Moody’s has downgraded the debt of landlord Canary Wharf Group warning that the company faces a ‘difficult operating and funding environment’ for at least the next year.
The company, which is owned by Qatar’s sovereign wealth fund and Brookfield Asset Management, has more than £1.4 bn worth of debts coming due in 2024 and 2025.
Moody’s thinks the firm may need to rely on asset sales to repay borrowings or inject fresh capital into the business.
The ratings agency said such sales would take place ‘amid still constrained UK real estate investment markets with cautious investor appetite leading to low transaction volumes and making it difficult to sell assets without offering substantial discounts’.
As such, Moody’s has downgraded Canary Wharf Group to Ba3 from Ba1 and placed it on review for further downgrade. ‘The recent banking turbulence has negatively impacted sentiment and softened the availability of funding for the sector, delaying a recovery of investment markets and putting further downward pressure on values,' Moody's said. In its view, Canary Wharf Group has been somewhat aggressive in managing its refinance risk by overly prioritising obtaining the best covenant lite structure over refinancing debt well before its due date,’ the ratings agency said in a note.
Canary Wharf Group develops, manages and currently owns interests in 9 million ft2 of mixed-use space including over 1,100 Build to Rent apartments. The investment properties, developments, and development land it owns were valued in total at £8.3 bn as of 31 December 2022, with 38 income-producing properties generating £294 mln of gross rental income.
Canary Wharf Group is attempting to reinvent a district originally developed for investment banks that wanted large office towers. The company is building apartments and attempting to lure life science companies as part of an effort to inject new life into the area, which has seen several major tenants shrink their office footprints or leave the neighborhood.
The Estate consists of 128 acres of land and includes 30 office buildings, five shopping malls with over 300 shops, cafés, bars, restaurants, and amenities, and over 16.5 acres of open space.