O&Y write-offs to be revealed

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OLYMPIA & YORK, the troubled Canadian developer, wrote off virtually its entire book value last year as a result of tumbling property values, the firm will tell its creditors later this week.

A 1991 financial statement, to be filed with a Canadian bankruptcy court today or tomorrow, shows that O&Y took a writedown of as much dollars 4.5bn ( pounds 2.3m), including about dollars 2bn for the Canary Wharf project in London, an official confirmed yesterday.

In April O&Y claimed a net worth of dollars 4.6bn after its debts were subtracted from its assets. The figure - based on the long- term market value of its properties - was widely questioned.

Company officials cautioned privately that the figures were accounted on historic costs and did not reflect the market value of O&Y properties, even at today's depressed prices.

By these accounting practices its Canadian and British properties are given a negative net worth while its US holdings - currently worth at least dollars 1bn - are also carried at minus dollars 470m.

The US properties, although burdened with heavy debts, are producing a positive cash flow and have so far avoided bankruptcy court protection, unlike their Canadian parent.

'Historical accounting methods are not very useful when it comes to real estate,' one property analyst said. 'But they do provide an indication of how precipitously values have dropped in O&Y's three key markets.'

A spokesman for the company also confirmed yesterday that O&Y's owners, the Reichmann family, have injected more than dollars 400m of their own money into the company over the past two years, most of it to allow construction to continue at Canary Wharf.

Since early 1991 the Reichmanns, family, using independently established prices, paid O&Y Cdollars 160m ( pounds 70.4m) to take personal control of Olympia Tile International, their Reichmanns' original Canadian business.

Documents filed with the court also show that O&Y expected to spend at least pounds 290m on tenant inducements at Canary Wharf until 1998. The money was budgeted to be spent on fitting out space and providing incentives for new tenants.