Billionaire Joe Lewis poised to increase stake in Kenmore investment vehicle

JOE Lewis, the US and Bahamas-based billionaire, is expected to up his stake and possibly even buy out Kenmore European Industrial Fund (KEIF), the listed investment vehicle launched by Edinburgh's failed Kenmore Property Group.

Last week, a rival bidder for the group, Hansteen, ruled itself out of a bid for KEIF, raising speculation that Lewis would buy up Hansteen's 12 per cent stake in the business.

Lewis bought an initial 7.5 per cent stake in KEIF – the share owned by Lloyds Banking Group – in November before announcing he had also acquired Kenmore Financial Services (KFS), the fund's manager, from Kenmore's administrators. In addition to managing KEIF, KFS – now based in the Netherlands and called Tamar Capital – manages an 800 million European property portfolio.

Analysts say KEIF, which is set to change its name to Tamar European Industrial Fund at its next general meeting later this year, has continued to disappoint investors. A brief rally in November prompted by the potential bid from Hansteen saw the share price reach a one-year high of 42.6p, although it has been languishing around the 35p mark more recently.

According to its last interim statement, KEIF values its portfolio at 330m, although its diminishing share price means the group is valued at 50.4m.

Michael Burt, an analyst with Execution Noble, said: "KEIF is sitting on a fairly secondary portfolio of industrial assets and the market is quite weak there.

"There is a good chance somewhere down the line that Joe Lewis will buy it out if the share price keeps floundering at 36p, and there is not a bad chance Hansteen sells its stock to Joe Lewis."

Next week, KEIF will reveal its annual results. It is likely to reveal further sell-offs of the group's portfolio of 95 European properties, demonstrating an effort to shave down its 260m debt.

The firm's lenders, the Royal Bank of Scotland and the Hypo Real Estate Investment Bank, expect repayment of a ?53m loan in October 2010 and a further ?67m (48m) is repayable in April 2011.

The firm said it was "considering a number of options regarding the refinancing of the company's bank facilities". According to Burt, the debt remains a "massive issue" for the firm.

Richard McGuire, a director of Lewis's international business Tavistock Group, said there was pressure to relocate Tamar's existing Edinburgh office to London, but insisted: "That is not going to happen."