Property taken for a fast ride: Ouvah Highfields took millions from developers and went bust inside a year. Chris Blackhurst reports

UNTIL last year, few people in the property industry had heard of Sean McCormack.

What they knew about him could be written on the back of an envelope: also known as John McCormack, he hailed from Armagh, Northern Ireland; hard-working and teetotal; a smooth talker; passionately keen on horse-riding; owner of several top eventing horses; joint master of the Garth and South Berks hunt; pub owner; and one of the first to spot the potential in the serviced office market.

Today, rather more people know about Mr McCormack. In one year - 1992 - he and his main company, Ouvah Highfields, took the commercial property market by storm. He struck deals with some of Britain's biggest landlords and most prominent tycoons, including Land Securities, Lord Hanson's Hanson Properties, Sir Allen Sheppard's Grand Metropolitan, the Duke of Westminster's Grosvenor Estates, and Cheverell Estates, part of Lord Sterling's P&O. Mr McCormack's company took leases on some of Britain's best commercial properties. These included the old Readers Digest headquarters at 7-9 Old Bailey, Swan Court, and 150 The Minories, all in central London, and Salford Quays in Manchester.

In 12 months, Ouvah turned from a small company with a few offices, into Europe's largest serviced office operator, into a burnt-out shell. Today it is in the hands of the Official Receiver and Mr McCormack has been declared bankrupt.

In that one year, Ouvah, which was 50 per cent owned by Mr McCormack, persuaded landlords to part with more than 500,000 square feet of space. For many, fending off the effects of recession, Mr McCormack and his business centres were a godsend.

Most deals followed the same pattern. Ouvah took an office building from the landlord at an agreed rent. It would then break up the building into smaller units and re-let them, usually to small businesses.

In return for taking the building off its hands, the landlord normally granted Ouvah a six-month rental holiday. Sometimes, the landlord would also make a payment to cover the fitting out of the building. The search for tenants was a hard sell, with advertisements in newspapers and the back of taxis. Once found, tenants were frequently required to pay a deposit.

At first, the scheme appeared to work well. The hard sell meant that, even in the depths of recession, Ouvah found tenants. But they were often paying rents far below the going rate. Land Securities' 88 Victoria Street in London SW1 would have commanded about pounds 50 per square foot. But one tenant was paying Ouvah pounds 15. Meanwhile, Mr McCormack's company received six months rent free, during which time it paid Land absolutely nothing.

According to landlords that dealt with Mr McCormack, the low rents were explained away on the basis that they would increase and eventually match the going rate. Unfortunately, that did not happen.

As soon as the rent-free periods expired, landlords discovered they were not receiving the agreed rents. 'We had two properties (at Mondial Way, Heathrow, and City Point, Manchester) for which we had no income,' said Martin Taylor, deputy chairman of Hanson. 'We were approached by Ouvah to take them off our hands. We gave them six months rent free. After that, they didn't pay us any rent, so we took the properties back.'

Ouvah was run by Mr McCormack. His brother, Ben, was the group's property manager, and Jonathan Starmer-Smith, brother of Nigel, the BBC rugby commentator, its finance director. At its brief height last year, the company employed 100 people. Unfortunately, no accounts have been filed since Mr McCormack bought the company as a loss-maker from Platignum, the fountain-pen maker, in November 1991 for pounds 1.

Estimates as to how much the group took in during its brief life vary. Some put the amount at pounds 10m.

Just before Ouvah went into receivership, Mr McCormack sold it to Colin Youell, a London property financier, for an undisclosed sum. Mr Youell maintains he knew Ouvah had problems but he thought he was buying an opportunity: he hoped to increase the rents paid by tenants and eventually make it viable. It was not until he moved in that he realised just how deep those problems were.

He claims that given the way the company was run, it was not intended to make a profit - at least not for its partners, the landlords. The fact that no accounts were filed, he believes, points to the company being set up 'to rape and pillage the British property market'. He said: 'If the previous directors could tell us how they intended to make a profit, we would be delighted to talk to them.'

He does not put all the blame on Ouvah. 'Some of the leases the landlords signed away were embarrassing. They signed away some phenomenal properties with ridiculous rents to a company with no balance sheet.'

The Official Receiver is preparing a report for the Department of Trade and Industry on Ouvah. Mr Youell wants the DTI to investigate now. 'The DTI asked me what I thought,' he said. 'I told them it was a can of worms.'

Mr McCormack could not be reached for comment.

(Photographs omitted)