pounds 2bn float will crown the fall and rise of Canary Wharf

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The Independent Online
ONE OF the newest and most instantly recognisable features of London's skyline - Canary Wharf and its fifty-storey tower - is to be floated on the stock market.

The Docklands development once hailed as the shining beacon of Thatcherite yuppiedom formally rose from the ashes of recession yesterday with its owners announcing it has been valued at more than pounds 2bn.

The flotation brings the fortunes of Canary Wharf full circle. After being endorsed by Margaret Thatcher as the financial face of the future, the project proved a disaster for the Canadian real estate developer whose dream it was.

Now Paul Reichmann, who led a group of investors to buy back Canary Wharf from its bankers in 1995 for pounds 800m, has recovered his optimism. He intends to place 25 per cent of the shares with institutional investors for an expected pounds 500m and keep a stake worth pounds 200m. The rest will stay with existing investors. The deal is expected to be done by Easter.

Under an agreement with the Government, the proceeds will go towards the Canary Wharf Group's final contribution of pounds 70m to pounds 90m to the Jubilee Line extension. The much-delayed Underground link to central London, which promises to be an efficient alternative to the erratic Docklands Light Rail, is due to open later this year.

The group also intends to cut its debt by pounds 350m, leaving it owing a total of pounds 500m. The remainder of the flotation proceeds will help to fund the 84-acre scheme's ambitious development programme.

"This is a huge watershed for us," George Iacobescu, the group's chief executive, said yesterday. "More than 60 per cent of the project is completed or under way."

Twenty-five thousand people work at Canary Wharf, a figure expected to treble in 10 years. A few years ago the complex resembled a ghost town, with few commercial outlets.

But despite the recent explosion of shops, restaurants and bars, many workers still feel cut off from the real world once they enter the futuristic, steel complex.

"It's like The Truman Show," said Anne Lynch, 36, sitting on a bench in the basement. "This is what we do every lunchtime. We always see the same people go past. It's really sad."

Indie Sangha, 25, an administrator at the Financial Services Authority, agreed. "It's isolated," she said. "It's characterless. Everyone looks like drones."

Such disenchantment did not seem to be linked to how much people earn. Bankers and builders expressed their dislike of the vibe yesterday.

"There's no atmosphere," said Matthew Tooth, 23, who recently joined a bank at the Wharf. "It's so business- oriented. Everyone walks with their head down."

To Joe Major, 40, who is installing heating and ventilation in the tower, Canary Wharf is "Americanism gone mad", particularly the comprehensive ban on smoking. "It's impersonal - I can't wait to get back to the City," he said. "The architecture's lovely, but you don't want to walk around with a camera every day."

Canary Wharf even has its own newspaper. Dennis Abbott, editor of The Wharf, said he never ceases to be amazed by his readers' attitude. "This place was built on the back of the yuppy boom and died with it," he said. "What we have now is a reinvented yuppy, a compassionate yuppy."

Undeterred by a 1996 bombing attempt by the IRA, Canary Wharf's current investors include Prince Al Waleed bin Talal bin Abdulaziz al Saud, CNA Financial Corporation, Franklin Mutual Series Fund and affiliates of Republic New York Corporation. Eleven buildings in the scheme are complete and a further seven under construction, including a 42-storey site that will be the headquarters of HSBC, owner of Midlands Bank.

Investment banks including Morgan Stanley Dean Witter and Credit Suisse First Boston are already installed, and the central tower - Britain's highest building - is home to nine national newspapers. Citigroup is about to complete one tower and is due to announce later this week that it is to build a second, bigger one next door, to house its investment banking arm Saloman Smith Barney, now in Victoria, central London.

During the recession of the early Nineties Canary Wharf was looked upon as an Eighties white elephant. The only way to attract tenants was with low charges and lengthy rent-free periods.

But Mr Iacobescu said yesterday that such incentives were finished. Rental income from Canary Wharf had doubled since 1995, from "the mid teens (pounds per square foot) to the mid thirties".

The plans to double the building space to 10 million square feet in five to seven years are expected in a pros- pectus for potential investors to be published in 10 days.

Canary Wharf's long-term viability depends on its ability to attract financial institutions. There were suggestions that staying out of the euro could affect London as a prime financial centre, losing vital business to Frankfurt. That is not the view of Mr Iacobescu. "London will remain Europe's financial centre," he said.

For those who may consider the complex soulless, help is at hand. The Rev Gordon Warren, rector of St Anne's Church in Limehouse, has the Wharf within his parish. "I've raised people's awareness to the lack of spiritual facility," he said. "There needs to be a centre of community and there isn't anything." He hopes to get space for a chapel.

History of the Wharf


1982 Thatcher government sets up enterprise zone in the Docklands

1988 Reichmann brothers take over Canary Wharf development and invest pounds 1.6bn

1991 One Canada Square, Britain's tallest building, is completed

1992 Canary Wharf collapses with debts of pounds 576m

1993 Banks put together pounds 1.1bn rescue package for Canary Wharf

1995 Reichmanns lead investor group to buy back Canary Wharf for pounds 800m

1999 Canary Wharf to float on stock market, valuing development at up to pounds 2.6bn