are expected to attract bids of around 25 million.

The exact reasons behind the sale have not been disclosed, but sources close to the deal say it is part of a wider review by Lloyds of property assets inherited from its takeover of HBOS in 2008.

According to the last available accounts, Bonnytoun made a pre-tax profit of 988,677 in the year to 31 December 2009, having recovered from a loss of 6,584,752 the previous year.

Sources say Cairns has been heavily involved in restructuring work over the past couple of years and "he felt the time was right to exit his own property firm".

Cairns is a respected figure in commercial property circles north of the Border, having made his reputation by turning around Scottish Metropolitan Property - once Scotland's largest listed property firm - in the 1990s.

It is understood he has been helping Lloyds to unwind Kenmore Property Group, the Edinburgh-headquartered development firm that went under in November 2009.

"He was put in to Kenmore as Lloyds' man on the ground in terms of winding the company down," one source told Scotland on Sunday.

"He's very well respected by Lloyds and I expect he'll be doing more of that type of work."

Bonnytoun was one of the first joint ventures in Scotland to receive the support of Cummings who, during his tenure at Bank of Scotland Corporate, provided funding for an array of property developers and investors - many of whom ran into severe difficulty after the credit crunch paralysed the market.

When the joint venture was set up a decade ago, Bank of Scotland held 47 per cent of Bonnytoun, NAI Gooch Webster, a subsidiary of Colliers International, took 12.5 per cent and Cairns owned the rest.

Cairns, who headed Scottish Metropolitan for eight years until it was sold in 2000, indicated at the time that he would use Bonnytoun to target industrial properties in particular, as he believed the yields to be better than on office or retail properties.

A total of 11 assets have been put up for sale. It is understood that King Sturge has been appointed to oversee the disposal of the properties, which are held within a subsidiary called Ben Cleuch Estates.

Lloyds has pulled the plug on a number of former Bank of Scotland-backed property firms since its takeover of HBOS in 2008 - including Kenmore, Kilmartin and Elphinstone.

The bank was saddled with a real estate loan book of about 60 billion following the takeover - a large slice of which was inherited from HBOS.

Both Lloyds and King Sturge decliend to comment on the sale of Bonnytoun.

Cairns was involved in a high-profile court scuffle with Scottish Enterprise in 2008 when the agency sought to end its lease on offices in Dundee which were held by subsidiary Ben Cleuch.

SE had attempted to end its long-term lease agreement ten years early but it sent notification to parent company Bonnytoun rather than Ben Cleuch, of which Cairns was also a director.

The property investor claimed that SE had not validly terminated the lease and initially won the backing of a judge at the Court of Session who ruled that the agency would have to pay 2m in rent on offices it no longer occupied.

However, that ruling was overturned on appeal. Bonnytoun held bank borrowings of 31.8m at the end of 2009, drawn down under a senior and mezzanine debt facility provided by the Bank of Scotland.

The firm stated at the time that its lending agreement with the bank had been renegotiated in May 2009 and would not expire until May 2012.