Eastern bloc cash flood buoys Regalian: Turkish and Russian high-rollers snap up last luxury flats to transform pounds 100m losses into profit

The last of 20 flats in Kensington Palace Gardens, the luxury London apartment building looking over the Princess of Wales' quarters, has been sold thanks to a wave of new money, partly from the former Eastern bloc.

The last word in luxury living, the Kensington development came close to bringing down David Goldstone, the Regalian chairman and Labour-voting property developer whose other high-profile projects include the MI6 headquarters at Vauxhall, London.

Desperate to raise cash from the building to pay down its towering debt, Regalian was bailed out last year by a flood of money from the Middle and Far East. But Mr Goldstone said this year's crop of high-rollers, prepared to pay an average pounds 3m for a London home, had been from an unexpected source - Turkey and Russia.

The development, built on two- thirds of an acre costing pounds 20m in 1987, failed to attract a single British buyer for its apartments, one of which was originally put on the market for pounds 16m but eventually sold for only pounds 6m.

The scheme incurred write-offs of more than pounds 50m and Mr Goldstone said it would not be repeated despite the rise in the central London residential property market which, he said, had pushed prices higher than in the 1988 boom.

The improvement in the capital's house market helped Regalian bounce back into the black after losses in the last two years of more than pounds 100m. Pre-tax profits of pounds 2.7m in the 12 months to March compared with a loss of pounds 83.5m last year. Selling 239 flats and houses during the year helped reduce debts from pounds 62m to pounds 5m.

Back from the brink of collapse, Regalian is gearing up for new developments. Plans include the conversion of Alembic House, an office block across the river from the Houses of Parliament, into 35 luxury flats. Lord Archer, the writer and politician, has an apartment in the building.

Planning permission has also been received for 1.3 million square feet of offices at Paddington, Regalian's important development site, accounting for about pounds 20m of pounds 45m net assets.

Regalian also announced that three executive directors are to take pay cuts of 15 per cent from August. Mr Goldstone said a bonus scheme would allow them to claw back the difference if unspecified performance targets were met. The shares, down from more than 300p in 1987 to 2p two years ago, closed unchanged at 31.5p. There was no dividend.

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