Canary Wharf Group (CWG) has secured two fresh financing facilities together worth £600m, split equally among four of the developer and investor’s relationship banks, Lloyds Banking Group, as well as Barclays Bank, HSBC and Wells Fargo.
The first facility is a straight refinancing of a maturing £350m term facility from Lloyds with a slightly larger £360m over five years, secured by an enlarged retail portfolio. The four banks have committed an equal £90m in the new term facility.
The valuation of CWG’s retail portfolio has now surpassed £1bn for first time, at £1.045bn at the end of June, driven by a 12.7% increase in the completed malls value to £978.0m.
In addition, the Canary Wharf Crossrail mall, still in construction and due to be completed in May 2015, has increased in value from £36.5m to £67.0m reflecting construction progress in the period.
Lloyds, Barclays, HSBC and Wells have also equally provided a five-year £240m revolving credit facility (RCF), of which £200m is available immediately with a further £40m available upon completion of the Canary Wharf Crossrail mall.
The new RCF will be used to for general corporate and liquidity purposes as well as to finance future development, for which CWG has the largest pipeline of any London developer with 9.8m sq ft at Canary Wharf and 1.4m sq ft elsewhere in London.
CWG and has plans to expand into sale, rental and social housing, as well as its ongoing office and retail diversification ambitions.
The margin for the £360m term loan and the initial margin for the £240m RCF is 150 basis points over LIBOR, with staggered margin increases on the RCF in line with usage.
Last week, CWG lodged an application with the Commercial Court in the High Court Queen’s Bench Division in respect of the issue of lost interest arising from the investor’s divestment of 10 Upper Bank Street and its subsequent release as collateral from the 2001-issued Canary Wharf Finance II plc securitisation.
As a result, CWG cancelled £577.9m of A1 notes, £26.1m of B3 notes and £35.3m of C2 notes and terminated the related interest rate swaps at a cost of £17.9m.
Bondholders in Canary Wharf Finance II plc could be entitled to up to £168.74m in interest payments which would have been due over the remaining term of the long-dated CMBS.
However, ambiguity over the original documentation leaves some doubt as to whether bondholders are in fact entitled to some, all or none of the £168.74m, which CWG has agreed to place on deposit with Deutsche Bank’s London Branch, as escrow agent, until a court order clarifies or a compromise is reached
CWG divested the 32-storey 10 Upper Bank Street, retaining a 10% equity stake and asset management responsibilities, while selling a 70% stake to China Life, the country’s largest insurance group, and a further 20% to Qatar Holding, the global investment house founded eight years ago by the Qatar Investment Authority (QIA).
The aggregate sale price was £795m, reflecting just under a 2% premium to the tower’s £780m valuation as at the end of December 2013.
The China Life-led consortium refinanced 10 Upper Bank Street with a circa £440m five-year senior loan provided by three of the four banks which closed the two new facilities announced today – Barclays Bank, Lloyds and HSBC – priced at 150 basis points over LIBOR.
The sale of 10 Upper Bank Street at £795m reflects the continued yield tightening for London’s most prime skyscrapers, which is expected to be evident again when the sales of both HSBC Tower in Canary Wharf and the Gherkin at 30 St. Mary Axe conclude in the coming months
Sir George Iacobescu told CoStar News that he expects the sale of HSBC Tower to effectively “re-rate the value of Canary Wharf assets”.
Songbird Estates, which owns 69.37% of CWG, reported that its overall property portfolio had risen by 8.4% over the six months to the end of June to £6.28bn, substantially driven by the uplift in value of CWG’s retail portfolio.
At the company level, Songbird Estate’s corporate loan to value ratio is now 49.2% at 30 June 2014, down from 56.3% at 31 December 2013, and the first time group LTV has fallen below 50%.
The only other shareholders in CWG with a holding of more than 3.0% are the Brookfield group of companies which maintains a 22.08% interest and Franklin Resources Inc which holds 7.10%.
On Tuesday, Wells Fargo separately closed a £163.2m seven-year combined term loan and RCF for Intu Properties’ 50% shareholding in the 1.4m sq ft St David’s shopping Centre in Cardiff.
The dual facility is split £122.5m term loan and a £40.7m committed RCF, which is currently undrawn. Pricing on the two facilities are expected to be slightly higher than the 150 bps CWG secured for its two new bank facilities today, owing to a slight premium for the shareholding rather than direct mortgage-backed security.
St David’s shopping centre is jointly owned by Intu and Land Securities Group.