View from City Road: Greycoat tried to be too clever

Geoffrey Wilson, chairman of Greycoat, is determined that shareholders should be under no illusions. Rejection of the restructuring proposals unveiled yesterday would put the group in jeopardy. Yet just seven months ago, Greycoat was insisting it could pay its bills and had positive net worth.

The difference now, according to Mr Wilson, is that values have suffered an unprecedented and prolonged drop. But surely they have not continued downwards throughout the last seven months? With 75 per cent of its portfolio in three well-let buildings in prime locations - exactly the properties that have now started to rise in value - it should have been able to ride out the slump. In fact, its problems stem from too- clever financing, which assumed that rents would carry on soaring.

The biggest risk of dissension about yesterday's deal must come from the holders of the pounds 50m preference shares, who are not being offered any compensation, despite being asked to waive their dividends and take a 60 per cent drop in nominal value. Until the detailed accounts and asset valuations are available, ordinary shareholders can only hope that the proposals ensure there will be something left for them. Certainly, no decision on taking up the rights can be made until then.

Postel clearly believes that the deal allows it to get some good quality property on the cheap. It is keen to add to its property holdings but, with virtually every other British institution thinking the same, competition has forced prices in the open market up higher than it was prepared to pay. Now that Hammerson has sorted itself out through a rights issue, Greycoat was the sole opportunity to buy well-let properties at a discount through corporate activity. Other companies are either at a premium to net assets or sitting on floors of empty space.

Whether the deal is as good as it seems depends on the asset valuation, which will not be revealed for about six weeks. The fact that Greycoat's portfolio is largely let makes its position unique and other struggling property companies should not wait to be bailed out by friendly institutions.

Greycoat is also one of the few remaining small property companies still paying its directors handsomely. Given the well publicised views on salaries held by Alastair Ross Goobey, Postel's chief executive, shareholders can at least hope for some economies there.