MGN to move to Canary Wharf: Five-year, rent-free deal to take three floors of Europe's tallest block will save newspaper group more than pounds 20m

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The Independent Online
MIRROR Group Newspapers, publisher of the Daily and Sunday Mirror, People and Sporting Life, is to move into Canary Wharf Tower, in Isle of Dogs, in a five-year, rent-free deal that allows it to back out if the Jubilee Line extension is not built.

Though the deal has yet to be signed, it is understood that MGN has agreed to take three floors in the Tower, numbers 20, 21 and 22 - slightly higher up Europe's tallest office block than the Daily and Sunday Telegraph.

MGN will be taking just over 150,000 sq ft of space. The nominal rent would have been around pounds 30 per square foot per year, but the rent-free deal will save the group more than pounds 20m. The contract also includes a 'get out' clause if the pounds 1.7bn project to extend the Jubilee underground line to the Docklands does not get the go- ahead. In that case, MGN can reverse the contract and refuse to go to Canary Wharf.

Discussions are still proceeding on the Jubilee Line extension with the banks, which lent more than pounds 500m to the project, accusing the Government of reneging on a deal to guarantee the timetable of constuction.

If the tenancy agreement is signed, MGN is expected to move to the Isle of Dogs in the early part of next year.

David Montgomery, the former editor of Today who is now chief executive of MGN, said that nothing had been agreed yet but that Canary Wharf was top of the shortlist. MGN was still talking to Grant Thornton, the administrators of the Maxwell family property company, Robert Maxwell Estates, about purchasing MGN's current headquarters at Holborn Circus, just off Fleet Street.

MGN has offered around pounds 25m for the building. Though this is felt to be a low offer, Grant Thornton has been considering it, and Maurice Whitall, the partner at Grant Thornton in charge of the receivership, is awaiting a final decision from the banks, led by Lloyds, that lent pounds 70m to Robert Maxwell Estates.

The situation is complicated by the fact that Lloyds is also a lender to MGN and one of the banks left with a shareholding in the newspaper group when the Maxwell empire collapsed in December 1991. Ironically, it is also the lead banker in the consortium that placed Canary Wharf in administration in May last year.

MGN is also in dispute with Grant Thornton over the tenancy of the building and has not paid the last two quarters' rent, more than pounds 4m. Grant Thornton is suing for the money.

The Independent on Sunday has learnt that MGN is set to move to Canary Wharf even if it buys the Mirror building. The newspaper company will hold on to the property as an investment until the property market picks up and it can sell it on to somebody who would redevelop the site.

A source close to the administrators of Canary Wharf, Ernst & Young, said that the deal was agreed and 'we are simply waiting for the ink to dry'.

The letting to MGN is a significant success for Ernst & Young, which has had great difficulty finding tenants for Canary Wharf since it took control of the project.

The administrators did not have the finance to offer the incentives that the developers of the project, the Canadian group Olympia & York, used to lure tenants - such as taking on the leases of the properties vacated.

Canary Wharf was chosen over two main rivals: Thomas More Square, which is in Wapping close to the News International building where Mr Montgomery used to work, and the Ark, in Hammersmith, west London, just next to the A4 heading towards Heathrow.

While there was much internal pressure to take the space at Thomas More Square, it is understood that the deal which was offered by Canary Wharf was simply too good.

(Photograph omitted)

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