Banks face losses of £20m on loans to Manchester property firm

A PORTFOLIO of more than 520 residential properties formerly owned by Prestwich-based entrepreneur Aryeh Ehrentreu will shortly begin to be broken up and sold off.

The properties were previously owned by Ehrentreu’s property investment company Grindale, which was placed into administration in March with debts of £67m owed to ten different banks and building societies.

Joint administrator Toby Underwood, an insolvency partner at PwC in Manchester, told TheBusinessDesk.com that it is “in the process is securing the disposal of properties within the company through an auction process”.

He added that the auctions would take place via a “staged process”, with the first few properties due to hit auctions within the next few months.

Grindale was started by Mr Ehrentreu in 1997 and by the end of 2008 the value of its portfolio of 525 properties – most of which were residential properties based in the Greater Manchester area – had reached £90m.

However, a recently-filed administrators’ report explains that Grindale “began experiencing cashflow difficulties when it became apparent that the rental income being generated from the portfolio was insufficient to meet both interest and capital repayments and maintain the quality of the portfolio to maximise occupancy”.

As the value of the portfolio began to drop the firm began talks with its lenders regarding capital repayment holidays, but when it failed to secure the agreement of all the lenders Bank of Ireland applied for an administration order to be issued against the firm.

This caused another lender, Clydesdale Bank (which had a qualified floating charge against the company’s assets) to appoint administrators.

Since being placed into administration, the properties are continuing to be managed on the administrators’ behalf by Broadhurst Estates – a property management company also owned by Mr Ehrentreu which is not in administration and continues to trade normally.

Some 202 of the 525 properties within the Grindale portfolio were mortgaged by Dunfermline Building Society and a statement of affairs prepared by Mr Ehrentreu shows that it is facing a shortfall of £12m on the £30m it is owed.

Bank of Ireland is looking at a shortfall of £3.1m on loans worth more than £12m secured on 124 properties and National Westminster is facing a loss of  £1.5m on mortgages worth £10.9m secured on 110 properties.

In total, the club of lenders are facing combined losses of over £20m on the Grindale portfolio.

Mr Ehretnreu was also previously a major shareholder of Warrington-based In-House Group plc, a property firm which delisted from the Alternative Investment Market shortly before its collapse in August last year.

He owned just over 22% in the company through another of his ventures, Graf Commercial Services.