Wharf raises 1bn to save it from brink

SONGBIRD Estates, the majority owner of Canary Wharf, yesterday announced a &pound;1.03bn rescue fundraising &ndash; the biggest ever in UK real estate history.<br /><br />The group will use the majority of the cash raised to pay down its &pound;800m senior loan with Citi, which was due to expire next year. <br /><br />Without the fundraising, Songbird would have breached its banking covenants when tested in November, due to its property portfolio plummeting in values. <br /><br />The group said it had raised &pound;620m through a placing and open offer, and plans to sell &pound;275m of preferred shares at 100p to investors including Qatar Holding, who will become Songbird&rsquo;s biggest investor, China Investment Corporation and Morgan Stanley&rsquo;s real estate funds.<br /><br />In addition to the equity raising Songbird announced a new credit facility of &pound;135m.<br /><br />Chairman David Pritchard said: &ldquo;The proposals provide stable financial footing for Songbird and are a good outcome for our shareholders.&rdquo; He added &ldquo;The significant investment being made by all of these shareholders is a strong vote of confidence in the future of London, Canary Wharf and the company.&rdquo;<br /><br />The group also used part of the fundraising to acquire a 8.45 per cent stake for &pound;112.5m from Canary Wharf founder Paul Reichmann. The acquisition raises Songbird&rsquo;s stake from 60.8 per cent to 69.3 per cent.<br /><br />Songbird said it had narrowed its losses for the six months ended 30 June 2009 to &pound;110.9m from &pound;412.8m the same period a year before.<br /><br />The group also said that the market value of the property portfolio was down 7.5 per cent to &pound;4,3bn in the six months to June, but that recent valuations showed that growth was beginning to return, echoing talk from peers of stability in the wider market. <br /><br />Yesterday it was revealed that Canary Wharf Group, which manages the Docklands site, had filed a $4.3bn (&pound;2.6bn) claim against collapsed bank Lehman Brothers for unpaid rent. <br /><br />Currently, the rent is being covered by Nomura and the administrator and the group is insured against future losses on the Lehman space.<br /><br /><strong>JOHN CARRAFIELL<br />ALPHA REAL ESTATE <br />ADVISOR TO SONGBIRD<br /></strong>John Carrafiell, the real estate supremo who led Morgan Stanley&rsquo;s role in the takeover of Canary Wharf, advised Songbird Estates on the equity raising.<br /><br />Carrafiell stepped down from his role as global co-head of Morgan Stanley Real Estate in January after 20 years, but continues to be a senior adviser to the investment bank. He recently set up Alpha Real Estate Advisers to take on board-level consultancies and advisory mandates. <br /><br />Carrafiell became global co-head of Morgan Stanley Real Estate Investing in 2005. Educated at Yale, he joined Morgan Stanley in 1987, and headed its European real estate group from 1995. <br /><br />He became famed for his shrewd direction of Morgan Stanley&rsquo;s purchase and subsequent sale of a stake in Great Portland Estates, which it bought from Liberty International in 2004 and sold in 2006 &ndash; almost doubling Morgan Stanley&rsquo;s investment in the process. <br /><br />He is advising Songbird with Morgan Stanley&rsquo;s managing director in real estate Nick White and executive directors in UK real estate Suniti Chauhan and Edward Knight.&nbsp; <br /><br />JP Morgan Cazenove chief executive Naguib Kheraj, directors Bronson Albery and Chris Nicholls are also advising.