Brookfield and Qatar Holdings prepare bid for Canary Wharf

Deal would be one of the largest in UK real estate corporate history

Canary Wharf

Brookfield and Qatar Holdings are jointly preparing a stunning bid to take over Songbird Estates and gain control of Canary Wharf Group’s £6.28bn portfolio Real Estate Capital can reveal.

The two investors, both major shareholders in Canary Wharf, are yet to make a formal approach for the company but advanced preparations are underway, sources confirmed.

It is understood that the pair plan to buy the remaining share capital they do not own in the listed Songbird Estates, which owns 69.37% of Canary Wharf Group. The remaining 30.63% of CWG is already largely owned by Brookfield.

If it completes, the deal would be one of the largest in UK real estate corporate history.

The  Canary Wharf east London estate is home to some of the world’s largest financial services groups. Its iconic buildings include towers One Canada Square, 25-30 Bank Street and One Churchill Place. CWG also owns significant joint venture stakes in 20 Fenchurch Street, known as The Walkie Talkie, in the City of London alongside Land Securities and the Shell Centre on the capital’s South Bank, with Qatar Holdings’ related company Qatari Diar.

Qatar Holdings already owns 28.6% of Songbird, while Brookfield – the world’s second-largest real estate manager by assets managed – owns a 22.08% stake in Canary Wharf Group. Qatar also holds 125m preference shares in Songbird.

The largest shareholders that the pair are looking to buy out are Simon Glick’s Glick Entities, which owns a 25.93% stake in Songbird; China Investment Corporation, which owns a 15.8% share and 125m preference shares in Songbird; Morgan Stanley Real Estate Investing, which owns 8.53% of Songbird, and Third Avenue Management, which owns 3.19% of Songbird.

However, control of CWG does not directly relate to the shareholdings. Brookfield does not have a seat on the board of Songbird or CWG. Songbird’s board is made up of three seats for Glick, three for Morgan Stanley, two for Qatar and two for independent board members.

This is not the first attempt in the last year to take over Canary Wharf Group. Brookfield promoted a proposal late last year which would have involved a third-party investor coming in and buying out the existing investors. However, it is believed the idea quickly foundered because the different sides could not agree on the value of the company.

Brookfield has held its minority stake since 2004 when the Canadian company attempted unsuccessfully to wrestle control of Canary Wharf.

The takeover move would be one of Qatar’s boldest yet. The Middle Eastern state’s holdings in London are substantial and high profile, including The Shard office tower, luxury department store Harrods and Chelsea Barracks.

Qatar and Canary Wharf Group are together currently the preferred bidder to buy 8 Canada Square at Canary Wharf, HSBC’s headquarters, if HSBC does not exercise its option to buy the tower. The pair have tabled a bid of £1.1bn to the building’s Korean owner NPS.

Canary Wharf Group is entering a new wave of 6m sq ft of development projects in London including the 1.5m sq ft Shell Centre on London’s South Bank – again with Qatar.  At its flagship Docklands estate, Wood Wharf, a 4.9m sq ft project includes 3,100 flats and homes, and 1.9m sq ft of offices, and Heron Quays West will comprise two offices of 700,000 sq ft each.

Songbird has a market capitalisation of £1.96bn, essentially giving the enlarged group a market capitalisation of around £2.83bn. As of 30 June Canary Wharf Group had £2.36bn of net debt.