According to the Financial Times, the board of Canary Wharf is considering several offers for some of the buildings on its London docklands estate.
Although the approaches are at a preliminary stage, the private company could sell one or two of its buildings, representing 10 per cent of the total space, as early as the New Year, according to property market insiders.
The board is sifting through opportunistic bids from UK institutions, syndicates, listed companies, foreign groups, German funds and private companies.
Although these offers are not for Canary Wharf´s five biggest towers, they involve hundreds of millions of pounds. The company may choose to carry out refinancing or joint ventures rather than straight sales, it is believed. These moves are likely to be considered at the company´s next monthly board meeting.
Royal Bank of Scotland paid Canary Wharf £1.1bn a year ago for two buildings - 25 Canada Square, leased by Citigroup, and 5 Canada Square, occupied by CSFB. Recently Canary Wharf had appeared to be in no hurry to sell property. However, it is understood that the current buying frenzy for commercial property has given its owners an unprecedented chance to sell.
The east London estate is 67 per cent owned by Songbird, a consortium which includes Morgan Stanley, private investor Simon Glick and Goldman Sachs´ Whitehall Fund.
The other shareholders are Brascan, the Canadian company, with 17 per cent; Franklin Mutual, the US fund, with 7 per cent; and Ontario Pension Fund with 6 per cent.
Canary Wharf has not sold any buildings since it went private. However, the Aim admission document for Songbird - its B shares are listed on the junior London market - said it was prepared to dispose of certain assets at the right time.
Canary Wharf´s portfolio was valued at yields of 5.75-6.25 per cent in June, since when the prices of commercial property have undergone a surge.
The sell-off of one or two buildings would not herald an immediate break-up of the Canary Wharf estate. It is thought the group´s management is more likely to hold out for the arrival in the UK of real estate investment trusts (Reits). These tax-transparent vehicles could enable the company to hold stakes in various buildings and continue to manage them, but also allow private individuals to invest in them.
Given Canary Wharf´s low contingent capital gains liability, the group would benefit from Reit status more than some other property companies.
The company still owns 5m square feet of undeveloped land, and has planning permission to develop more skyscrapers in the medium term. Canary Wharf refused to comment yesterday.
Source: Financial Times