The assets of Capital & Regional, the beleaguered quoted property firm, have been offered to a select group of property tycoons as the company fights a rearguard action to stabilise its fragile balance sheet.
Capital & Regional, which has seen its share price collapse from 1,709p to 467p in one year, is understood to have touted large chunks of its assets including shopping centres and leisure attractions worth £5bn. Although the company refused to comment on what it calls market rumours, property insiders confirm they have been approached.
Capital & Regional has an unusual structure in that its assets are held in three investment funds backed by a range of institutions. Each fund has private-equity-style performance fees: investors pay Capital & Regional if targets are met. But since the downturn has sparked a steep fall in valuations, Capital & Regional is facing the prospect of paying investors for undershooting targets - a penalty estimated to equate to 30p per share. Its retail-park fund has seen a 19.8 per cent drop in valuation, which the company revealed two weeks ago. The retail downturn could further reduce this fund's valuation.
However, its leisure arm, headed by French businessman PY Gerbeau - the man parachuted in to turn around the Millennium Dome - has proved resilient to the consumer downturn. It includes a collection of indoor snow slopes and has achieved a small valuation uplift in a falling market.
As the property market enters its toughest period for 15 years, cash buyers are gearing up to take advantage of any distressed sales. Helical Bar, the quoted firm led by Mike Slade, has a £500m war chest, while it is understood that two tycoons - Nick Leslau and Sir Tom Hunter, Scotland's richest man - are about to buy a £200m portfolio.
Gerald Ronson is also cash-rich, having sold a large chunk of his empire 18 months ago in anticipation of a sharp property downturn.
With the property industry desperate for an interest rate cut to rekindle confidence, some developers are facing the prospect of paying steep business rates on empty buildings as tenant demand dries up.
The situation could trigger some emergency sales and the problem is thought to be particularly acute in the Square Mile, where financial institutions are reining in expansion plans.
Paul Kemsley, a close associate of Newcastle FC owner and retail billionaire Mike Ashley and veteran currency trader Joe Lewis, has wound up his share trading business Rock Properties and laid off staff. In December, Kemsley told the Financial Times: 'I want Rock to be a global trading company of equities, derivatives and real estate and I think we are well on track for that.' Kemsley is backed by the Bank of Scotland, Lewis and Tottenham Hotspur chairman Daniel Levy. Plans to add 50 traders to his payroll seem to have been ditched. Kemsley was in New York this weekend, where he is looking to do more property deals, and was unavailable for comment.