Canary Wharf Group has initiated talks on a major refinancing of its £750m retail portfolio 18 months ahead of a loan maturity as it looks to cash in on the cheap debt available to prime property.
The Docklands landlord is in talks with its lenders regarding the £350m loan secured against its retail and car park assets, an exercise thought to have been codenamed project Toronto.
The loan is not due to expire until 17 December 2014 but CWG is likely to be keen to take advantage of the desire of the major clearing banks to lend on large, safe-haven assets.
Margins on the best buildings have tightened by up to 100bps in the past year.
Lloyds Banking Group wrote the original loan which was extended in March 2011 for a further two-and-a-half years.
Canary Wharf’s retail and parking assets represent 15.6% of the investment portfolio, according to a 31 December 2012 valuation. The £754.3m valuation implies a 46.5% loan to value.
The maximum LTV on the loan is 70%.
CWG broke an interest rate swap relating to the loan in December 2012 at a cost of £29.1m including fees. A new interest rate swap was agreed that fixed the interest rate payable under the loan at 3.3%.
The 2009 extension of the loan saw the margin fixed at 2.75%, but a negative mark-to- market valuation on the pre-existing swaps amounting to £19.97m was blended into a new five-year swap at an all-in rate of 4.425%, giving an interest rate on the loan of 7.2%.
A source familiar with the talks said: “Canary will be able to borrow very cheaply against its retail assets and now is a good time for it to be borrowing.”
Canary’s retail portfolio is among the most successful in the capital. Its four shopping malls, covering around 690,000 sq ft, are fully let.
Canary Wharf Group and Lloyds Banking Group declined to comment.
? Canary Wharf Group formally went under offer to buy the £130m 15 Westferry Circus, E14, this week. The building is in the hands of administrators at Ernst & Young. It is thought to be of strategic importance to CWG, sitting next to the planned Park Place development.
jack.sidders@estatesgazette.com
