Cash flush Capco goes shopping


Cash flush Capco goes shopping

Published Date: 2019-12-03 | Source: Stephen Gunnion | Author: Stephen Gunnion

Cash flush Capco goes shopping

The Covent Garden landlord says a strong balance sheet and financial flexibility position it to capitalise on investment opportunities in the West End of London.

Capital & Counties (Capco) plans to convert to a real estate investment trust (REIT) before the end of the year following the £425 million sale of its Earls Court development property. And with a growing cash pile, the property owner is bolstering its Covent Garden portfolio with smaller acquisitions.

The group sold its Earls Court asset to Dutch pension fund APG and property investor Delancey in order to focus on its central London property investment business in the upmarket shopping and entertainment district of Covent Garden.

Capco believes London's West End offers greater insulation from challenges weighing on the retail sector. Although some retailers have taken a more conservative view due to political and macroeconomic uncertainty and occupational cost pressures, it says the trading performance on the Covent Garden estate has remained encouraging with footfall growth and average tenant sales continuing to trend upwards.

Capco has about £900 million of cash and undrawn facilities. It received net proceeds of £156 million from the Earls Court sale. The balance of £211 million will be received in two equal instalments. It said its strong balance sheet and financial flexibility positioned it to capitalise on further investment opportunities. It has already invested over £50 million through targeted acquisitions at Covent Garden, including £34 million for a multi-let building on Henrietta Street and £17.8 million for the Sussex Mansions restaurant, office and residential building on nearby Maiden Lane. The Henrietta Street property produces an annual rental income of £1.2 million, while Sussex Mansions generates £600,000 a year in rental income.

Following its conversion to REIT status, it said it would target a progressive dividend policy over the medium term by driving rental growth and securing income.

Its shares declined 0.8% to R45.99 yesterday.

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