Chelsfield and P&O unload US portfolio: As one developer counts the cost of an untimely London venture, another gambles on the success of an innovative deal in America

CHELSFIELD, Elliott Bernerd's recently floated property developer, and P&O have sold a portfolio of 6,500 apartments in the south-eastern United States for dollars 400m (pounds 276m), of which dollars 280m is payable in cash, writes Tom Stevenson.

The disposal replaces a planned flotation of the properties as a real estate investment trust, shelved last month because of the poor yields available on new offers in the US real estate investment trust market.

The deal confirms Mr Bernerd's reputation for innovative financing arrangements because the portfolio is being acquired by Security Capital Atlantic, a newly formed property company which itself plans to float as a real estate investment trust in the near future.

Chelsfield and P&O will initially own 25 per cent of Security and have negotiated a two-year put option on its shares in case they prefer to cash in their stake.

The properties were acquired in 1990 when Mr Bernerd and his former colleague, Lord Sterling, the chairman of P&O, teamed up to bid pounds 495m for the then-quoted Laing Properties.

Mr Bernerd said yesterday that William Sanders, Security's chairman, headed one of the most highly regarded property management teams in the US.

In the UK it is understood that a proposed pre-let or forward- funded West End development of 115,000 square feet of offices by Chelsfield will now be started as a speculative venture with no guarantee of a tenant.

Mr Bernerd said the decision to press on with the development of the offices, near Pall Mall, reflected the increased buoyancy of the West End property market where shortages of space are beginning to push rents higher after a four-year slump.

Chelsfield is also adding 100,000 square feet to the Merry Hill shopping centre in the West Midlands. The company took a 30 per cent stake in the shopping centre last year.

Lord Sterling said at P&O's annual meeting yesterday that first-quarter profits had shown a big improvement on last year. He said P&O had emerged from the recession stronger than it had ever been.

The delay to the opening of the Channel tunnel would benefit the company this year, he added.