Real Estate Opportunities (REO) said yesterday that it is taking legal action against its former partner in the company, Aberdeen Asset Managers which has said it will fight the claims made against it.

The property group, in which John Ronan and Richard Barrett's Treasury Holdings has a 55 per cent stake, has served proceedings on Aberdeen Asset Managers Jersey, Aberdeen Asset Managers Limited and UBS Limited, its former financial adviser.

"REO is seeking compensation for the substantial losses suffered by REO in its income portfolio, which was established by those advisers in June 2001," the company said.

It is understood that REO is claiming up to €80 million but has also notified that further amounts may be claimed.

The legal action follows the failure to negotiate satisfactory compensation payments with Aberdeen, REO said.

"REO is determined to obtain appropriate compensation and will pursue its case with vigour," the company said.

Aberdeen said it had not yet received service of the proceedings, which are being taken in Britain, but it rejected REO's allegation as "wholly without foundation".

It also said it would be bringing a counterclaim against REO in due course.

REO was originally established in 2001 as a quoted split capital investment trust, with funds in two asset classes, property and high yield bonds.

Its property portfolio was to provide asset growth while bonds were to make up 40 per cent of the fund and provide an income stream to pay dividends.

Treasury had a 24 per cent stake in the company while Aberdeen held 21 per cent and had three representatives on the board of directors.

However, a poor performance by its income portfolio as stock markets crashed led REO to dismiss Aberdeen as its investment manager in April 2003.

This followed a review of the income portfolio, on which REO said it had incurred losses of more than £165 million sterling (€248.2 million).