Canary Wharf sticks by Clifford Chance on sale...

A team led by Clifford Chance corporate finance partners Adam Signy and Joel Ziff is gearing up to advise Canary Wharf on its impending sale, following a formal offer last week from the Morgan Stanley Real Estate Fund.

Clifford Chance, a longstanding adviser to the property developer, ran into trouble last month over the 1992 drafting of its lease with the Telegraph Group for 1 Canada Square. Despite that row, which centres on the length of the lease, Canary Wharf is sticking with the magic circle firm and prospective tenant. Group legal counsel Michael Ashley-Brown would not comment, but the company confirmed that Clifford Chance had been instructed.

The momentum for the sale began in March, when Canary Wharf's latest round of results included a profits warning. The results revealed details of put-back clauses that allowed tenants with unused space to place it back with the developer, which in turn would reduce the property company's revenues.

"The risk was that a significant number of tenants would exercise these clauses and Canary Wharf would be forced to try and let the space in a declining market," explained one property partner unconnected with the sale. "Canary Wharf bet on the market and the market's gone against them."

When the news broke that Canary Wharf's share price had tumbled, it became very attractive to potential purchasers. Once it became the subject of a bid, however, the share price rocketed, rising by 46 per cent on the day of the announcement, to close at 263p. Bids are expected to be around the 300p mark. "The deal is likely to hinge on the quality of Canary Wharf's income streams," the partner added.

On Friday 6 June the Canary Wharf board announced that it had been approached by a number of parties in relation to a possible offer.

The auction, which is expected to be a lengthy process, is likely to keep several firms active over the summer. Morgan Stanley Real Estate was first to go public with its bid on 10 June.

Other potential bidders are likely to include Land Securities, a client of Nabarro Nathanson, British Land, regularly advised by SJ Berwin, and Canadian property company Brascan. None of the law firms would comment on whether they had received instructions at this stage.