A financial slump in 1827 dashed Ladbroke’s plan to cover his lands with houses. In 1836 he managed to earn some potential income from his land by leasing 140 acres to John Whyte for a racecourse to be called the Hippodrome. This opened in 1837 and was used for steeplechases and flat racing. It quickly ran into difficulties. The locals objected because it cut off a public footpath and the racecourse had to be altered to avoid it. Racing began again in 1839 but the ground was heavy clay and was just not suitable for horseracing. In October 1840 Whyte gave up, and sold his lease to his solicitor, John Duncan, a partner in the firm of Roy Blunt Duncan and Johnstone, with offices in Westminster and the City.
Duncan immediately involved his client, Jacob Connop, a financial operator in the City of London. In October 1840 Connop entered into an agreement with Ladbroke to take 99 year leases of the land outside the Hippodrome itself – an area of about 58 acres. And the next year, Duncan entered into a similar agreement for the 77 acres within the Hippodrome. The result, effectively, was that Connop could develop the land to the east of Ladbroke Grove, and Duncan the land to the West. Duncan's tried to carry on racing at the Hippodrome but the last race took place in June 1841.
Duncan soon got himself in over his head financially. He agreed with Ladbroke to spend £80,000 on building houses and £2,000 on infrastructure. He also owed money to William Chadwick. This was a debt he had inherited along with Whyte’s lease. Whyte owed Chadwick £6,000 for building the stables and fences at the racecourse and half the debt was secured on the land Duncan now retained. To cover this commitment, Duncan borrowed £6,000 from a bank which his firm acted for and Richard Roy, one of his partners, guaranteed the debt. In 1842 Duncan refinanced the £6,000 loan by borrowing from Edmund Walker, a Master in the Chancery Court. But he could not raise loans fast enough to cover his commitments and in December 1842 he was declared bankrupt.
Some of his creditors, including his partners (to whom he owed £45,000 by this time) had taken security over Duncan’s building agreement with Ladbroke. Richard Roy had experience of property development. He had developed an estate in Brighton with a local property owner, Pearson Thompson, so the creditors put the two of them in charge of trying to recover their losses by carrying out the development. It was a successful plan. Ultimately they recovered all their losses.