Crash landing: the fall of Robert Tchenguiz

His buccaneering business strategy has made him one of Britain's richest men. But the last few months have witnessed a dramatic decline in the value of his investments. Cahal Milmo reports
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The Independent Online

Some 25 years ago, Robert Tchenguiz bought a one-bedroom flat near London's Marble Arch for £47,000. When the unknown Iraqi-born émigré sold it less than six months later, the price had risen to £73,000 and the man who would become one of Britain's wealthiest property moguls had begun the journey towards his status as a playboy plutocrat.

For the last decade the name Tchenguiz has become a by-word in the City for eye-catching acquisitions (both successful and thwarted) of a succession of household brands and their adjoining real estate, including Odeon cinemas, the Somerfield supermarket chain, the Selfridges department stores and the All Bar One pub empire.

"Robbie", as he is widely known, lives in a £30m five-storey house next to the Royal Albert Hall and spent £100,000 on his Louis XIV-themed 40th birthday party, complete with fire eaters and acrobats.

It is no accident that his surname (pronounced chen-geez) is the Iranian version of Genghis, another figure famed for his acquisitiveness and steely determination. Despite being born in Iraq to a longstanding family of Jewish merchants, he spent his childhood in Tehran after his parents fled to Iran in 1948.

Precise estimates of Tchenguiz's fortune are difficult to come by, but his main investment vehicle, R20, controls assets from Polish petrol stations to the Kyndal whisky distillery in Scotland worth about £10bn and, along with his brother, Vincent, has a private worth thought exceed £900m.

Or at least that was the case. The recent turmoil in the global credit and stock markets has made this most dynamic of London's millionaires one of the biggest losers of the current downturn. And following years of playing the property world and investment funds with an aplomb that earned him admiration and envy in equal measure, a series of what until a few weeks ago had looked like lucrative deals has gone spectacularly sour. After spending and borrowing heavily to accumulate a 10 per cent stake in the Sainsbury's supermarket chain at 525p a share ahead of an anticipated £10bn buy-out by a Qatari investment fund, the deal failed to materialise. Sainsbury's shares have since lost a third of their value, costing Tchenguiz an estimated £325m. The cost of financing the debt on the Sainsbury's stake is estimated at £1m a week.

A similar story has afflicted SCi Entertainment, the software company behind the hugely successful Tomb Raider computer games, in which Tchenguiz took a 15 per cent stake ahead of an expected takeover. Again, the bid never emerged and SCi's shares have plummeted by more than 80 per cent since last November. Together with turmoil at the Mitchells & Butlers (M&B), the pub group that owns more than 2,000 outlets and yesterday announced a write-down of £274m on a disastrous interest-rate gamble, it is estimated that the paper losses to the Tchenguiz business empire are running at £560m – and could rise further.

For an entrepreneur who has become used to plotting an ever-rising curve on his personal wealth graph, the sharp correction will be a shock. One senior investment analyst said: "Robbie has fought his way up from small beginnings so he knows how rough it can be out there. For a couple of decades he's led a charmed existence. With just one or two exceptions, his investment model has worked. But now he's lost a packet and it will be beginning to hurt. Nobody says goodbye to £500m on paper without saying: 'Ouch'."

If that is the case, Tchenguiz, now 47, is not showing it in public. When asked whether he was going to be forced to sell his yacht moored in Monaco, he said: "I love my boat. I have no intention of selling it. I've lost a lot of money but I'm not in trouble. It's just taking the rough with the smooth."

In an apparent act of bravado to underline the fact he is still very much in business, Tchenguiz yesterday increased his stake in M&B, spending £46m to take his share of the company to 22 per cent ahead of what could be a consolidation of its assets with a competitor. The company faces a stormy annual meeting tomorrow, as bosses try to explain the loss of £274m on a hedging bet taken as part of a £4.5bn property deal with Tchenguiz that has been shelved as a result of the credit crunch.

The storm of speculation surrounding his companies is proving wearisome. Speaking yesterday, he said: "We have always maintained that [M&B] is very undervalued. This speculation is all rather unnecessary and causing instability across these companies. I'm not selling my yacht and I don't want to become [a] figure of interest for the tabloids."

This was not always the case. The financier and his brother were fixtures on the higher end of London's party circuit for much of the 1980s and 1990s, collecting a circle of high-profile friends that includes the Formula 1 billionaire Bernie Ecclestone and Stelios Haji-Ioannou, the founder of easyJet.

Such was Tchenguiz's ubiquity among the A-list party set that there is a story – described as apocryphal by his entourage – that he was responsible for introducing Diana, Princess of Wales to Dodi Fayed while staying on Sir Richard Branson's Caribbean hideaway, Necker Island.

What is undeniable, however, is that he enjoyed a high profile during his bachelor days, dating the American model Caprice Bourret, who leapt to prominence in the adverts for Wonderbra. The couple were mugged on London's Bond Street in 1997 while leaving a fashion show, and Tchenguiz was hit over the head with a bottle before the three hooded assailants made off with Caprice's phone and handbag. Unsurprisingly, the incident made international headlines, and the reputation of the Tchenguiz brothers as being unstinting in their pursuit of the high life was cemented three and a half years ago when Vincent won £1m gambling on the outcome of the Euro2004 football tournament.

When Tchenguiz held his 40th birthday in the Royal Organist's Hall, his Kensington mansion, it was converted for his 500 guests into a miniature replica of Louis XIV's Versailles, complete with staff in liveried costumes and wigs, a nine-piece ensemble and acrobats from the Cirque Du Soleil.

More recently, however, he has stepped back from the limelight. In 2005 he married his American girlfriend, Heather Bird, who runs a chain of hi-tech anti-ageing clinics that cater for the burgeoning demand for injectable vitamins, and the couple have a three-year-old daughter, Violet, named after Robert's mother. The name has also been given to one of the brothers' lead investment vehicles.

As "Robbie", whose in the past has listed scuba diving and country sports among his interests, put it recently: "I am really boring now. I live for my work. I spend 14 hours a day in the office and then I go to sleep."

While the name Tchenguiz ranks alongside Fayed, Hinduja and Mittal in the pantheon of entrepreneurs from across the globe nurtured in Britain, the Tchenguiz dynasty has not been in existence for long. The name was adopted by Robbie's father, Victor Kedourie, when he fled the persecution of the Jews in Iraq in the late 1940s.

Victor made his money in Tehran from a variety of activities, ranging from landlord to head of the royal mint for the Shah. The income from his relationship with Iran's last monarch allowed Victor to send both his sons to international schools and US universities before the family fled to London in 1979 after the revolution in Tehran.

When Robert arrived in London in the early 1980s armed with a business law degree from Pepperdine University in Los Angeles and a postgraduate diploma from the New York Institute, he went into partnership with his brother. Both men insist they are self-made, although Victor is reported to have supported their initial bout of speculation on London's property market – buying and letting holiday flats for tourists – with a £1m bank guarantee.

By 2000, the Tchenguiz brothers had emerged as major players at the higher end of London's commercial property boom. Their holding company, Rotch, had a portfolio of more than 600 buildings worth £4.5bn, including the main offices in the capital of Royal Bank of Scotland and West LB.

In effect acting as glorified "buy-to-let" landlords, the two men hit upon a winning formula – leveraging their deals with large amounts of debt and calculating that the income from rent on the office or shop space would outstrip the cost of servicing the loans. Then, after an appropriate period, the property could be sold for a healthy profit due to London's sky-rocketing land prices.

The preponderance of borrowed capital in many of the brothers' dealings makes calculating the size of their fortune difficult, leading some analysts to suggest that they face trying times as property prices and rental rates head into reverse. But the effectiveness of this careful balancing act, executed with the help of a meagre staff of 40 operating from an office in Mayfair, was shown when the brothers bought Shell-Mex House, the art deco former HQ of the oil giant opposite the Palace of Westminster, for £328m in 2002. They sold it last summer for £490m, sharing the £160m profit with two fellow investors, the metals trading brothers David and Simon Reuben.

A similar model has been applied to a number of ventures, including the acquisition of Odeon cinemas, a substantial stake in Whyte & Mackay and a mortgages company that was sold to Barclays for £270m. The brothers finally went their separate ways in 2003, with Robbie setting up R20 to oversee his interests, from a £280m portfolio of BT buildings to the Kyndal distillery. Ironically, its owner has given up drinking.

Speaking last year about the prospects for the investments in which it was active, a senior R20 manager said: "It's tough to go wrong in this market." They are words for which his boss will not be thanking him.