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CapCo confirms demerger

The commercial landlord plans to spin-off its Covent Garden assets as a standalone Reit
July 25, 2019

Confirmation that Capital & Counties (CAPC) is to split its business in two overshadowed the commercial landlord's first-half results. After receiving a number of offers for its struggling Earls Court development “at a range of discounts” to the balance sheet value, management plans to launch the Covent Garden assets as a Central London-focused real estate investment trust (REIT) before the end of the year.

IC TIP: Hold at 216.6p

The Earls Court site - which was planned in 2013 but is yet to be built - continued to drag on the portfolio valuation, which declined 2 per cent on a like-for-like basis. The development's valuation dropped 11.5 per cent on the same basis, although the second phase of the Lillie Square construction is on track for first hand-over in 2020. 

Covent Garden - which posted a 0.5 per cent like-for-like rise in valuation - was boosted by a marginal increase in rental values. Forty leasing transactions were completed in the period, representing £13m in annual rent at 2 per cent above December 2018 estimated rental values. Like-for-like rental income rose 7 per cent to £31.1m.     

Analysts at Panmure Gordon expect adjusted NAV of 316p at the December 2019 year-end, down from 326p at the same time last year. 

CAPITAL & COUNTIES (CAPC)   
ORD PRICE:216.6pMARKET VALUE:£1.84bn
TOUCH:216.4-216.8p12-MONTH HIGH:294pLOW: 208p
DIVIDEND YIELD:0.7%TRADING PROP:£296m*
DISCOUNT TO NAV:30%  
INVESTMENT PROP:£3.21bn*NET DEBT:21%
Half-year to 30 JunNet asset value (p)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2018322-4.92.70.5
2019311-129-10.20.5
% change-3-- 
Ex-div: 29 Aug   
Payment: 20 Sep   
*includes investments in joint ventures