Robert Tchenguiz takes a bath as his property empire collapses!

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Robert Tchenguiz suffers heavy lossesBritish billionaire Robert Tchenguiz may not be a name which many people recognise but he is a major player in the UK equity markets and property sector.

So who is Robert Tchenguiz?

While Robert Tchenguiz was born in Tehran on 9th September 1960, his family is originally from Iraq but were forced to flee to Iran for safety in 1948.  The family was originally known by the name of Kedorie but this was changed to Tchenguiz in order to give them a new start when they moved to the UK in 1979.

Tchenguiz has had a number of high profile investment wins over the last few years and became known as one of the faces in the City, often directly involved in an array of takeovers and corporate deals, using his skills in property management to its full capacity.  He has been involved in a number of sale and lease back agreements which have seen many companies raise substantial funds.

While Robert Tchenguiz is the name that is more recognisable in the City he does work very closely with his brother Vincent who seemingly prefers to stay out of the limelight.  Just last year his net worth was valued at close to £900 million but many believe that this is well short of the mark.

He became involved in a number of high profile takeovers with an expertise in utilising and squeezing the last drop out of a company’s property portfolio.  However it now appears that he was very much tied in with Icelandic bank Kaupthing which as most people will be aware, was taken under government control only a few days ago.

So where does this leave Robert Tchenguiz?

Unfortunately for the UK billionaire he is rumoured to be on the verge of crystallising nearly £1 billion of losses as a number of his large equity holdings were taken by his Icelandic bank after he failed to meet a number of margin calls on earlier loans.  As a consequence we have seen the market absorb large stakes in J Sainsbury’s and M & B which have been liquidated to cover some of the outstanding debts of Robert Tchenguiz.

After losing upwards of £700 million you would assume that this has completely blown Robert Tchenguiz investment portfolio apart.  However, friends say that he has made a killing over the last few years with investments in an array of companies which were in possession of quality asset backing.  This is the fore of Robert Tchenguiz and one in which he has shown great skill over the years.

Where did it all go wrong?

Robert Tchenguiz is no fool when it comes to property and while he is hitting the headlines today with loses estimated in the region of £1 billion this may not be a true representation of his portfolio.  However, with regards to the losses in Sainsbury’s and M&B is would appear that the only mistake he made was getting heavily involved in the property market just a few years before the credit crunch and arranging finance through the Icelandic financial market.

It must be noted that Robert Tchenguiz is not the only investors to be hammered after the collapse of the Icelandic system as Iceland has very much been fighting above its weight for a number of years.  The country is literally stuck in the middle of nowhere, has a population of just 300,000 but has some how become a main player in the world of European takeovers and mergers.

The willingness of many Icelandic banks to become involved in larger deals led to them over extending themselves at a time when market liquidity was starting to dry up and property assets and equity markets were falling in value all around the world.  This seems to have been the crux of the matter, the substantial borrowings from the money markets and growing client default numbers.

So is there any value left in the sale and lease back market?

While many people are very sceptical about the sale and lease back market, viewing it as selling the family silver for short term cash flow, it is a market which has assisted many companies and investors such as Robert Tchenguiz for some time.  There may be no interest in sale and lease backs at the moment but there is no doubt that when property asset values stabilise there will be a number of investors looking to become involved, but highly unlikely to be funded by an Icelandic bank!

If you take a quick look back at the history of the sale and lease back market it soon becomes apparent that this is a massive market and one which has allowed many companies to make use of their static assets.  While sale and lease back arrangements may not be to the liking of everyone they can and do give balance sheets a short term boost as well as offering the chance to invest funds raised into the business and or other ventures.

Conclusion

Robert Tchenguiz is a man with a great knowledge of the UK property market and a man whom we will surely see again when the markets settle down and return to some form of normality.  However, he seems to have struggled because of a number of unfortunate circumstances which included the fall in equity markets, the proposed takeover of Sainsbury’s which finally floundered and the fact the he was being financed by an Icelandic bank.

He was due to make a substantial return on his Sainsbury’s investment if the original takeover had gone through although even after the bid failed there was speculation that he was looking at ways to maximise the property portfolio of the group.  If either of these scenarios had occurred there is every chance that he would not have been forced to write off loses approaching £1 billion.

Life is tough in the world of finance and while many investors use leverage and debt to increase their potential gains, it can go horribly wrong if markets turn.  Nobody could have expected us to be in the position we are in today, least of all Robert Tchenguiz who has seen his personal wealth plummet over the last few days.

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