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The collapse of the Kenmore Property Group, despite a 1 billion property portfolio, could hit Lloyds bank very hard with news that the bank has a 700 million exposure to the operation. The company is believed to have placed 21 subsidiaries into administration and two others into receivership despite the fact it has a substantial property portfolio. However, those close to the company expect Lloyds bank to provide more short-term capital to keep the company going and increase the chances of a potential breakup of the group, which would at least see Lloyds bank receive some of the money owed to it.

While the situation is still shrouded in some mystery, there are concerns that this could just be the tip of the iceberg as more and more property companies struggle with cash flow and are unable to realise their assets at “fair prices”. Despite signs that the property markets, both corporate and housing, are recovering, many corporate property companies have been hit by reduced rents as well as a number of tenants going out of business. With UK banks unwilling or unable to inject significant capital into the sector in the short to medium term we may be approaching crunch time for the UK corporate property sector, which could place pressure on short-term property prices.

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