Wrap Text
Trading Update and Publication of Circular
Capital & Counties Properties PLC
(Incorporated and registered in the United Kingdom and
Wales with registration Number 07145041 and registered in
South Africa as an external company with Registration
Number 2010/003387/10)
JSE code: CCO
ISIN: GB00B62G9D36
21 July 2020
CAPITAL & COUNTIES PROPERTIES PLC (“CAPCO”)
TRADING UPDATE AND PUBLICATION OF CIRCULAR
Capco today releases a trading update and further to the announcement on 30 May
2020, intends to publish a circular on the proposed acquisition of a stake in
Shaftesbury PLC. Financial information below represents unaudited figures for the
six months ended 30 June 2020, and Capco’s interim results for this period will be
released on 12 August 2020.
- The Company is confident in the long-term resilience, attractiveness of
and prospects for prime central London, in particular the West End
- Covent Garden is a pedestrianised open air environment and is well
positioned as lock down measures ease and consumers return to central
London
- Additional streets around the Piazza have been pedestrianised, allowing
for greater freedom of movement and increased al fresco dining across
the estate
- As a responsible, long-term owner of the estate, Capco has been working
with local communities and continues to provide assistance to local
charity partners in the West End
- The majority of retail and dining concepts on the Covent Garden estate
have reopened
- Capco has provided support to retail and hospitality customers
experiencing cash flow pressures, with rental agreements being adjusted
on a case by case basis to include deferrals and turnover-linked
arrangements where appropriate
- Covent Garden total property value of £2.2 billion, a decrease of 17
per cent since 31 December 2019
- Acquisition of 20.94 per cent stake in Shaftesbury PLC completed with a
further 5.31 per cent agreed subject to shareholder approval
- Strong balance sheet with loan to property value of 32 per cent, net
debt to gross assets ratio of 26 per cent and £616 million of cash and
undrawn facilities
- £90 million of deferred consideration from the Earls Court sale
received in March 2020, with a further £105 million expected to be
received later this year and £15 million due in 2021
Covent Garden property valuation
As at 30 June 2020, Covent Garden total property value was £2.2 billion,
representing a 17 per cent like-for-like decrease (31 December 2019: £2.6 billion).
Substantially all of the valuation movement relates to the retail, leisure and F&B
(food and beverage) portfolio which represents 75 per cent of total property value.
(Portfolio value by use represented by retail 52 per cent, F&B 20 per cent, office
16 per cent, residential 9 per cent and leisure 3 per cent). The main contributors
were a 12 per cent (like-for-like) decline in ERV to £95.5 million, yield expansion
of 17 basis points to 3.82 per cent (equivalent basis) and other movements
including the valuer’s assumption on loss of near-term income (£31 million).
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Supporting the re-opening of retail and hospitality tenants
On 23 March 2020 the majority of retail and F&B tenants closed across the
estate. Throughout this period of COVID-19 uncertainty, Capco’s priority has
been the health and safety of its people, customers and visitors.
As a long-term investor in the estate, Capco took early action ensuring the
safety and security of Covent Garden whilst also providing support on a case by
case basis to customers experiencing cash flow challenges as a result of COVID-
19. This supports the reopening of stores during this period of significant
disruption, ensuring the business is well positioned to benefit from a recovery
and prosper over the medium-term. Bespoke solutions have been agreed which
include rent deferrals, rent-free periods and other arrangements reflecting the
position of each customer. For certain tenants which are experiencing short-term
cash flow issues, rental agreements will be linked to turnover for the second
half of the year in exchange for other provisions such as lease extensions.
98 per cent of Q1 2020 rents were collected. Rent collection for the March (Q2)
and June (Q3) quarter rent dates have been significantly lower than normal
levels with 44 per cent collected for the second quarter and 27 per cent for the
third quarter. Overall 71 per cent of rent has been collected in the first six
months of the year compared to 99 per cent for the equivalent period in 2019.
Quarterly rent collection summary
Gross Alternative
rents Received Collected arrangements Outstanding
£m £m % % %
- 2%
Q1 16.2 15.9 98%
53% 3%
Q2 16.9 7.5 44%
27% 2%
H1 2020 33.1 23.4 71%
Q3 2020 17.9 4.8 27% 67% 6%
The majority of retail and hospitality customers on the estate have reopened or
are set to reopen imminently. Whilst initial indicators are encouraging, the
trading environment remains challenging. It is too early to predict when
footfall will return to previous levels whilst physical office occupancy remains
significantly reduced, and with the ongoing travel restrictions and fragile
consumer sentiment.
Operational performance and leasing update
Capco began the year with a strong leasing pipeline however activity levels were
affected significantly by the pandemic from early February onwards. 22 leasing
transactions completed with a rental value of £2.7 million (H1 2019: £13.0
million).
During this challenging period a small number of tenants have entered into
administration representing £3.0 million of passing rent. EPRA vacancy has
increased by 0.9 percentage points to 4.1 per cent (31 December 2019: 3.2 per
cent). Approximately 12 per cent of ERV is in or is held for development or
refurbishment (31 December 2019: 8 per cent). Opportunities will be taken to
ensure that the best possible tenant line-up is maintained across the estate.
Notwithstanding the significant disruption to the occupational market, leasing
interest in the Covent Garden estate has been encouraging.
Since the announcement of Capco’s 2019 results, Bucherer’s expansion in the
Royal Opera House Arcade is underway and its opening is on track for later this
year, while Ganni has opened its new flagship on Floral Street and will be
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joined by American Vintage later in the year. Jewellery brand Vashi is the
latest signing on James Street for a new London flagship store while Bubblewrap
and Belgian chocolatier Neuhaus have both agreed terms to open in the Market
Building.
Covent Garden offers a welcoming open air environment for visitors. Capco is
implementing a number of marketing initiatives and collaborating with
stakeholders to promote Covent Garden and the West End, encouraging a return of
footfall to normal levels over time.
Capco continues to engage directly with the consumer offering differentiated
experiences. Covent Garden now hosts a new al fresco, socially distanced dining
area on the Piazza. With many of the area’s restaurants open for take away, it
provides the opportunity for visitors to dine outside in the heart of the West
End.
In partnership with Westminster City Council, there are additional
pedestrianised streets in the Covent Garden area to allow for greater freedom of
movement and use of outdoor space. Newly pedestrianised streets include
Henrietta Street, Floral Street, Maiden Lane and Tavistock Street alongside
extended car-free hours for the Piazza and King Street. Further to this, there
are additional outdoor seating areas across these streets for our restaurants,
providing approximately 200 incremental outdoor covers.
Capco remains confident in its tenant mix, continuing to focus on concepts with
strong financial covenants, differentiated offerings, successful multi-channel
programmes, close customer relationships and brands that recognise the value of
high-profile locations with a complementary leisure and dining offering.
As a responsible, long-term owner of the estate, Capco has been working with
local communities and continues to provide assistance to local charity partners
in the West End. Financial aid has been provided to COVID-19 funds supporting
homelessness, food banks, the elderly as well as hospitality and retail
foundations.
Strong liquidity and balance sheet position
The financial information below represents unaudited figures as at 30 June 2020:
– Group loan to property value of 321 per cent (31 December 2019: 16 per
cent), reflecting property value and net debt as at 30 June 2020
– Group net debt to gross assets of 261 per cent (31 December 2019: 15 per
cent), taking into account the value of the investment in Shaftesbury
shares, as at 30 June 2020
– Group undrawn facilities and cash of £616 million (31 December 2019: £895
million)
– Group net debt of £721 million (31 December 2019: £442 million)
– Capital commitments of £93 million (includes £88 million in respect of
second tranche of Shaftesbury shares) (31 December 2019: £14 million)
– Weighted average cost of debt of 2.6 per cent (31 December 2019: 3.0 per
cent)
– Weighted average debt maturity of 4.4 years (31 December 2019: 4.9 years)
– There is significant headroom against the LTV covenant position, and
interest cover covenant waivers in respect of the current financial year
have been agreed with Covent Garden group lenders to address interruption
to near-term income.
1. Before £88 million investment in the second tranche of Shaftesbury shares payable in August 2020 (subject to
shareholder approval) and receipt of a further £105 million of deferred consideration from the sale of Earls Court
expected later this year (with the balance of £15 million due in 2021).
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Acquisition of shareholding in Shaftesbury PLC
As announced on 30 May 2020, Capco agreed to acquire a 26.3 per cent
shareholding in Shaftesbury across two tranches (“the Investment”) for total
consideration of £436 million, at a price of 540 pence per Shaftesbury share.
The Investment comprises the acquisition of 64.4 million shares for £347.7
million in cash, representing 20.94 per cent of Shaftesbury's shares, which
completed on 3 June 2020 (the "First Tranche") and the proposed acquisition of a
subsequent tranche of approximately 16.3 million shares for £88.2 million in
cash, representing 5.31 per cent of Shaftesbury's shares (the "Second Tranche").
Capco expects to publish a shareholder circular later today in respect of the
acquisition of the Second Tranche, which when aggregated with the First Tranche,
constitutes a Class 1 transaction for the purposes of the Listing Rules and is
therefore conditional on approval by shareholders at the General Meeting to be
held on 10 August 2020.
The Shaftesbury Investment is a unique opportunity to acquire a significant
stake in an exceptional mixed-use real estate portfolio, adjacent to Capco’s
world-class Covent Garden estate. It represents an attractive investment and
entry price relative to historical levels and the Board’s view of the future
long-term prospects for prime central London. The Investment is consistent with
Capco’s strategy to invest in complementary opportunities on or near the Covent
Garden estate.
Earls Court deferred proceeds
£90 million of deferred consideration from the Earls Court sale was received in
March 2020. In addition, a further £105 million of deferred consideration is
expected to be received later this year with the balance of £15 million due in
2021.
Lillie Square (50:50 joint venture)
The completion of Phase 2 continues with 66 units handed over in the first half
of this year, representing £81 million of cash proceeds received (£40 million
Capco share).
A further 120 units remain in Phase 2, of which 93 have been pre-sold
representing approximately £120 million of further proceeds (£60 million Capco
share). The property valuation of the Lillie Square joint venture as at 30 June
2020 was £138 million (Capco share), a slight decline (like-for-like) against
the 31 December 2019 valuation of £177 million.
ENQUIRIES
Capital & Counties Properties PLC:
Ian Hawksworth Chief Executive +44 (0)20 3214 9188
Situl Jobanputra Chief Financial Officer +44 (0)20 3214 9183
Head of Commercial Finance and
Sarah Corbett Investor Relations +44 (0)20 3214 9165
Media enquiries:
UK: Hudson Sandler Michael Sandler +44 (0)20 7796 4133
SA: Instinctif Frederic Cornet +27 (0)11 447 3030
JSE Sponsor:
Merrill Lynch South Africa (Pty) Limited
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About Capital & Counties Properties PLC
Capital & Counties Properties PLC is one of the largest listed property investment
companies in central London and is a constituent of the FTSE-250 Index. Capco's
landmark estate at Covent Garden was valued at £2.2 billion (as at 30 June 2020)
where its ownership comprises over 1.2 million square feet of lettable space. Capco
owns a 20.94 per cent shareholding in Shaftesbury PLC. The Company is listed on the
London Stock Exchange and the Johannesburg Stock Exchange.
This press release includes statements that are forward-looking in nature. Forward-
looking statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of Capital &
Counties Properties PLC to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. These forward-looking statements are made only as at the date of this
announcement. Nothing in this announcement should be construed as a profit
forecast. Except as required by applicable law, Capital & Counties Properties PLC
undertakes no obligation to update the forward-looking statements, whether as a
result of new information, future developments or otherwise.
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Date: 21-07-2020 08:00:00
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