Once Britain’s Most Expensive Building, Trafford Centre Is Taken Over By Lenders
The 2M SF Trafford Centre still holds the record for the highest price paid for a single building in the UK, when Intu bought it for £1.65B in 2011. Today, it epitomises the decline of the shopping centre, with one of its lenders taking ownership of the scheme after a sales process couldn’t find a bid of half that price.
The credit division of Canada Pension Plan Investment Board said it acquired the shares in the holding company that owns the Trafford Centre after a sales process for the asset did not turn up a “viable” bid or refinancing option.
CPPIB provided £250M of junior debt secured against the centre in 2017. There is also a £750M securitised loan against the centre.
As recently as last year, Intu valued the centre at £1.7B, and there were reports that it would try and refinance it at a value of £2.1B.
After Intu’s collapse into administration, CPPIB appointed CBRE and PJT to try to find a buyer for £1.2B or more to try and get its money back.
But bids for the centre came in between £600M and £900M, and CPPIB decided that it would rather take ownership of the centre than sell at a loss. Bidders included Morgan Stanley and Henderson Park.
The reason for the low bids is not hard to fathom: In a financial report earlier this year, Intu said income from the centre was only 2% higher than the interest payments owed on the £1B of debt, and that was before the full impact of the coronavirus pandemic had begun to take its toll, with retailers withholding rent payments, cutting deals for lower rent or simply going out of business.
“While conditions for retail in 2020 have been very challenging, we are able to take a long-term view and believe that, with strategic management and investment, the Trafford Centre has strong prospects,” CPPIB Head of Real Assets Credit Geoff Souter said in a statement. “An immediate priority is to support the Trafford Centre’s management, ensuring continued optimal operation of the Trafford Centre, and to appoint a long-term expert operating partner.”
The likelihood is that partner will be Unibail-Rodamco-Westfield.
The move marks the end of the association with the centre of Peel Holdings and its founder, John Whittaker, who developed it in the 1990s. He put his mother’s old Mercedes-Benz car in the lobby, and the centre also contains a statue of himself dressed as a Roman legionnaire. Peel moved its offices out of the centre earlier this year.
In many ways, that acquisition of the Trafford Centre from Peel was the beginning of the end for Intu. It undertook the deal in order to see off a takeover bid from Simon Property Group, but its shares never reached the level offered by Simon.