Capco confirms Earls Court demerger

Capital & Counties has confirmed its intention to demerge its business in to two, meaning the Earls Court interests will be in a separate company.

The demerger has been widely trailed, and would make the sale of the Earls Court assets more likely. At the same time, Capco released their interim six month financials which show a further write down of the Earls Court asset values.

The Earls Court investments are now valued at £599 million, a decrease of 11.5 per cent on December 2018. Capco report ongoing operational progress on their land with railway track suppression works progressing on schedule, and ongoing interest from potential investors and occupiers with Lillie Square Phase 2 construction on schedule with first handovers expected in H1 2020.

The Covent Garden assets will be positioned in a central London focused REIT. The new business which will own Capco’s Earls Court assets, EC Properties, aims to “optimise and realise the value of its Earls Court land interests over time”. The statement says there has been a broad range of interest in Earls Court with indicative pricing “at a range of discounts to the balance sheet value”. They say there is no certainty that this will result in a sale transaction.

However, the statement says: “The Board believes that separation of the two businesses is in shareholders’ interests and therefore intends to proceed with the demerger – Capco expects to publish shareholder documentation in September 2019. Completion of the demerger, subject to shareholder approval, is anticipated before the end of 2019.”

The demerger statement says: “EC Properties will be a London land enablement and development company, whose Earls Court interests are held primarily through Earls Court Partnership Limited, the investment vehicle with fellow land owner Transport for London.

“EC Properties’ strategy will be to optimise and realise value from its interests at Earls Court over time, by facilitating delivery of the Masterplan through the introduction of third-party capital. As value is realised from its interests, EC Properties will seek to return capital to shareholders as appropriate.

“The property interests of EC Properties were independently valued at £426 million as at 30 June 2019. In addition Capco’s interests in respect of the Conditional Land Sale Agreement are carried on balance sheet at £84 million, comprising land prepayments and associated costs.”

Henry Staunton, Chairman of Capco, commented: “At Earls Court we have created one of London’s most important development opportunities. The Board has considered the structure of the Group and believes that a separation of Covent Garden and Earls Court is in shareholders’ interests and offers significant benefits. As two distinct and focused businesses, with experienced management and growth prospects, Covent Garden and Earls Court can pursue independent strategies to deliver long-term shareholder value.”

Ian Hawksworth, Chief Executive of Capco, commented: “At Earls 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. Separation of the two estates would enhance strategic flexibility, and allow each business to pursue independent strategies and deliver long-term value for our shareholders.”

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