Thursday 24 September 2009 8:00 pm

Wharf raises 1bn to save it from brink

SONGBIRD Estates, the majority owner of Canary Wharf, yesterday announced a £1.03bn rescue fundraising – the biggest ever in UK real estate history.

The group will use the majority of the cash raised to pay down its £800m senior loan with Citi, which was due to expire next year.

Without the fundraising, Songbird would have breached its banking covenants when tested in November, due to its property portfolio plummeting in values.

The group said it had raised £620m through a placing and open offer, and plans to sell £275m of preferred shares at 100p to investors including Qatar Holding, who will become Songbird’s biggest investor, China Investment Corporation and Morgan Stanley’s real estate funds.

In addition to the equity raising Songbird announced a new credit facility of £135m.

Chairman David Pritchard said: “The proposals provide stable financial footing for Songbird and are a good outcome for our shareholders.” He added “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.”

The group also used part of the fundraising to acquire a 8.45 per cent stake for £112.5m from Canary Wharf founder Paul Reichmann. The acquisition raises Songbird’s stake from 60.8 per cent to 69.3 per cent.

Songbird said it had narrowed its losses for the six months ended 30 June 2009 to £110.9m from £412.8m the same period a year before.

The group also said that the market value of the property portfolio was down 7.5 per cent to £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.

Yesterday it was revealed that Canary Wharf Group, which manages the Docklands site, had filed a $4.3bn (£2.6bn) claim against collapsed bank Lehman Brothers for unpaid rent.

Currently, the rent is being covered by Nomura and the administrator and the group is insured against future losses on the Lehman space.

John Carrafiell, the real estate supremo who led Morgan Stanley’s role in the takeover of Canary Wharf, advised Songbird Estates on the equity raising.

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.

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.

He became famed for his shrewd direction of Morgan Stanley’s purchase and subsequent sale of a stake in Great Portland Estates, which it bought from Liberty International in 2004 and sold in 2006 – almost doubling Morgan Stanley’s investment in the process.

He is advising Songbird with Morgan Stanley’s managing director in real estate Nick White and executive directors in UK real estate Suniti Chauhan and Edward Knight. 

JP Morgan Cazenove chief executive Naguib Kheraj, directors Bronson Albery and Chris Nicholls are also advising.