Two firm bids for Canary Wharf

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The Independent Online
PAUL REICHMANN, the head of Olympia & York Developments, and Hanson, the giant conglomerate, are both understood to have put in firm offers to buy Canary Wharf, the London Docklands development that went into administration six weeks ago.

However, senior sources said yesterday that the two had not joined forces, as had been expected after Mr Reichmann was photographed leaving Hanson's London headquarters two weeks ago.

Stephen Adamson, a partner of Ernst & Young and one of the joint administrators of Canary Wharf, said earlier this week that he had received six firm approaches for the development.

He refused to say who had made an offer, but it has now emerged that one is from Hanson and one from Mr Reichmann.

It is believed that a third offer has come from Li Ka-shing, the Hong Kong businessman who heads Hutchison Whampoa, and another from a consortium of Far Eastern financial institutions.

The Hanson offer is understood to be quite low - in the region of pounds 300m to pounds 350m. This would leave the banks, which lent pounds 570m to the project, nursing large losses.

Many in the City and the property market had expected Hanson to put together a tax-based deal that would allow it to use pounds 800m or so of capital allowances and tax losses in Canary Wharf.

However, a senior financier said yesterday that Hanson's offer might not be tax-based. 'Hanson has not found a way to use the tax breaks without encountering an advance corporation tax problem,' he said.

Hanson would not confirm this. 'We are evaluating the situation,' said Martin Taylor, the group's vice-chairman.

The size of the bid made by Mr Reichmann has not been disclosed, but as the man behind the development he has intimate knowledge of the project and its value.

Olympia has yet to write down the value of Canary Wharf in its own books to reflect the fact that it is in administration.

The parent company in Canada has filed for court protection from its creditors and recently sold its corporate jet.

Bankers that have lent to the project, including a group of Canadian banks that have in effect lost all their investment, will be intrigued to find out how Mr Reichmann intends to finance his offer.

'No banker will allow Mr Reichmann to buy the project unless they are getting full repayment of their debts,' said one banker yesterday, though this view is not believed to be unanimous.