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Canary comes to market
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March 1, 1999: 8:04 a.m. ET
Canary Wharf, owner of London's tallest building, plans market debut
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LONDON (CNNfn) - Canary Wharf, the owner of the U.K.'s tallest building, has confirmed its intention to list before the end of March. The flotation of 25 percent of the shares on the London stock exchange should value the company in excess of 2 billion pounds ($3.2 billion).
The property developer, which controls most of the eponymous financial and business center three miles east of the City, is hoping to raise 500 million pounds from the initial public offering.
Currently, the group owns three quarters of the 4.7 million square feet of office and retail space already built on the site, which is also known as Docklands.
Hugh Rich, property analyst at Charterhouse Tilney, said the funds would mainly be used to repay some of the investment the controlling consortium pumped in when it rescued the ailing company in December 1995.
"It was always the intention of the investor group that there would be an IPO in the future," a Canary Wharf spokesman said.
The consortium is led by executive chairman Paul Reichmann and includes Saudi Prince al-Walid Ibn Talal, a unit of Loews Corp. (LTR), Franklin Mutual Series Fund and affiliates of Republic New York Corp (RNB).
The group is rumored to have paid around 800 million pounds when it bought the company out of administration just over three years ago. At the time, the developers had over-extended themselves and were hamstrung by burgeoning debt.
The development, which was conceived as a rival to the crowded City of London in the mid-1980s was in danger of becoming a very expensive white elephant.
The current owner have pursued an aggressive pricing policy, offering floor space at a 30 percent discount to the City. This strategy has pulled a number of top names away from the traditional financial center, including HSBC, Morgan Stanley Dean Witter and Credit Suisse First Boston.
The group owns the U.K.'s largest building: a 50-storey, 800-foot edifice. A second, 700-foot office block is currently under construction and will house the world-wide headquarters of HSBC Holdings. Development of a third, 700-foot tower is also planned.
The entire complex will take another seven years to complete and once finished will comprise 13.5 million square feet of office and retail space.
Rich believes the IPO will be a success because it is likely to offered at a substantial discount. The group's gross assets are valued at around 3.8 billion pounds.
But Rich does warn that Canary Wharf offers no spread of risk, which the more traditional property stocks offer. "A single asset company is flawed at worst, and boring at best," he said.
A market capitalization in excess of 2 billion pounds makes the group of the U.K's biggest property companies. The largest listed developer is Land Securities, valued at 4.6 billion pounds, followed by British Land at 2.8 billion pounds. The latter recently slipped out of the blue-chip FTSE 100 index.
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Canary Wharf
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