Capco looks to recovery as property value falls

“The worst of the pandemic may be behind us” according to management at Capital & Counties (CAPC) as the West End landlord pointed to a greater number of enquiries and stronger deal-making activity. Twenty-nine new leases and renewals were agreed during the six months ending 30 June, equivalent to £6m of contracted income, with another £3.1m under offer.

The easing of government restrictions has allowed retailers and hospitality customers to reopen, translating into higher customer sales – particularly in the premium and luxury categories. In turn, Capco flagged “high occupancy” with a vacancy rate of 3.4 per cent, lower than the rate of 3.5 per cent posted in December and a strong performance compared with the broader central London environment.

But the hope of a recovery couldn’t offset a 5.1 per cent decline in the FTSE 250 group’s total property value to £1.8bn. Its Covent Garden-based total property value slipped 4.9 per cent like-for-like from the end of 2020 to £1.7bn, feeding into a drop in NAV.

Admittedly, 12 new openings are planned for 2021 including indoor cycling brand Peloton and the digital make-up disruptor Glossier. Rent collection has ticked up with almost two-thirds of the June quarter collected. And the group benefited from the sale of two residential blocks on Southampton Street for £50m pre-costs.

IC view: Still, the outlook remains uncertain. While Capco says footfall trends have gradually improved since non-essential shops pulled up their shutters, it is difficult to gauge how far that will be sustained. The group itself has not received government support measures during the pandemic, but its tenants have. When such support is withdrawn, it’s feasible that the vacancy rate could increase. And that’s before mentioning the accelerating shift towards online shopping. Sell.

Last IC view: Sell, 136p, 12 Aug 2020