Capco moving ahead with the demerger of Covent Garden
Capco, which maintained its interim dividend at 0.5 pence per share compared with the same period last year, also confirmed that it was planning to launch its £2.8bn Covent Garden portfolio as a central London focused real estate investment trust (Reit).
Capco’s share price traded at R37.39 yesterday, with a price to earnings ratio of around 78. The share price was trading at more than R77 per share in 2016, but has fallen due to Brexit.
The demerger was expected to be complete before the end of the year and to list Covent Garden and EC (Earl's Court) Properties separately on the LSE with secondary listings on the JSE.
“Covent Garden is now of a scale and income profile to be strongly positioned as a central London-focused Reit”, chairperson Henry Staunton said in a statement.
EC Properties would aim to optimise and realise the value of its Earl's Court land interests, over time.
Capco chief executive Ian Hawksworth said: “The West End in Central London is well-positioned for continued long-term success.“At Earl's Court, we have created one of London's most important mixed-use development opportunities, which has the ability to evolve with market dynamics and bring forward much-needed homes for London,” he said.
Covent Garden London principally comprises the Covent Garden estate and Capco’s 50 percent interest in the Lillie Square joint venture, the development of which was well-progressed, with its second phase expected to be delivered in 2020.
Capco’s remaining business, comprising the interests at Earl's Court, would become EC Properties, a London land enablement and development company.
The properties of EC Properties were independently valued at £426 million as at June 30, 2019.
Following the demerger, Covent Garden and EC Properties would each retain their existing debt facilities. In addition, EC Properties would retain cash of about £145m.
The target administration costs of Covent Garden and EC Properties were expected to be about £20m and £10m respectively.
The group said the valuation of Covent Garden rose 0.5 percent to £2.6bn in the interim period.
The equivalent yield remained unchanged at 3.6 percent, reflecting the independent valuer's view of the strength of demand for central London retail investments. The performance of retail and dining operators in the West End of London had proved more resilient than the wider UK market.
Earl's Court Properties valuation was £599m, representing a decrease of 11.5 percent over the interim period.