Wilderness of frozen assets: As the receivers begin untangling Rosehaugh's tentacles, Gail Counsell traces the path to destruction

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The Independent Online
GODFREY BRADMAN was in meetings on the day the receivers started to dismember Rosehaugh. He was forced to abandon the ailing property company he had run for more than a decade to its bankers last February, but he is already too busy with other things to return calls about his former obsession.

It is characteristic of the management style that brought down a group which was once one of the most highly rated stocks on the London market.

'Everyone at Rosehaugh seemed to spend their whole time in meetings,' says one analyst. 'No one ever had the time to go out and find out what was going on in the real world. They drowned themselves in paperwork and administration.'

While the men at the top talked, the company ran aground at the bottom.

When the receivers from Peat Marwick turned up at Rosehaugh's headquarters in the Marylebone Lane in London last Tuesday, they found a company with more subsidiaries than employees. Rosehaugh's downfall lay in this labyrinthine construction, a spaghetti bowl of mostly poor investments.

Finding and realising those assets which remain will challenge the ingenuity of Tim Hayward, Roger Oldfield and John Alexander, the men picked for the task by the banks, which have been calling the shots at Rosehaugh for more than 18 months.

Few people think there is much left to begin to repay the pounds 350m that was lent to one of Britain's most famous property companies. The 160 or so subsidiaries and associates which made up the Rosehaugh group formed a tangled web of often ill-thought-out and inadequately controlled projects.

'Godfrey would go around finding entrepreneurs and setting them up in business,' says another developer. 'He'd set up a subsidiary, give them a 25 per cent or so stake and leave them to it. So by the end there were all these chaps in smart suits driving around the countryside in Porsches, able to draw down funds. When things started to go wrong, Godfrey just couldn't get control back.'

Since the banks effectively replaced Bradman with two accountants, Leonard Kingshott and Nigel Turnbull, in March 1991, Rosehaugh has been desperately trying to dispose of assets. It is unclear what is left. Some estimates say there is pounds 100m of land and buildings still scattered through the group, though putting a value Rosehaugh's shares of joint ventures and associates, over which the receivers have no direct control, will be very difficult.

'The first thing we did on Tuesday was to ask the directors to prepare a list of what properties were left in which companies,' Oldfield said. 'Once we get that we can make a start.'

But with many of the loans secured against specific assets, shareholders, some of whom bought stock when the price was almost pounds 12, look unlikely to get any money back.

Mystery surrounds why the banks chose this moment to pull the plug. Putting in receivers admittedly saves money: 18 of the 48 staff have already been sacked, and Rosehaugh's expensive headquarters in the Marylebone Road looks certain to go at the end of this month, saving pounds 1m a year in rent.

Nevertheless, the timing looks odd. Rosehaugh had a standstill agreement with the banks which was due to run until January 1994. Cynical shareholders now argue that the banks consented to the deal to ensure they had time to rearrange the financing and control of Rosehaugh Stanhope Developments to their best advantage.

RSD was Rosehaugh's joint venture with Stuart Lipton's Stanhope Properties, and was responsible for the acclaimed Broadgate development in London. As such it was Rosehaugh's main quality asset, and its share in it remains in the long term the receivers best hope of repaying creditors - or even shareholders. The banks, led by Barclays, (also lead banker to Stanhope, which is in difficulties) needed time to put in place a new RSD management and refinance RSD's pounds 1.25bn debt.

But there were also other problems. With the value of many of Rosehaugh's remaining assets impossible to ascertain, the auditors had not yet signed the accounts, due by the end of this year. Receivership means they will not now have to be signed. All that is required is that the receivers produce an outline of the remaining assets some time within the next three months.

Rosehaugh had been in financial difficulties since the begining of 1990, when Bradman had to announce a one-for-one deep-discounted pounds 125m rights issue. Although RSD was a much bigger debtor than its parent, the biggest problems were in Rosehaugh, where debts had zoomed from pounds 262m to pounds 410m in months.

Bradman failed to capitalise on Broadgate, and tried to stave off insolvency by shedding other assets. These proved of too poor a quality to raise enough to keep the company going. By early this year it was clear Rosehaugh was unlikely to survive.

It had taken just over a decade for Bradman's star as Britain's foremost developer to rise and fall.

He is a self-made man, born the son of a poor Jewish shopkeeper in Willesden. He left secondary modern school at 15 and qualified as an accountant after taking his examinations by correspondence.

With a quick mind, he was drawn to tax work, once saving George Wimpey & Co more than pounds 18m through clever exploitation of a tax loophole, closed by legislation the following year.

In 1978 he switched into property, buying Rosehaugh, a former tea company, as his quoted shell, and began a series of deals that formed the foundation of his wealth.

The first was typical of the mix of daring and financial engineering which characterised his successes and his failures. To part-fund the purchase of an office block on Tottenham Court Road, Bradman needed to raise pounds 1m.

His solution was simple, if risky. A landlord in north London was offering a pounds 1m reverse premium (an up-front sweetener) to anyone who would rent his building. Bradman took it.

Then he succeeded in selling the Tottenham Court Road block for pounds 13m, making a profit of pounds 2.5m, and letting the north London building shortly after.

It was audacious and lucky. It also gave rise to one of Bradman's legendary gestures; visited by letting agents to discuss the brochure to advertise the building, he spent his time peeling pounds 10 notes from a bundle and throwing them into a wastepaper basket. The idea was to bring home to them that while they debated the colour of the brochure, the unlet building was eating up interest charges.

The deal which moved Rosehaugh into the big time came shortly afterwards. In 1981 Bradman spotted that Woolworth UK's assets - primarily property - were worth four times its share price, and approached Charterhouse Bank with the aim of putting together a bid for its UK operation. However Woolworth's US operation did not want to sell.

The following year Charterhouse persuaded Woolworth to change its mind. Although Bradman was not active in the deal, as the initiator he was given share options in one of the most successful buy-outs of the Eighties. Rosehaugh made more than pounds 20m as a result.

There followed a string of developments with Stuart Lipton, which established the Rosehaugh-Stanhope partnership. The first was at Finsbury Avenue, a joint development in the City, and it characterised the relationship between Bradman and his alterego, Lipton.

Bradman was the accounting whiz, dreaming up a novel form of financing for Finsbury in which he persuaded John Ritblat's British Land and Stanley Kalms's Dixons to invest. Lipton was the creative architect, who built offices of the highest quality.

Finsbury Avenue became the much more ambitious Broadgate. But by then Bradman had already started on the expansion course which was to bring the company down.

A heritage division, a retailing division, a residential division, companies specialising in self-build housing and convention centres, investments and landbanks followed with frightening speed.

Some of the figures who had been integral to the company's early success left, starting with David Blackburn, a solicitor with an eye for detail who had been responsible for much of the tortuous detail of the Broadgate development - his letter of instruction to the solicitors was more than 70 pages long. He left in the mid-Eighties.

'In his early days Godfrey had around him people who pulled his leg and kept his attention fixed on what mattered,' says one insider. 'Gradually they left, though, and were replaced by bureaucrats.'

Bradman was also increasingly distracted by high-profile social causes. From isolated examples, such as his 1974 offer to raise pounds 2.25m from businessmen to pay the striking miners to go back to work, he became involved in a variety of causes as the Eighties wore on, crusading for the anti-abortion movement, promoting campaigns on Aids, lead-free air and freedom of information, organising self-build housing schemes and masterminding the fight for compensation for Opren victims. He was continually finding something new to absorb his energies.

But property is an industry which is built on individual judgement, and Bradman was increasingly out of touch with Rosehaugh's roots.

'He virtually franchised the name Rosehaugh,' observes one insider. 'But not only did he set up these small companies, he bankrolled them. And you can lose an awful lot of money on a small deal.'

(Photographs omitted)