# Capital & Counties Properties Business Update

- Link: https://www.directorstalkinterviews.com/capital-counties-properties-business-update/412799572
- Published: 2019-12-02T07:28:09+00:00
- Author: Giles Arbor

Following completion of the sale of Capco’s interests in Earls Court for £425 million,**
Capital & Counties Properties** (LON: CAPC) has today provided the following update
on the business:

· Sale of Capco’s interests in Earls Court completed successfully with initial net
proceeds of £156 million received and £211 million to be received over the next 
two years

· Capco is now positioned as a prime central London property investment business
and will convert to UK REIT status before the end of 2019

· Capco’s strong balance sheet and significant financial flexibility (approximately
£900 million of cash and undrawn facilities) positions it to capitalise on further
investment opportunities. Over £50 million invested recently through targeted acquisitions
at Covent Garden

· Capco will target a progressive dividend policy over the medium-term by driving
rental growth and securing income. Administration costs expected to be approximately
£20 million on a run rate basis from the end of 2020

Capco is now positioned as a prime central London property investment business centred
around Covent Garden. This is a world-class estate based in the heart of London’s
West End in concentrated ownership, which provides a differentiated offer, delivering
an attractive environment for retail and restaurant brands, office occupiers, residents
and consumers. Capco’s creative approach and emphasis on the consumer ensures the
estate is well-positioned to deliver further rental growth and capture its reversionary
income.

The West End offers greater insulation from the well-documented wider retail challenges
however it is not immune with certain retailers taking a more conservative view,
as a result of broader political and macro-economic uncertainty and occupational
cost pressures. Nevertheless, trading performance on the estate remains encouraging
with footfall growth and average tenant sales continuing to trend upwards.

Recent signings across the estate include Big Mamma on Henrietta Street, L’Occitane
in the Market Building, Pandora on James Street, A.P.C. on Floral Street and Lulu
Guinness on King Street. There has been strong demand for office and residential
space with high occupancy and rates of renewal.

Capco continues to create unique customer experiences on the estate. For the Christmas
trading period, cosmetics brands Glossier and Huda Beauty have launched pop up concepts
on Floral Street and the East Piazza, which is also hosting the Tiffany & Co. ice-
skating rink.

**Acquisitions**

Capco’s strong balance sheet and access to substantial liquidity provides significant
financial flexibility. Over £50 million has already been invested through the acquisition
of two target properties located on the southern side of the estate, which offer
significant value creation opportunities.

Capco has exchanged contracts to acquire the freehold interest of 5-6 Henrietta 
Street for £34 million (before purchaser’s costs) with completion expected later
this week. The multi-let building produces an annual rental income of £1.2 million
across 14,300 square feet which comprises 8,200 square feet of restaurant space 
let to Din Tai Fung and four floors of office space which are currently vacant.

In addition, on 19 November 2019, Capco acquired the freehold interest of Sussex
Mansions, 36-39 Maiden Lane for £17.8 million (before purchaser’s costs). The building
comprises a restaurant let to Franco Manca, as well as office and residential space.
The property generates an annual rental income of £0.6 million across 13,300 square
feet.

**Further information on the sale of Earls Court**

Payments will be made to Capco on a phased basis, with 45 per cent received on completion
and the balance over two years. Net proceeds from the initial payment were approximately
£156 million (adjusting for net debt, transaction-related costs and other completion
items). The balance of £211 million will be payable in two equal instalments, 12
months and 24 months after completion. The deferred payments receivable by Capco
would be accelerated in part to the extent that payments made by Capco to the London
Borough of Hammersmith and Fulham pursuant to the CLSA are refunded to the Purchaser
after completion. Refer to the announcement ‘Sale of Earls Court Interests for £
425 million’ released on 15 November 2019 for further information.

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