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Capco investors richly rewarded

Oct 15 2012 08:27
Elma Kloppers

Johannesburg - South African investors in British property company Capital & Counties (Capco) who held on when it was unbundled from the former Liberty International in May 2010 have been richly rewarded.

Property analysts are confident that continued unlocking of value in the group’s prime properties in central London with be to their further benefit.

Shareholding in Capco by South African investors, including the Gordon family, is currently at 22%. The rand share price of this company, which is listed both in London and on the JSE, last week reached an all-time high of R31.58, from R14.35 on May 10 2010.

That's a 120% increase. “In the year to date the rand-hedge element of Capco has produced an additional yield of between 10% and 15% for South African investors compared with returns in pounds,” said Coronation property portfolio manager Anton de Goede.

He attributes this to the value so far unlocked in the company’s Covent Garden properties and progress with planning approvals for the Seagrave Road and Earls Court development sites. “London is increasingly regarded as a safe haven and Capco is benefiting from this,” said De Goede.

Capco chief executive Ian Hawksworth says the biggest value unlocking is in the 28.5ha-odd land that the company owns in Earls Court in the heart of London. This land was bought for £15m/ha and is currently worth £22.5m/ha. He said when all the planning approvals have been obtained its value will probably double.

The company spent £30m on the master plan for the development, which includes 808 dwelling units on the Seagrave Road site and almost 7 000 residential units in four “villages” on the Earls Court site. The Seagrave development will be approached in a 50/50 enterprise with entities of Hong Kong’s Kwok family.

Hawksworth says it's a unique development opportunity because the site adjoins some of London’s most luxurious residential addresses, including Chelsea, Kensington and Fulham. There is also a 300 000 waiting list for ordinary accommodation in London, which reflects the structural undersupply of all categories of accommodation in the British capital. “Last year fewer new houses were built in London than there were in 1920.” He said this makes the city’s residential market the place to be.

These developments will lead to 12 000 permanent jobs.

Capco is on its way to convert Covent Garden, which attracts more than 43m visitors a year, into one of London’s most prestigious shopping areas with unique retailers of luxury goods.

Hawksworth said that since the unbundling more than 50 new brands have been brought to Covent Garden and they are prepared to pay a premium for space there. Over the year to date retailers’ turnovers have doubled.

The newest shops are Chanel’s only free-standing beauty store in Britain and 7 For All Mankind.

He expects significant growth in market rentals in the area, which are still far below average market rentals for central London. Capco’s target is to push this up to £50m by the end of next year. At the end of June it was £47.1m and in 2009 £33.2m.

Hawksworth said the properties in Covent Garden comprise 52% of Capo’s assets and there are plans to expand them further.

The company recently placed 68.4m new ordinary shares, netting it £149.1m. This, with an additional £50m in cash, will be invested in property assets in the area.

De Goede said London’s status as a safe haven is not entirely risk-free. “The capital that has flowed into the city in recent times could flow out again when the global economy recovers.” This could put the residential market under pressure and impact the execution of the Earls Court plan, he said.

 - Sake24

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