Songbird Estates, the 60% owner of Canary Wharf Group, said today it was unsure what would happen to the 1m sq ft of space formerly occupied by collapsed investment bank Lehman Brothers.

Lehman had a lease expiring in 2033, at a rent of £41/sq ft, rising to £53/sq ft in November, putting the current rent paid by Lehman at £41m a year.

Company secretary John Garwood said: 'It is too early to assess the full impact of the failure of Lehman which occurred after the period end.

‘However, Nomura have announced that it has reached agreement to acquire the European equities and investment banking operations of Lehman and efforts are being made by the administrator to sell other parts of the business as a going concern.’

The rental income provided by Lehman is insured for four years by AIG, the insurance group bailed out by the US government two weeks ago following its own funding problems.

However, under this agreement, AIG had to maintain a certain credit rating, and it has now been downgraded.

This means AIG must now post collateral into the insurance deal or find a new guarantor, a process which is ongoing.

Songbird updated the market on Lehman as part of its interim results for the half years to 30 June. It said that adjusted net asset value fell 31% during this period to £1.49 a share. Its property portfolio, comprising investment and development properties, fell in value 10% to £6.7bn.

It said it was difficult to asses the impact that the fresh wave of turmoil experienced by the financial markets over the past few weeks would impact on values and rents.

Topics