Ritblat homes in on Stanhope

John Ritblat came a step closer to his goal of acquiring the City's most prestigious office complex yesterday as he announced a recommended bid for Stanhope, the struggling property developer whose banking facilities ran out a month ago.

Since Mr Ritblat's British Land took a 29 per cent stake in Stanhope last February, he has made no secret of his desire to add the £1bn Broadgate scheme, 50 per cent owned by Stanhope, to the company's portfolio.

To complete his ambition, however, he must now persuade Roger Oldfield of KPMG, receiver to Stanhope's development partner Rosehaugh, to sell the other half of Broadgate Properties. KPMG has controlled the stake since 1992 when Godfrey Bradman's Rosehaugh collapsed with debts of £350m, and has made it clear that it will not let its charge go on the cheap.

Yesterday Mr Oldfield said he was in no hurry to sell Rosehaugh's shares in Broadgate. He also indicated that circumstances had changed since he recommended acceptance of between £110m and £120m in a rival offer from PosTel.

British Land's bid offers Stanhope's shareholders 3p a share, valuing the 71 per cent of the company not already owned by BL at just £3.5m. The cash offer compares with the 8p at which the stock was suspended just before Christmas.

Floated in 1987, just before the stock market crash, the shares reached a high in June 1988 of 304p. A share alternative to the cash offer values each Stanhope share at 2.7p.

Stuart Lipton, Stanhope's founder and chairman, and other directors have already pledged their shares to British Land, representing 36.4 per cent of the equity. That means that BL now controls 66.3 per cent of Stanhope.

A consortium of 16 banks finally overcame their differences to accept roughly 82.5p in the pound for the £148m they had lent Stanhope. British Land has said it will fund the £122m payment with a share issue.

Stanhope's banking facility expired on 19 December, since when the company has been allowed to continue trading only on the sufferance of the international consortium of lenders.

Since Christmas they have been weighing up the relative merits of rescue proposals, which as well as British Land's offer included a rights issue plan from PosTel and a cash injection brokered by Mr Lipton.

Following KPMG's comments, adding the Rosehaugh half of Broadgate Properties is expected to cost British Land at least a further £120m. Broadgate is valued at about £1bn and has over £700m of non-recourse debt secured on its buildings.

Mr Lipton is expected to stay with British Land for a couple of months to ease the transition. One of the most feted property men of the 1980s, he is widely tipped to make a rapid return to property development.

Yesterday he would only say that he planned to sit back and think. He wanted to spend more time with his outside interests at the Tate Gallery and Royal Opera House.

The deal closes the final chapter on a story that has come to characterise the boom and bust of Britain in the late 1980s. It also marks a humbling hiatus in an architecturally praised but financially flawed career.

Stuart Lipton always thought in grandiose terms, planning whole streets and areas, not just buildings. Broadgate, thought by many to be Britain's best post-war development, epitomised his vision and style.

Broadgate, a massive office complex complete with ice-rink, transformed a marginal site in a previously unfashionable area of London around Liverpool Street station. It in effect shifted the City's centre of gravity Previously Mr Lipton had transformed a400-acre rubbish tip near Heathrow airport, turning it into the highly acclaimed Stockley Park business park.

But as he bows out of Stanhope, Mr Lipton admits that he paid too much attention to the quality of his buildings and not enough to the financial side of the business.

It has been said that he fell in love with the architects, not with the bankers, and held on to Broadgate when it would have been more astute to sell out to foreign investors, who at the peak of the market in 1990 were keen to buy into the scheme.

Stanhope's decline is in marked contrast to British Land's success in riding the roller-coaster property cycles of the last 10 years. In the run-up to the bull-market of the late 1980s BL concentrated on buying portfolios from institutional investors andthen benefited as values soared.

During the heady days, the temptations of property development were firmly resisted, however, and properties were sold into a rising market.

As a result British Land, unlike Stanhope and most others, entered the recession with relatively low gearing and the firepower to start buying once opportunities emerged.

Outlook, page 32