Controversial property millionaire Paul Reichmann now has a virtual "lock- out" deal to buy back London's Canary Wharf, largely because of the clout behind his backing group of investors, it emerged last night.
"Bad blood" between Mr Reichmann and the banks, which lost hundreds of millions of pounds when the development crashed three years ago, is being put aside to let a new deal go through.
There was speculation when Mr Reichmann unveiled his pounds 800m bid to buy back the London docklands scheme from the banks a month ago that they would look badly on the man who lost them so much money. The 11 banks, led by Lloyds, which rescued Canary Wharf are still owed pounds 900m.
However, wrangling over the conditions of the deal is expected to delay the official announcement of the deal by another week or so, according to sources.
Mr Reichmann's backers include Prince al-Waleed bin Talal bin Abdulaziz of Saudi Arabia, US investors Larry Tisch (through CNA Financial, part of his Loews empire), and Michael Price through his Mutual Series Fund.
A rival bidder, Tishman Speyer Properties of the United States, pulled out three weeks ago. The detailed inside knowledge the Reichmann group has gained of Canary Wharf's current finances places it far ahead of any outsider now thinking of a counterbid, said one source.
One thing which angered the banks more than anything else three years ago when Canary Wharf collapsed was that the Reichmann family was able to keep hundreds of millions of dollars of its own money in private companies, beyond the reach of receivers and administrators. A Saudi newspaper yesterday hailed the Reichmann deal as having been verbally agreed with the banks last Tuesday, although this was denied by Lloyds.
"Sources close to the consortium led by Prince al-Waleed bin Talal and which comprises Canadian businessman [Paul] Reichmann affirmed it has won the deal to buy the Canary Wharf", the London-Based Saudi newspaper Asharq al-Awsat said. It quoted the sources as saying the consortium will pay pounds 800m in the deal which is expected to be announced later this month.
The sources did not specify the financial contribution of Prince al-Waleed, a nephew of Saudi Arabia's King Fahd, to the deal, but the newspaper suggested his contribution was larger than that previously mentioned.
The Reichmann brothers' private family company Olympia & York poured pounds 1.6bn of their own money into developing Canary Wharf in the five years following 1988.
Up and down at Canary Wharf
1988 Reichmann brothers' original investment pounds 1.6bn. Total cost of development pounds 5bn.
1992 Canary Wharf collapses with debts of pounds 576m.
1993 pounds 1.1bn rescue package: pounds 568m debts deferred to 2007, new lending of pounds 278m. Banks to pay further pounds 300m over 25 years to London Regional Transport for Jubilee Line extension, worth pounds 45m in today's money.
1994 Canary Wharf valued by banks at pounds 500m.
1995: Reichmann's new bid for Canary Wharf, pounds 800m.