As David Ross’s public company profile shrinks, the focus will shift to the privately held property interests of the Carphone Warehouse entrepreneur – in particular his Kandahar group of companies – where the slumping real estate market will hit him hard.
Ross borrowed heavily from Bank of Scotland in the boom years of the property market, building up an extensive portfolio of retail and leisure properties let to high street names.
But a fall in property prices of almost 30% since the peak of the market in the summer of 2007 will have wiped out much, if not all, of the equity in his main investment vehicle – a £500m joint venture, Kandahar Real Estate, set up with Morgan Stanley at the end of 2006.
In August 2006, Kandahar Group increased its portfolio by acquiring 22 leisure and retail properties for £42.7m, with the support of Bank of Scotland Corporate.
In the summer of 2007, at the peak of the property boom, the joint venture was refinanced with about £460m of new debt from HBOS.
There is likely to be concern at HBOS, however, which is looking at its commercial property ventures closely given its extensive involvement in the market. HBOS has withdrawn from co-investing ventures with companies such as Guestinvest and property fund manager Aaim.