Canary Wharf under fire for £100m Lehman sweetener

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The Independent Online

Canary Wharf was heavily criticised in the City again yesterday over its standards of disclosure as the company revealed it had agreed to a £100m incentive package to sign up Lehman Brothers as a tenant.

Analysts also said an attractively priced bid for the Docklands property developer looked increasingly unlikely after the company reported full-year results. They said the property market was beginning to turn more positive, while the complex financial structure of Canary Wharf worked against an offer at or above the 300p a share that was previously expected. The company reported that its net asset value had dropped by 33 per cent to 344p a share for the year ended June.

There was outrage among many analysts that the company, which saw its share price plummet last year when it admitted that some tenants had the right to "put back" space to the developer, had hit investors with a new surprise. Buried in part two of the results, in note 17, are details of the incentive package Canary Wharf agreed to get Lehman to take 1 million sq ft of space in a new building on the estate.

Andrew Penny, analyst at JP Morgan, said it was the "second time" Canary Wharf had sprung such a shock on the market. "It's no-one favourite company," he said.

Lehman, a US investment bank, signed up for Canary Wharf in March 2001. Its building is now virtually complete. Canary Wharf revealed it had lured it with the equivalent of a 3.1 years' rent-free period - worth £100m, according to analysts.

Mike Prew, an analyst at Citigroup, said of the Lehman news: "This is not satisfactory conduct. But at least they've now come clean about it ... It's an issue of incomplete disclosure." A spokeswoman for Canary Wharf said: "We didn't hide anything."

The company gave no update on the bid approaches it has received. Sir Martin Jacomb, the non-executive director leading the committee evaluating the bids, said: "We are now actively reviewing indicative proposals."

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