Canary Wharf banks like Reichmann bid

JOHN WILLCOCK

Financial Correspondent

The consortium of 11 banks that owns Canary Wharf is considering "very, very seriously" the bid from the Docklands scheme's original developer, Paul Reichmann, for a price thought to be around pounds 700m-pounds 800m.

Sources said Mr Reichmann's original bid a month ago had been "revised in several essential ways" since. They also said that the addition on Thursday of Prince Al-Waleed bin Talal, a nephew of Saudi Arabia's King Fahd, to Mr Reichmann's investor group had significantly boosted the Toronto developer's credibility as a buyer.

City sources also said the split between the consortium's North American banks, which want to sell up now, and the British banks, which want to sit out the property cycle, had been narrowed by Mr Reichmann's link-up with the Saudi prince.

The consortium, led by Lloyds Bank, rescued Canary Wharf three years ago when its failure led to the collapse of Mr Reichmann's global property empire, Olympia & York. The banks are now owed about pounds 770m.

The US and Canadian banks in the group, including Citibank, Chemical Bank, Canadian Imperial Bank of Commerce and Royal Bank of Canada have been keen to get out of the project at the earliest opportunity.

Lloyds and Barclays are more reluctant to sell, preferring to wait for the Jubilee Line underground extension linking Canary Wharf to central London to be completed. More than three-quarters, or 4.5 million square feet, of the development has now been let and there is planning permission for another 8 million square feet.

Sources said the Reichmann/Al-Waleed bid offers more to the banks if other obligations are taken into account. These include pounds 300m that will have to be paid towards the cost of the Jubilee Line extension. The sources said it seemed unlikely the current lenders would retain an involvement and spoke of a "clean-break" deal.

The money owed by Canary Wharf can be divided into three portions. The first, of nearly pounds 773m, was restructured in 1993 over 14 years, deferring payment until 2007.

The banks also provided extra working capital facilities of pounds 278m, including pounds 98m from the European Investment Bank, of which pounds 150m has been drawn down. When the Jubilee Line extension is completed, Canary Wharf will also be liable to pay its pounds 300m contribution over 25 years.

Any buyer could benefit from hundreds of millions of pounds of tax losses accumulated during the building of the complex.

Sources said the possibility of Canary Wharf's planned second stage being built had been enhanced, although this would only be financed by pre-letting space. "This is solid, patient money," one source said.