Office valuation fall leads £1.1bn write-down on CWG estate

More than £900m has been wiped off the value of Canary Wharf Group’s 6.9m sq ft office estate, according to newly filed accounts for the year ended 31 December 2023. The group’s office portfolio has reduced in value from £5.2bn in 2022 to £4.3bn, despite an increase in rental income from £242m to £248m and a marginal drop in occupancy from 92.5% to 91.1%.  Occupancy figures for the office estate do not include the 636,600 sq ft 10 Cabot Square, however, which CWG said was not actively being relet. In December last year, CWG took a sublease on the former Barclays HQ so it could reposition it to “meet the increasing demand for high-quality, sustainable office and life sciences uses”. Headline rents across the office estate are £60.76 per sq ft, up from £59.69 per sq ft in 2022. The weighted average unexpired lease term is 11.1 years to expiry and 8.9 years to break – up from 10.6 years and 8.7 years respectively. CWG said it signed 10 office lettings, including renewals, during the year, totalling 94,000 sq ft and generating £5.7m of rent. A further five lettings and renewals totalling 53,000 sq ft were under offer at 31 December 2023 with a potential to secure £3.1m of annual rent. Three were signed after the year end, including its deal to retain Morgan Stanley on the estate. The investment bank has agreed to stay in 547,000 sq ft at 20 Bank Street until 2038. CWG said that the office leasing market was expected to “present further challenges” over the coming year and that it would continue to be a key focus of risk management. “The group has a strong history of creating value for office tenants,” it said in the report, “and controls for these risks will continue to focus on engaging with current tenants to understand their requirements, diversifying product offerings, while engaging with new sectors, including life sciences, and continuing the development of premium space on the multi-dimensional estate.” The value of the group’s 1.2m sq ft retail portfolio remained relatively static at £1.1bn, with rental income up from £56.8m in 2022 to £68.5m and average headline rents increasing from £36.53 per sq ft to £63.42 per sq ft. CWG signed 75 retail deals over the year, totalling 175,000 sq ft and £6.9m of rent in new deals and £4.4m in renewals. In its build-to-rent portfolio, which now comprises four assets and 800,000 sq ft of space, values fell from £665m to £598.9m. Rental income increased from £21.3m to £26.2m.  Occupancy rates fell from 96.7% to 88.2%. Across the whole estate some £1.1bn was wiped off the value of its property portfolio in 2023, with its value dropping from £8bn to £6.9bn. The group’s NAV per share fell by 83.3% to just 84p during the period. Underlying revenue was up from £476.7m to £491.9m. The total pretax loss for the year ended 31 December was £889.3m, compared with £194.4m in 2022. CWG said the loss was caused by “significant property revaluation deficits”.  CWG has also announced that it has secured £553m of fresh financing on projects across its estate. The company said the refinancing would give it “increased financial flexibility to implement its transformation plan”, as well as significantly extending its debt maturities.  The new financing deals include £132.3m secured on 15 and 20 Water Street, E14, £341m secured on 25 Churchill Place, E14, extending the loan until July 2030, and a loan of £80m for the construction of two new serviced apartment buildings at 3 and 15 West Lane, Wood Wharf, E14. CWG is also in talks with lenders on £900m of debt that it intends to extend or refinance before the end of the year. Chief financial officer Becky Worthington said: “These loans are testament to the strength of our assets, the transformation that has been taking place at Canary Wharf and the support we have from our lenders for our long-term plan.” Compare and explore the Docklands market >> Photo © David Taylor/Shutterstock