s the summer neared its end, shareholders, to the immense disappointment
of the doomsters who had predicted the end of the world, saw their biggest
summer gains in five years with the FTSE 100 forty percent above its
March low. Nevertheless, things were not good, unemployment was surging and
lending remained weak. Those who had hoped for a quick turnaround there were
disappointed.
To the relief of all, another 1930s style Great Depression had been avoided. That
did not lessen the anxiety at the Irish Netherlands Bank, where concern was
growing over certain of its commercial property loans, more notably those relating
A
to Canary Warf. The bank was part of a pool that had provided an almost nine
hundred million pound loan to the Songbird Consortium, sixty percent owner of
the Canary Wharf Group. Songbird announced unless it could refinance the loan,
repayable in May 2010, it could breach its covenants.
The story of the Canary Wharf development went back to the early eighties, when
the American banker Michael Von Clemm, chairman of the bank Credit Suisse
First Boston, and the property tycoon Gooch Ware ‘G’ Travelstead, an American
property developer and entrepreneur, persuaded the London Docklands
Development Corporation and the Government of Margaret Thatcher that a new
financial services district, located at the old West India Docks, was viable. They
planned to repeat the Boston, Massachusetts, docks redevelopment by the
transformation of the Isle of Dogs area in London’s derelict Docklands.
From the outset the project was plagued by a chain of corporate collapses and
financial problems. When finally the Canadian developers Olympia and York took
over, they too were hit by a recession. But, the project was saved by a new
company, the Canary Wharf Group, which in turn was taken over by the Songbird
consortium in 2004.
Then came the crisis and the value of City commercial property plunged, as did
Songbird’s portfolio. The property company’s liquidation seemed inevitable,
threatening the solidity of the Irish Netherlands.
Fitzwilliams, fearing the worst, turned to Tarasov, who was working to form a
group of investors that included the China Investment Corporation, a sovereign
wealth fund, and Libyan investors.
Canary Warf was not the bank’s only problem. Its Dublin end was involved in a
vast one billion euro new town development programme in the Pembroke district
to the south of the city. Its developer, Allen Holdings, had announced the project
would provide thousands of jobs on completion. The project included offices,
leisure facilities, a shopping centre, a multiplex cinema, a bowling alley and what
the prospectus described as a family entertainment centre.
The new town, strategically located only fifteen minutes by train from Dublin
City centre, fifteen minutes to the airport, was to have provided homes for
thousands on completion. In addition the Irish developer had planned a new deepwater port, which he then described as one of the most exciting infrastructure
projects to be undertaken in Ireland.
Unluckily for Allen, one year after the debacle caused by the collapse of Lehman
Brothers, he was in deep trouble, struggling to keep his head above water, as the
aftershocks hit Ireland. Unemployment was surging and public finances in a
disastrous state.
‘If things continue like this Pat we’ll have to get into bed with Tarasov.’
Pat nodded, he liked the idea, he liked anything that was unorthodox. The idea of
linking up with the Russian opened up vast new fields of opportunity, which to
Fitzwilliams’ mind were potential minefields.
‘We don’t have much choice, at least we’re free not like our High Street friends.’
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‘New opportunities are always risky Fitz,’ replied Pat reading his mind. ‘In the
past people weren’t afraid of exploring new territory. Now it’s others, the Russians
and the Chinese who are showing the way.’
‘What’s this I’ve heard about Battersea Power Station Pat?’
‘Battersea Power Station?’ mumbled Kennedy. ‘Real Estate Opportunities is
involved…a Dublin Irish firm.’
‘Fuck Dublin,’ snarled Fitzwilliams losing his famous cool. ‘We’re trying to get
out of trouble, not into it. We’ve enough trouble with Canary Warf without taking
on any more lame ducks.’
Kennedy clamed up, it had been his idea to get involved with the developers,
considering the four hundred and fifty acres of space waiting to be built on. The
site, a stone’s throw from his apartment, provided a sad panorama and a constant
reminder of the opportunity in attendance as he crossed Chelsea Bridge to drive
into the City each morning.
The power station had been closed down and stood gutted for as long as he could
remember; a casualty of political dithering. Plans dated back to 1981, making it
one of London’s longest running property sagas. Only the shell remained, a strange
architectural monument in the heart of London. Its rebirth had been launched in the
middle of 2008, soon after Kennedy’s Irish friends had completed the purchase of
the thirty eight acre site, their eyes fixed on a vast development. Then with the
arrival of the crisis its value plunged leaving the overambitious Irish developers in
debt to the tune of one and a half billion pounds.
Fitzwilliams had reason to fell glum. A way had to be found out of the mire and
as prospects in the UK faded the idea of working with Tarasov’s seemed, like it or
not, a possible solution to the impasse. The British economy was surviving on
hand-outs. All together the cost of the nation’s rescue, with bank bailouts, capital
injections, purchase of frozen assets, guarantees and Bank of England provisions,
had reached a barely imaginable one point three trillion pounds, equivalent to over
eighty percent of its GDP.
The global economy was not faring much better, with a total of nine trillion
dollars, one thousand dollars for every single person on the planet, pumped into its
stricken economy.
Britain’s share would weigh heavily on its future.