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What do You Give the Canadian Pension Fund that Has Everything?

Posted on Dec 16, 2020. by NTI

What do you give the Canadian pension fund that has everything?

KPMG have already given them their gift (a bill worth, according to The Times today, millions of pounds in fees). "Oh, you shouldn't have," said the Canada Pension Plan Investment Board who just hates to disappoint more than 20 million of their compatriots by reluctantly adding an over-preened shopping mall in Manchester to their portfolio. But KPMG said they really should, and handed over the keys to the formerly Intu retail monolith. The Canadians were one of the lenders to Intu, and have now got almost literally what they bargained for when the debenture was signed.

The surprise KPMG gave the Board at the bottom of their stocking was the Trafford Centre, as they couldn't sell it to anyone else (including the ubiquitous Mike Ashley, Henderson Park Capital and Morgan Stanley's property arm). The Canadians loaned £250 million to Intu, securing it against the 'jewel in Intu's crown'. And now they have it themselves and must already be looking at who they can re-gift it to next Christmas.

Was it really June when Intu fell into Administration, sparking article upon commentary of chat about the death of malls and the beginning of a new era in retail? It seems like two lockdowns ago, now. Lenders such as the Canadian Pension Board refused to postpone covenant testing and debt repayments and now have a huge shopping centre in the north-west of Britain with a load of boarded up retail units and restaurants to enjoy in the new year. The Canadians have agreed a debt-for-equity swap and will now manage Trafford Park in the attempt to oversee an increase in its value.

No, seriously.

There is a very good chance the Canadian pension fund could find themselves accessorising Trafford Park with the Bullring in Birmingham and Westfield in East London (which goes with everything), as they have loaned against them, too. So, there is every chance the Traford Centre could end up being their 'best present' this year when they come to describe the contents of their Christmas stocking.

Robbie Duncan of Numis Securities put it well: "You're trying to sell ... probably the best [shopping centre] asset in the UK, but the fact it is doesn't matter. It's still the best asset in the worst sector."

Next time the Canada Pension Plan Investment Board should just ask for a voucher. Then they can buy what they want; ie not a shopping centre.

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