Songbird Estates increases stake in Canary Wharf
Group to increase the size of emergency rights issue
Saturday 19 September 2009
Songbird Estates is planning to spend £112.5m increasing its stake in Canary Wharf in London, despite only last month hammering out the terms of a rescue rights issue to save the company.
The real-estate group is set to buy the 54 million shares in Canary Wharf owned by the German bank Commerzbank. The buyout will see Songbird increase its stake in the capital's financial district to 69.3 per cent.
"This transaction significantly increases Songbird's ownership interest in Canary Wharf and further demonstrates the commitment to the company by a core set of investors," the chairman, David Pritchard, said.
Songbird's biggest backers – Qatar Holding, China Investments Corporation, Morgan Stanley Real Estate and GF Investments II – have agreed to back an extension to last month's emergency rights issue. The proceeds of the cash call, which was initially intended to raise £825m to repay all of an outstanding £880m loan owed to Citibank, will now also partly finance the buyout of Commerzbank's Canary Wharf shares.
Mr Pritchard conceded last month that without the funding, Songbird would not have been able to repay the loan to Citibank, and "would have faced liquidation or administration".
Under the original terms of the rights issue, Songbird asked shareholders for £550m through ordinary shares, and a total of £275m in preference shares. Songbird said yesterday that it would increase the ordinary share offering to £620m, relying on a debt facility provided by the investors to make up the difference needed to buy the additional Canary Wharf shares.
Ahmad al-Sayed, the chief executive of Qatar Holdings, said: "We fully support Songbird's management in undertaking this transaction, which we believe is a good opportunity for all shareholders. We are therefore increasing our participation in the planned fundraising to ensure its successful completion".
Despite its backing from shareholders, Songbird's investors have endured a torrid 12 months, with the shares losing more than two-thirds of their value.
Broadgate deal: Blackstone takes 50%
British Land has agreed to sell 50 per cent of its Broadgate office portfolio in the City of London to the private equity group, Blackstone.
The real estate company said the sale would free capital to invest in new property projects.
Under the terms of the deal, British Land and Blackstone will create a joint venture: Blackstone will pay £77m for its stake and also take on half of Broadgate's £1.97bn debt pile. British Land's chief executive, Chris Grigg, said the deal fitted the company's plan of balancing its portfolio and freeing up capital to invest in new office and retail property. However, analysts at Evolution pointed out that, "the yield paid – equating to 7.9 per cent including rent-frees – may disappoint". Mr Grigg refused to be drawn on which projects British Land would target, but said that the purchase of a shopping park in the north of England was a "sign of intent". He added that he did not yet expect banks to start selling distressed property assets.
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