Slump hits Heritor's upmarket property development arm

THE development arm of upmarket property firm Heritor's has fallen into administration after months of battling against the credit crunch and the downturn in the property market.

Heritor's Residential Property has mothballed its 20 development sites in Edinburgh and Glasgow after being taken into the hands of PriceWaterhouseCoopers. It is understood that the residential arm of the business, which lets out luxury serviced apartments, is continuing to trade.

The decision to place the company into administration was the last resort for a firm which has struggled to cope with the impact of Edinburgh's contracting housing market for several months.

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Heritor's Residential Property holds properties worth an estimated 150 million in a partnership with HBOS.

In October it admitted that it had had to change its development strategy and had put a stop to work at four of its sites, axing four of its 19 staff.

It also recently put three Georgian townhouses on Inverleith Row up for sale for 1.2m – just over half the 2.25m price tag it paid out only 11 months ago.

Bruce Cartwright, joint administrator at PriceWaterhouseCoopers, said he hoped to sell off part or all of the company's assets. He said: "I think it is well documented at the moment that it is a difficult market to complete and sell property.

"The company was experiencing some financial difficulties before we were called in. We are currently examining the accounts to decide on the best way of moving forward."

Cartwright added that the branch of Heritor's business which is currently in administration does not directly employ any staff as its building work is carried out by contractors.

He explained: "We have done some work to ensure the sites have been closed down safely. We will now evaluate all of the developments and decide whether it would be best to complete some of them before sale or dispose of them as they are. We will take action in the way to best benefit the creditors."

Heritor's, which states on its website that it has a worldwide property portfolio worth 250m, includes a site at Greenhill Gardens in Bruntsfield, Edinburgh.

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But while the property, originally two apartments, was bought for 1.72m last year, the remodelled property was advertised at offers over 1.6m.

It was also understood to be behind the conversion of the former Edinburgh Academy boarding houses into luxury flats.

Ron Hewitt, chief executive of Edinburgh Chambers of Commerce, said: "This major group has chosen to shut down the loss making side of the business and focus on that which still makes profit.

"These are the kinds of difficult decisions business has to make in this climate."

HBOS, which is understood to be Heritor's bankers and also holds a stake in the business, refused to comment.