Word has it SEGRO is seeking a plot in or around the Square Mile on which to dig a ruddy great big hole.
A cavern capable of containing a ‘subterranean city logistics hub’. A hole big lorries rumble into and little vans scurry out of. With the possibility of a cherry on top in the shape of over-ground development.
This is not surprising. Last September, David Sleath’s merry band signed a deal with SNCF and French developer Icade to insert an 800,000 sq ft underground logistics hub beneath the over-ground redevelopment of the Gobelins station in Paris, not far south of Notre Dame Cathedral.
Where SEGRO’s agent Savills is looking in London is a mystery. There are 1960s underground car parks with complex ownerships that might be converted, with difficulty. But can I suggest a freehold on which a valuable commercial cherry could be sat?
Has CPPIB repossessed a clunker in the Trafford Centre – or a long-term runner?
Cushman & Wakefield is selling 41 Tower Hill, a traffic-marooned nine-floor block adjacent to Tower Gateway DLR, hard against the main line into Fenchurch Street. To the rear sits the Minories car park. The freehold of these 1.7 acres was bought by now-troubled Chinese property company SRE in 2016 for £84m.
Also marooned in this unedifying architectural triangle lies 40 Tower Hill, a smaller block owned by an unknown Middle East investor and leased out as a seat of learning for overseas students as the Tower Hill Study Centre.
The Chinese government might want to bag either block as temporary space, if it ever gets to start work on its new embassy in nearby Royal Mint Court. But bag that as well and SEGRO would have acres of underground space. We will leave it to the imagination of developers (and C&W) as to what might work. Someone is probably already on the job.
Clunker or runner?
When the Canadian Pension Plan Investment Board (CPPIB) pulled its £250m block of debt at the 11th hour from the Jenga tower of rescheduled intu loans last June, the owner of Lakeside and the Trafford Centre collapsed. The Canadians evidently did not share the faith of the other debt holders that things would take a turn for the better.
CPPIB’s loan was secured against the Trafford Centre, which fell into its hands along with responsibility for paying high interest to holders of some £675m of bonds.
You can imagine how the intu board felt at this last-minute betrayal, or, indeed, the other debtors who had agreed the standstill. Note: Canadian pension funds tend to have more wolf than Labrador in their DNA than Brits might imagine. British-born boss Mark Machin, 54, trained to be a surgeon before moving on to Goldman Sachs to operate in a world where the scalpel is just another tool in the box. In 2015, Machin joined CPPIB – effectively a $460bn sovereign wealth fund whose beneficiaries are pensioners rather than despots.
Has CPPIB repossessed a clunker – or maybe a long-term runner? Last year, it failed to flip the 1.97 million sq ft centre, which stands in an ocean of car parks and has a five-mile light rail connection into Manchester city centre.
Word is CPPIB wanted £1.2bn, as the mark-to-market value of £675m bonds paying 6% to 8% interest is close to £1bn (meaning sellers are going to want a lot more than the face value for surrendering bonds paying high interest rates.) The highest bid is rumoured to have been £800m, horribly low for a centre once valued at over £2bn.
Just before intu went under, it published figures showed rents had dived from £105m in 2019 to an estimated £66m in 2020. This year? £50m? Who knows?
The problem CPPIB has is that the interest on the bonds must be around £50m as well. Never mind. Machin said last month: “We are increasingly focused on creating added value to our assets.” Any developer fancy a long-haul JV with scary but clever CPPIB?
Peter Bill is a journalist and the author of Planet Property and Broken Homes