Canary Wharf, including the landmark skyscraper, is to be floated on the stock market later this month in a share sale which could value the once-bankrupt development at more than £2.6 billion sterling.
The move will turn in a hefty profit for the owners, including Paul Reichmann, the Canadian property magnate, although none of the existing investors intends to sell their stakes as the flotation will comprise new shares worth 25 per cent of the expanded company.
The Canary Wharf tower, visible all across London, will soon share the skyline with a second tower which is under construction for the HBSC banking group and Canary Wharf is expected to confirm that a third 42-storey office tower is also going to be built.
Investment bank Salomon Smith Barney is expected to be named as the occupier for the lower-half of the new Norman Foster-designed tower.
It will have walkways to connect it to the 17-storey office block which is being constructed in front of the vacant site for Citibank, part of the same group of companies as Salomon.
The flotation represents a turnaround in the fortunes of Canary Wharf which collapsed in 1992 when the Olympia & York property company run by the Reichmann family failed. After three years in the hands of administrators and a syndicate of banks, including Lloyds and Barclays, Paul Reichmann and a team of investors bought the business back for £800 million in 1995.
After the flotation, Mr Reichmann will retain a 10 per cent stake in the development he spearheaded. The two largest shareholders, with 15 per cent each, will be the Mutual Series Fund, run by Franklin Mutual Fund of America, and CNA Insurance. Other main shareholders will be the Saudi millionaire, Prince al-Waleed bin Talal bin Abdulaziz alSaud, and Republic National Bank.
By floating on the stock market, the existing shareholders will be able to value their stakes more easily, said Peter Anderson, managing director of corporate finance at Canary Wharf.
The company, which made losses of nearly £100 million last year, does not expect to pay a dividend immediately after its flotation. It does, however, intend to return excess capital in the medium term.
Chief executive George Iacobescu said the money raised through the flotation would be used to repay up to £850 million of outstanding debt and help fund its £40 million contribution to the delayed Jubilee Line underground extension.
He said the entire Docklands development should be completed in the next six years at an additional cost of £1 billion. The £2.6 billion value placed on the entire company is based on its existing buildings, those under construction at the moment and the value of those which will be built.
Companies, particularly investment banks, have been lured to Canary Wharf in the past three years because rents are up to 30 per cent lower than in the City, three miles to the west of the once-derelict docklands area. Set up as an Enterprise Zone by Margaret Thatcher, Canary Wharf has been able to keep rents lower because of the tax breaks this status bestowed.
Despite its troubled transport connections - the Jubilee Line is late and the Docklands Light Railway notorious for its unreliability - Canary Wharf has also been attractive to banks because it can provide vast, open-plan office space.
Mr Anderson does not expect rents ever to be greater than those in the City although he anticipates that the differential might narrow. However, one City source insisted: "It's a long way east of the City and I don't really think the Jubilee link is going to make much difference."
