Tuesday, February 4, 2025
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London’s Canary Wharf, a major financial district, has secured a $777 million loan from investment giant Apollo Global Management. This refinancing agreement allows Canary Wharf Group (CWG), the district’s landlord, to repay existing bonds maturing in the next two years. While the loan comes with higher interest rates compared to the previous bonds issued at lower market rates, it provides CWG with a crucial buffer and eliminates near-term refinancing risks.

The COVID-19 pandemic significantly impacted Canary Wharf, as work-from-home trends led to the departure of key office tenants, including major financial institutions like HSBC. This decline in occupancy rates presented a challenge for CWG, particularly in managing its debt obligations.

The Apollo loan, secured against a majority of CWG’s retail portfolio, allows for the repayment of bonds maturing in April 2025 and 2026. While the specific terms of the loan haven’t been disclosed, it’s understood that the interest rates will be higher than the previous bonds due to the current market climate. Nonetheless, this deal provides CWG with a breathing room until 2028, when its next major refinancing is due.

CWG views this refinancing as a sign of continued investor confidence in the district’s potential. The previous bonds had significantly lower interest rates (2.625% and 1.75%) compared to current market rates, reflecting the changed economic landscape. Property companies worldwide are facing similar challenges, having to refinance debts secured before the pandemic at today’s higher rates.

The Apollo deal alleviates some of this pressure on CWG. Last month, another key backer, Brookfield, had offered a £900 million financing backstop in case CWG needed assistance with bond repayments in 2025, 2026, and 2028.

“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,” stated Becky Worthington, CWG’s Chief Financial Officer.

The decline in occupancy rates has prompted CWG to explore alternative uses for its vacant office space. Reports suggest they are considering converting some areas into hotels or other non-traditional office uses. Additionally, one of the district’s biggest tenants, JPMorgan Chase, is evaluating options for its European headquarters in London, potentially including a new building.

This deal with Apollo highlights the growing role of non-bank lenders in the financial landscape. Apollo is a major player in the private credit market, which has boomed in recent years as these institutions fill the gap left by traditional banks, often catering to borrowers with a higher risk profile.

With the refinancing secured, CWG can now focus on navigating the changing commercial real estate landscape. Exploring alternative uses for office space and attracting new tenants will be crucial for the district’s future success.

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