Slough loses pounds 40m on Bredero stake: As one developer counts the cost of an untimely London venture, another gambles on the success of an innovative deal in America

SLOUGH Estates, the UK's largest industrial property company, has crystallised a loss of more than pounds 40m on an investment in the retail developer Bredero Properties.

Slough yesterday offered to buy the 51 per cent in Bredero it did not already own at 10p a share, valuing the company at just pounds 3.6m and drawing a line under an investment first made in 1986.

Derek Wilson, managing director, said the offer was being made to protect what remained of Slough's investment in Bredero, where a breach of banking covenants had forced the company to sell all of its most valuable assets.

Bredero, originally a developer of retail sites, was brought down by an ambitious mixed office and retail scheme at Hammersmith Broadway in west London. The project was completed just as demand for offices and rents collapsed, and led to a pounds 77m write-off in 1992. That in turned pushed the company into a pounds 106m loss and left Bredero with negative net assets of pounds 24m.

A refinancing last September in effect handed control of the scheme to Hypo Bank and, in return for the continuing support of its lenders, Bredero had to liquidate the rest of its income-producing portfolio.

In November 1993 the company sold its 28 per cent stake in Epsom's Ashley shopping centre to Standard Life and last month the Paisley Centre in Glasgow was sold to Legal & General for pounds 38.4m.

The disposals reduced debts at Bredero to less than pounds 10m but left the company with no income and only two development sites, one for a shopping centre in Glasgow, the Buchanan Centre, and Phase 2 of the Hammersmith scheme, Centre West.

Of the two, Slough said yesterday that it was likely to proceed with the Buchanan Centre this year. Planning permission has been achieved for 580,000 sq ft, of which John Lewis has said it plans to take 280,000 for a department store.

The London site is likely to remain undeveloped for the foreseeable future until demand for offices picks up. Only four fifths of the retail element of Phase One is currently let while Coca-Cola and Systems Union, the computer company, occupy about half of the offices.

In the year to December Bredero made a pre-tax loss of pounds 194,000. Net assets at the year-end were pounds 6.56m but after deducting the nominal value of preference shares, which are all held by Slough, ordinary shareholders were left with a deficit of 9p per share.

Derek Wilson, managing director of Slough, said the 10p-a-share offer reflected the deficit of shareholders' funds and the fact that dividends on the ordinary and preference shares would not be paid for the foreseeable future.

The shares, which reached 379p in 1989, closed 4.5p lower at 10.5p.

Great Portland Estates has let a development on New Cavendish Street in the West End of London for pounds 18 per square foot with a two-year rent-free incentive period to Allied Dunbar.