By Iain Withers
LONDON (Reuters) -London’s Canary Wharf business district said on Tuesday it would borrow 610 million pounds ($777 million) from U.S. investment giant Apollo to repay bonds due over the next two years.
Landlord Canary Wharf Group (CWG) has faced challenging trading since the COVID-19 pandemic, as changing working patterns have driven out key office tenants including HSBC.
The refinancing deal showed strong support from lenders for the district, CWG said, but the loan from Apollo will mean higher interest rates for the district after it repays bonds taken out when rates were much lower.
CWG said the loan was secured with clients and funds managed by Apollo against the majority of its 1.2 million square feet retail portfolio. After repaying the bonds due in April 2025 and 2026 with the proceeds, the landlord said it now had no further material refinancings until 2028.
The bonds being refinanced by CWG had rates of 2.625% and 1.75% respectively, well below current industry finance costs.
The landlord did not disclose the financial terms of the deal with Apollo.
Property companies have been squeezed globally by having to refinance debts agreed before the pandemic at today’s higher financing costs.
The Apollo financing deal nonetheless eases some pressure on CWG. One of its key backers Brookfield had agreed a 900 million pound financing backstop with CWG last month in case it needed help repaying its 2025, 2026 and 2028 bonds.
“We have achieved a significant amount of financing over the last 12 months and this latest deal with Apollo is testament to the strength of the proposition and our performance at Canary Wharf,” said Becky Worthington, chief financial officer for CWG, in a statement.
Property values in the Canary Wharf financial district fell by 1.2 billion pounds in 2023, led by a decline in the value of its office buildings, the landlord said in annual results published in April.
Reuters has reported that CWG is considering converting empty office space into other uses including hotels. One of its biggest occupiers – JPMorgan – is weighing options for its European headquarters in London, including potentially building a new tower.
($1 = 0.7850 pounds)