£2m slips through Romanov's net as former RBS HQ lies vacant

Published on Friday 16 January 2009 09:00

VLADIMIR ROMANOV has missed out on almost £2 million after failing to find a temporary tenant for the former Royal Bank of Scotland headquarters.

The building on St Andrew Square is still lying empty nine months after the Hearts owner put it on the rental market.

He is now considering abandoning the search for a short-term tenant as he steps up plans to turn the A-listed building into a hotel.

His Ukio Bankas Investment Group (UBIG) bought the former bank HQ for 20 million in 2007 with a view to turning it into a hotel.

After deciding last April it could take at least three years for work to start, UBIG made the building available to companies to rent as short-term office space.

But now, nine months after marketing began, it is still lying empty with no agreement with a prospective tenant in sight.

It is understood that UBIG is now considering whether to continue the hunt for office space occupiers.

Mark Jones, director of the office agency at property consultancy DTZ, which was appointed as the letting agent for the building, said: "We have come close to securing a tenant a couple of times but nothing has run its way through."

Although UBIG has been hampered by a 15 per cent fall in demand for new office space in Edinburgh last year, Mr Jones said the building itself makes it difficult to secure tenants. He said: "You have got to look at the history of these offices. They are very bespoke headquarter offices and not your traditional working space.

"There would also be a certain amount of work needed to get them into an operational condition."

Mr Jones said UBIG appointed a management company to take the hotel vision forward last month, by finalising a planning application and searching for occupiers.

There is already "serious" interest from hotel users, he added.

With up to 86,500 square feet of space available, it is thought UBIG could have made up to 2m a year in rent if the building had been fully occupied.

Stewart Taylor, a director of the business space consultancy at CB Richard Ellis, said: "Flexibility is fine in this market but not having the option of a longer lease may be a problem."

The struggle to let the building is the latest setback to hit Mr Romanov's development plans in Edinburgh.

Hearts, owned by UBIG, submitted a planning application for the 51 million redevelopment of Tynecastle last January.

But city planners have asked for more details relating to design and "other matters" – information which the council said today it had yet to receive.

Ukio Bankas, the bank which sponsors Hearts and of which Mr Romanov is the largest shareholder, has rented an office at 10 Castle Street with the intention of turning it into its first branch outside Lithuania. The bank was due to open in March 2007 but there are no signs of it opening yet.

A spokeswoman for Ukio Bankas said: "Ukio Bankas is currently fine-tuning its plans. Its position and strategic goal remains to open its first UK branch in Edinburgh."