The Tchenguiz Brothers’ Empire Is Still Bigger Than You Think

Vincent Tchenguiz is selling his £600M portfolio of 10 U.K. Hilton hotels, the latest move in a real estate story that the words “roller coaster” do not even begin to cover.

At the height of the market in 2007, the gross value of Robert and Vincent Tchenguiz’s assets was conservatively estimated at more than £7B.

The Iraqi-born brothers, who grew up in Iran before moving to London, were high-profile and flamboyant, dating models and gunning speedboats around the waters of Cannes at the annual property conference Mipim.

But the financial crisis laid low their debt-heavy empire. In October 2008 Robert lost £800M in one day alone when one of his lenders, Kaupthing, sold big stakes in supermarket Sainsbury's and pub company Mitchells & Butlers to repay debts.

“It took about an hour to sink in. You are angry, but that's life. But what are you going to do, throw yourself out of a window?” he later said phlegmatically.

Then in March 2011, as they were about to head to Mipim, the pair were arrested as part of an investigation by the Serious Fraud Office into Kaupthing’s collapse. As a result, one of Vincent’s companies managing his huge ground rent portfolio, Peverel, was placed into administration, owing £126M.

The pair were exonerated, paid £6M in damages by the SFO, and are suing Kaupthing and its liquidator, Grant Thornton, for more than £2B in a complex piece of ongoing litigation.

After these incredible ups and downs, and with Vincent about to sell a £600M chunk of his business, what is left of the brothers' once-extensive holdings?

Robert Tchenguiz — Mega Madrid Madness And A West End Trophy

The financial crisis and the negative fallout from his arrest arguably hit Robert’s business harder than Vincent’s.

As well as the stakes in M&B and Sainsbury, he handed over £137M in profits from the sale of Somerfield to Kaupthing. Banks or liquidators sold many of his other businesses and assets, such as the Welcome Break motorway services chain; the Menzies hotel chain; and the headquarters of BAE Systems in Farnborough.

But he maintains a large portfolio. Land Registry records show he still owns Leconfield House, the 69K SF Mayfair office building that his company, among others, occupies. Accounts for the special purpose vehicle that own it show it was worth £134M as of May last year, with around £37M of debt against it. It is the former headquarters of MI5.

There is also his house — the former home of the Royal College of Organists, next door to the Royal Albert Hall — which has been valued at £50M in some media reports, but is the kind of unique property that it is hard to put a value on.

He is engaged in a battle with fellow highly leveraged entrepreneur Glenn Maud to try to make a big profit on a €200M slice of debt secured against the Madrid HQ of Spanish bank Santander, bought by Maud and Irish investor Derek Quinlan for €1.8B in 2007.

Robert teamed up with Abu Dhabi fund Aabar to buy the junior debt on the property at a deep discount in 2011, and in a long-running legal battle has been seeking to enforce the loan to get the debt repaid at its par value, and if possible, take control of the entire asset, which is now valued at €2.7B. The case was delayed for a further eight months last week.

Vincent Tchenguiz — Tesco, Hilton And Ground Rents — But What Are They Really Worth?

Vincent avoided the catastrophic losses of his brother Robert by steering clear of the listed sector, where the value of shares can be a lot more volatile than that of real assets like property.

Vincent owns up to 250,000 ground rents, giving him a stake in around 1% of the U.K.’s housing stock. Peverel, which was seized, managed rather than owned them.

Tchenguiz tried to sell the entire portfolio for £3.5B in 2012 — he was on the verge of launching the sale the night before he was arrested in 2011. But ground rents are complicated to value, and some of his ground rent portfolios are still heavily indebted and in negative equity. A portfolio called Fairhold has almost £1B debt against it and a loan-to-value ratio of more than 150%, according to rating agency Moody’s. The debt was not repaid at maturity and the portfolio is mired in litigation.

No single buyer was found at the price he wanted. Instead, he sold some, including a portfolio worth £250M, to a fund backed by Hong Kong tycoon Li Ka-Shing in September 2014, and refinanced others.

Vincent still owns a portfolio of 12 Tesco stores and two distribution centres bought in 2005 for £366M and valued at £500M. They have 15 years remaining on the lease, and given the way property long-leased to blue-chip companies has increased in value in the past five years, the value is likely to have increased significantly.