Canary Wharf Secures £610 Million Loan from Apollo

By Iain Withers

London's Canary Wharf business district announced it would borrow £610 million ($777 million) from U.S. investment firm Apollo to repay bonds maturing in the next two years.

Background

The landlord, Canary Wharf Group (CWG), has struggled with challenging trading conditions since the COVID-19 pandemic. Shifts in working patterns have led to the departure of major office tenants like HSBC.

The refinancing deal indicates strong lender support for the district, but the loan from Apollo will come with higher interest rates compared to prior bonds, which were secured when rates were significantly lower.

Loan Details

The CWG loan is secured against the majority of its 1.2 million square feet retail portfolio. After repaying the bonds scheduled for April 2025 and 2026 using the borrowed funds, the group will face no more substantial refinancings until 2028.

The bonds being refinanced had rates of 2.625% and 1.75%, which are considerably lower than current market financing costs. Specific financial terms of the loan agreement with Apollo were not disclosed.

Market Context

Global property companies are grappling with the need to refinance debts signed before the pandemic at today's elevated finance costs. Despite this, the Apollo deal alleviates some financial pressure on CWG. Brookfield, one of its significant backers, previously agreed to a £900 million financing backstop to assist with the repayment of upcoming bonds in 2025, 2026, and 2028.

Becky Worthington, CWG's CFO, commented, "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."

Property Values

In its annual results published in April, CWG reported a £1.2 billion decrease in property values in the Canary Wharf district in 2023, primarily due to falling office building valuations.

Additionally, CWG is exploring the possibility of converting vacant office spaces into alternative uses, such as hotels. One of its largest tenants, JPMorgan, is also considering options for its European headquarters in London, which may include constructing a new tower.

(USD to GBP conversion: $1 = 0.7850 pounds)