City & Business: Ritblat and Soros play first card for Broadgate

WHEN John Ritblat teamed up with George Soros last summer with the idea of exploiting opportunities in Britain's bombed-out commercial property market, few in the property world had any doubt that, ultimately, they had their eyes on the Broadgate complex in the City of London and its associated Ludgate development. Last week they played their first card in what is likely to prove a fascinating and protracted game of poker for the prize of Britain's most prestigious office development.

By purchasing a 30 per cent stake in Stanhope, which jointly owns the complex with Rosehaugh, now in receivership, Mr Ritblat has at least bought himself a place at the table, but the outcome is by no means assured. If he pulls it off, it will be easily the biggest deal of Ritblat's career transforming British Land into a pounds 3bn company. The Ritblat/Soros partnership would also have acquired one of the most important developments of the post-war period. First, however, Mr Ritblat has to deal with the determined opposition of Stuart Lipton, chairman of Stanhope.

Two more different property men would be hard to imagine. Mr Lipton is the visionary developer beloved of architects for making their dreams become reality; Mr Ritblat is the streetwise wheeler-dealer, capitalising on the mistakes of others, scouring the land for overlooked value like some kind of corporate totter. For Mr Lipton, there could scarcely be a worse outcome than for Mr Ritblat to end up with his prized development, and he is determined to thwart him.

Of the two approaches to the property market, there can be little doubt which is the more successful from a financial point of view. Mr Ritblat has survived two property slumps, emerging from the most recent healthy enough to contemplate taking on the Broadgate mantle.

Stanhope's head-in-the-clouds development policy, by contrast, has led it into deep water. The company is technically insolvent, living only by the good grace of its bankers. It's a wonder Stanhope has not already followed its partner in the Broadgate venture, Rosehaugh, into ignominious receivership.

Soros, undisputed king of the hedge fund operators, has an altogether different agenda. His pioneering trading techniques have made him rich beyond the dreams of avarice but he senses the party's over. Central bankers are increasingly determined to drum the hedge fund players out of town, and in any case it is becoming more and more difficult for them to generate the spectacular returns of the past.

There was growing evidence last week that the big sell-off in bond markets was partly caused by the over-indulgence of perilously exposed hedge fund managers. Sticking money into property with a canny operator like Ritblat to guide him is what Soros refers to as part of his 'estate planning' for the future. Like all great speculators, Soros has eventually been drawn back to the safe haven of property. It would also no doubt give him some kind of special pleasure to end up with Broadgate, which houses some of the City's biggest investment houses.

So what are the two of them offering in an attempt to prise Broadgate away from Mr Lipton? For a start they would pay off all pounds 750m of debt attached to the complex, a prospect that leaves bankers apoplectic with delight. If they could take the money and run, they would. It would be like Christmas come early.

The Broadgate bankers, however, are not the only determinants. Mr Ritblat also has to deal with Stanhope and Rosehaugh, to whom he is prepared to offer only pounds 150m between them. That is not enough to rescue Stanhope and it is certainly not enough to satisfy the Rosehaugh receivers, who have got pounds 300m of debt to recover. If necessary, they are prepared to wait the years it might take for Broadgate and Ludgate to become fully let, in the hope that this might secure a better price.

At the moment, however, there are few in the property world who can boast pockets as deep as Mr Ritblat and Mr Soros. Certainly I can think of no one else adventurous enough to buy Broadgate outright; and if it were to be sold off piecemeal there would be a real danger of Stanhope and the Rosehaugh receivers being left with the unwanted rump.

It must seem a cruelly ironic outcome to Stuart Lipton, but Mr Ritblat's offer may yet prove an irresistible one.