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Demerger speeds up UK property development

Johannesburg – The London-based property and development group Capital & Counties Properties (Capco) demerger from Liberty International in March was a catalyst for fast-tracking the go-ahead for its Earls Court rejuvenation project.

According to Capco CEO Ian Hawksworth, had it not been for the demerger permission from London authorities for the project would not have come as speedily.

"Since the demerger the local authorities could see our plans weren't to build just another shopping centre, but to rejuvenate the area and offer housing, and they responded well to our plans," Hawksworth said on Tuesday, following the release of the group's interim results to end-June.

He said it usually takes eight to 10 year to obtain permission for projects like Earls Court. After purchasing the property in 2009, the group now expects to receive planning consent by August 2012.

This development has been a carrot in front of most of Capco's investors, as it is located in a "sweet spot" in the city and unrivalled in size.

Dual-listed Capco de-merged from Liberty International in March to focus on central London property investment and development. Liberty International was split into Capco and Capital Shopping Centres, which focused on retail property.

According to Jamie Boyes, an analyst at Catalyst Fund Managers, Capco is a risky investment in the listed property space, as its Earls Court property is still awaiting development consent from the city of London.

"It comes down whether you feel confident that Earls Court will work out," he said. "We have only anecdotal information to go on about the Earls Court story."

Old Mutual Investment Group of SA analyst Evan Robins said the Earls Court development may have been small fry for Liberty International, but it is definitely a sizeable incentive for investors interested in Capco.

"If this goes through it's massive," he said. However, Robins concurred with Boyes that a great deal of uncertainty around its completion makes it a risky buy for investors.

The group's portfolio consists of shops, restaurants and offices in Covent Garden (representing 45% of the group's property assets), the Earls Court and Olympia venues used mostly for exhibitions and concerts and the great Capital Partnership with Portland Estates, consisting mainly of West End properties.

"London did well," said Robins. "The market has had a good 12 months."

Capco's portfolio of central London properties increased in market value by about 5% to £1.3m during the last six months.

The group reported a rise of 9% in diluted net assets per share to 138 pence for the period under review. Earnings per share dropped slightly from 2p to 1.6p.

The company will pay an interim dividend of 0.5 pence per share, in line with the indication given during the demerger process of a full-year 2010 dividend of 1.5p/share.

The group is cautious about its second-half performance. "Valuations will now be driven more by rental growth captured from active asset management rather than any further downward yield shift," the interim report said.

 - Fin24.com
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