Revealed: Buried Accounts Show Canary Wharf Group Is Weathering London’s Slowdown Better Than You Think
Not much has been heard about the financial performance of Canary Wharf Group since the company was taken private by Brookfield and the Qatar Investment Authority in a £2.6B deal in 2015. But it is amazing what you can find if you look hard enough.
Documents at Companies House show that in March 2018 the UK company converted to a REIT listed on the little-known International Stock Exchange in Jersey.
This means its annual report is available for public consumption once again, though it is not easy to find, and not appearing on Canary Wharf’s website. What does it show? Canary Wharf, with its large concentration of financial services tenants, was expected to suffer greater falls in rents and values as a result of Britain’s decision to leave the European Union. But the company has actually fared very well, and is gearing up to become a far more mixed-use destination.
According to the 2018 results for the Jersey-listed company, called Stork Holdings, Canary Wharf's adjusted net asset value increased by 2.5% in the 12 months ending December, as values and in particular rental income held up well.
The value of its portfolio fell 0.7% on a like-for-like basis to £8B, but net asset value rose because debt and costs fell faster. When Brookfield and QIA bought the business its portfolio was valued at £6.3B.
Its office investment portfolio held up in value, rising by £41M to £5.065B. Its retail portfolio was the driver of the overall drop, falling by £72M to £1.232B. The rest of its portfolio is development sites, which were again broadly flat.
The company produced overall rental income of £284.4M, up from £281M the year before. Its investment portfolio totals 6.8M SF across 18 buildings, and it manages another 19 properties on the Canary Wharf estate owned by other investors.
Its existing office portfolio is 95.8% leased, down from 96.6% the previous year, with a weighted average lease term of 12 years, down from 12.4 years at the end of 2017. The company said it completed 208K SF of leases in 2018 at an average rent of £47/SF and for an average term of 13 years. In May it leased 365K SF to the European Bank of Reconstruction and Development but did not specify the rent. The average yield of its office assets was flat across the year at 4.7%.
Its retail portfolio also held up well in terms of leasing. The company said it undertook 18 retail rent reviews which resulted in a £425K uplift on existing rents, with all of the reviews agreed is above valuers’ estimated rental values. Footfall at its retail assets was up 0.31% compared to a national average of a 3.79% drop. The fall in the value of its retail portfolio was a result of valuers increasing the average yield of its assets by 35 basis points to 4.3%.
The company has a major development pipeline, with which it aims to continue to become a more mixed-use rather than office-dominated company.
Wood Wharf is the largest element of the pipeline, and will total 5.3M SF, and the results give more detailed info on the scheme than has previously been released. It will include 3,600 homes, 1.9M SF of offices and 380K SF of retail and leisure space.
The first phase has already commenced construction, and will begin to complete in the fourth quarter of this year. It will total 1.8M SF, 1.3M SF of which will be residential. Of this, 501 units will be for rent, and are scheduled for completion toward the end of the year. They will be managed by Canary Wharf’s Ventus rental management brand, as will Newfoundland, a 639K SF rental apartment building on another part of the estate that will comprise 636 apartments and complete in June next year.
The first phase of Wood Wharf will also comprise 400K SF of offices and 100K SF of retail and leisure. Canary Wharf said four leases have been agreed and five more are in solicitors’ hands. The Office Group has taken office space, Ennismore is opening a hotel and Third Space is opening a gym at 15 Water St.
The second phase of Wood Wharf will be smaller, at 732K SF, with 408K SF of offices, 69K SF of residential, 157K SF of serviced apartments and 98K SF of retail. Clearing works for the site will start this year.
Canary Wharf is significantly altering plans for its North Quay development site, which was originally envisaged as a scheme comprising 2.4M SF of offices. In the results the company said it was working up plans for a more “flexible mixed-use scheme” which would be more in keeping with the current needs of the market, and smaller at 1.8M SF. It would include offices plus potentially retail, residential, student accommodation and leisure uses.
