Johannesburg - Capital & Counties (Capco), the listed specialist central London property company, has taken a knock to its residential property valuations following the vote for Brexit.
The company disclosed in its financial results for the six months to June released yesterday that the value of its land holdings in the Earls Court district in London were written down by 14 percent to £1.2 billion (R22.6bn) from £1.4bn following the vote.
It said the downward move in property valuations reflected the valuers’ assessment of the weakened sentiment in the central London residential market following the EU referendum.
“At ECPL (Earls Court Partnership Ltd), the valuer has reflected a higher risk premium post the EU referendum through a higher developer’s margin for consented development land as well as trimming sales values,” the company said.
Bloomberg reported that Peel Hunt analysts, including James Carswell, wrote in a note to clients that they expected to see a reduction in prices and a further hit of 10 percent to the valuation of Earls Court this year.
However, Capco stressed property valuers across the industry were stating in their valuation reports that their valuations carried a higher than normal level of uncertainty “because there is little or no empirical evidence as at the valuation date due to the unprecedented nature of the EU referendum result”.
The group has a 63 percent controlling interest in ECPL, the investment vehicle with Transport for London that owns the land previously occupied by the Earls Court exhibition centres.
The approved masterplan for Earls Court for the 70 acres of prime land in Chelsea and Fulham provides for 7 500 new homes, including Lillie Square in Fulham, creating 10 000 new jobs and delivering more than £450 million of community benefits. The exhibition centres are currently being demolished.
The other major estate Capco owns in London is Covent Garden, which represents 59 percent of the group’s portfolio.
Driven by rental growth, the valuation of Covent Garden rose 3 percent like-for-like to £2.1bn in the six months to June.
Ian Hawksworth, the chief executive of Capco, said the group had two of London’s best estates in Covent Garden and Earls Court and remained confident in these estates and current conditions on the ground remained positive.
“Covent Garden is established as a world class retail location, attracting high retail and consumer demand and continues to deliver immediate value creation.
“At Earls Court, we continue to make positive progress on site. While the last quarter has been characterised by uncertainty in the London market as a whole, the value of this estate will increasingly be realised in the years ahead.”
Hawksworth said Capco’s financial position was strong and with low leverage, high liquidity and modest capital commitments, the business was well placed to withstand macroeconomic uncertainty.
Capco yesterday reported a loss of £109m in the six months to June compared with the profit of £431.1m in December.
Net rental income increased by 6.3 percent like-for-like to £40.5m from £38.4m.
Adjusted net asset value a share dropped by 4.7 percent to 344p from 361p in December, which together with the 1p dividend paid in June represented a total return of -4.5 percent. An unchanged interim dividend a share of 0.5p was proposed.
Capco shares yesterday fell 4.45 percent to close at R53.51.
BUSINESS REPORT