Property blow as bank pulls plug on Kenmore

SCOTLAND'S property sector was dealt a blow last night when Kenmore Property Group, a high-profile Edinburgh firm with £1 billion worth of holdings in the UK and Europe, was put into administration.

The company's principle banker, Lloyds Banking Group, appointed Grant Thornton as administrator to 22 companies in the group, including the Kenmore Property Group, Kenmore Investments and Kenmore Private Equity.

A subsidiary, the Kenmore European Industrial Fund, is not in administration and confirmed "ownership of the fund's assets is unaffected" in a note to the London Stock Exchange. Shares closed down 8.8 per cent to 31p.

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It is understood the decision to put the company into administration was taken after months of negotiations.

The decision by Lloyds is thought to be the first of several others likely to follow after the bank agreed to deal with the Treasury to raise 13.5bn from investors. It is thought this has allowed Lloyds to start selling off assets acquired under its takeover of HBOS, which also operated a joint venture company with Kenmore.

David Hunter, managing director of Hunter Advisers and former head of Arlington Property Investors, speculated this might be the start of banks putting their loan books on the market: "It is very sad to see the bank pull the rug at this time.

"Conceivably, this will end in a fire sale. People are waiting for the banks to panic and for the property to fall out of trees. Who knows whether this is the first sign of that."

Derek Gordon, director of Eric Young & Co, said the timing of the receivership was likely to be an attempt by the bank to capitalise on recent upturns in the property markets. Meanwhile, Dan Macdonald, chief executive of Macdonald Estates Group, warned: "It is not good news for the Scottish property at all. People have been asking me who is next?"

Kenmore chairman John Kennedy declined to comment.