The British firm Songbird, the developer behind canary wharf property is one of the worst hit Group by the credit crunch pole vaulting across the Atlantic dumping its worst on them.

The giant British office development located East of London, rented offices to the bankrupt pair Lehman Brothers and Bear Stearns and the hobbling Morgan Stanley. However some of its income was insured by the basket case American giant AIG, which until recently has been of collapse itself.

Songbird revealed in results for the six months to the end of June that the value of its property portfolio has tumbled by £592m, or 9.6% to £6.73bn. Adjusted net assets per share, a key industry metric, fell by 30.7% to 149p reflecting the slump in value of its estate.

It seems that Songbird (flat at 93p) is in a worse position than many of its rivals in the property sector given its exposure to a very narrow cross section of tenants. The struggling UBS( as they have for Lehman and Bear) is of opinion that it may be difficult to find a replacement to occupy the space and may take years to fill the empty offices.

According to one city expert, this crisis is the key issue for property firms like Songbird, which otherwise has a strong estate and is well run.

Songbird issue is more extraordinary as it had the prudence to hedge its rental risk by taking out insurance policies to pre-empt such bankruptcies.

Lehman contributed £41m a year in rent and had a lease expiring in 2033 at a price of £41 per square foot, which was due to rise to £53 per square foot the end of this year. The policy will pay out the equivalent of the rent for a period of four years. As long as AIG remains solvent Songbird will receive compensation.

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Date : 2008-11-12 01:19:53
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