A prestigious, multi-million-pound residential and retail development in Glasgow's Merchant City has collapsed into administration after Royal Bank of Scotland and other creditors became rattled by the rapid decline in Scottish property prices and grew worried about the security of the investment, The Herald has learned.
Anderson Homes (City), a subsidiary of the eponymous Edinburgh-based property group that was established specifically to develop the site of the old China Bazaar on Glassford Street in Glasgow, is understood to have called in the administrators yesterday after Royal Bank and other creditors brought pressure to bear over the increasingly bleak prospects of getting a return on its investment.
The failure of the Anderson project - called Opal 77, incorporating 25 high-spec one and two-bedroom flats, two penthouse suits as well as retail space on the ground floor - is the latest example of how the credit crunch and banking turmoil in the world of global high finance is trickling down to street level.
It is understood Royal was concerned about the com pany's ability to service its loan amid the property slump and that other creditors, panicked that they might lose their investment, pressurised the Anderson subsidiary into going to the wall.
Administrator Matt Henderson, a partner at accounting firm Johnston Carmichael, declined to be specific about the extent to which Royal financed the Glassford Street project, but he said it was "several millions" of pounds and that it was also the stricken subsidiary's largest creditor.
He also said that residential property values in Scotland had fallen by around 25% this year and the decline in Opal 77's value "is no exception".
Commercial property in Scotland is also estimated to have slipped 20% over the past year.
Henderson said: "For some time the company had been trying to market the property, and they looked at different options - such as renting and leasing - but there was no progress. Given the way the market has been going, the bank was growing less optimistic about the outcome.
"What happened here is a real symptom of the decline in the property market. This is a real sign of the times. And I have to say this was not a development that was put up quickly or cheaply.
"This is a high-quality part of the city centre and the pro-ject is high-spec and luxurious. Everything was fitted to the highest of standards, and it's right in the heart of the Merchant City. It just shows what a crisis of confidence can do."
The problems at Opal 77 follows news earlier this week that Gregor Shore, the property group behind the Granton Anchor and Platinum Points developments at Leith, had been forced into administration by the slowdown in the Scottish property market.
Many businesses are already finding it harder to operate in the current stressed economic environment, but their positions have become even more difficult as banks tighten their lending practices. In doing so, they may also accelerate the end for many businesses that are already struggling.
The longer money markets remain tight - and the price of wholesale lending between banks remains expensive - the more risk-averse the banks become and the more they fret about their investments.
Experts say the banks' behaviour also makes it clear that they are bracing themselves for harder times .
Meanwhile, a spokesman for Royal yesterday told The Herald: "We have worked closely with our customers in a bid to reach a satisfactory conclusion throughout what has been a very difficult trading period for the business.
"Unfortunately, the company has been placed into administration with the agreement of the directors and therefore we continue to work with the directors to reach a suitable conclusion for all parties involved."
Royal's fellow creditors in the Opal 77 project were not identified last night.
Henderson added: "The ultimate aim of this process is to sell the entire property as a block, and return money to Royal and the rest of the creditors. We remain hopeful."
