CPPIB backs UK shopping centre with £250m loan

The subordinated debt package is indirectly secured on intu’s Trafford Centre property and is due to mature in 2022.

Canada Pension Plan Investment Board has provided a £250 million ($328 million; €281 million) junior loan to intu Properties.

The UK shopping centre company is owner of the Trafford Centre in Manchester, valued at £2.3 billion, and the Lakeside Shopping Centre in Essex, valued at £1.4 billion. The company also owns retail centres in Spain.

The £250 million subordinated facility is indirectly secured against the Trafford Centre and has a maturity of 2022. It followed a £140 million refinancing debt secured on the Milton Keynes intu shopping centre, as well as a £366 million loan to secure a stake in the Xanadu centre in Madrid.

“This investment fits well with our strategy of providing customised, large-scale funding solutions to best-in-class operators of high-quality underlying real estate assets,” said Geoff Souter, head of private real estate debt at CPPIB.

In total, debt on the Trafford Centre via commercial mortgage-backed securities notes is £775.2 million with no financial covenants, according to intu’s first-half results report published today.

The announcement comes as traditional retail outlets are under pressure online retailers. Occupancy rates across intu properties remained stable for the first half at 95.9 percent, despite the collapse of department store BHS. However, footfall dropped by 0.5 percent.

While flagship stores Trafford Centre and Lakeside continue to show positive traction, other outlets, such as intu Potteries and intu Braehead, have seen their values decline. Underlying earnings dropped marginally to £98.5 million compared with the first half of 2016.

intu has been on a refinancing spree this year, having completed a £488 million refinance of its Merry Hill store in addition to the Milton Keynes loan. No major debt payments are required until 2021 when £921 million is due. In total, the company’s external debt is £4.75 billion and the company has £922 million in cash available.

“intu has performed robustly over the six-month period in a UK retail environment which continues to be challenging,” said David Fischel, chief executive of intu.

“Retail brands are being selective in their expansion, looking at established locations such as our 17 prime shopping centres which are attracting high footfall through their differentiated offering and compelling customer experience.”

Representatives from both intu and CPPIB were not available to comment further before publication.