Capco has R17.5bn to spend on Covent Garden

UK landlord Capital & Counties (Capco), which spun out of SA businessperson Donald Gordon’s Liberty International a decade ago, says it has access to about £900m (R17.5bn), which will be channelled into its flagship Covent Garden asset and new acquisitions.

The company said it would return £100m to shareholders through share buybacks and would deploy other capital into Covent Garden. The total amount is proceeds from disposing assets.

The announcements were made after the release of financial results for the year to December, on Wednesday.

Capco reported that its loss for the year had widened partly due to the costs of disposing of the assets, with the group reporting a 2.2p loss per share from a loss of 0.8p previously.

The company declared a total dividend of 1.5p, unchanged from the prior period.

In morning trade on Wednesday Capco’s share price was up 1.89% to R46.89, giving it a market capitalisation of R40bn.

In November Capco said it would sell its interest in residential assets at Earls Court in London and other asset sales to raise cash and strengthen its balance sheet.

Capco's 63% stake in Earls Court was sold for £425m, as part of a strategy to focus on its central London property business, centred on Covent Garden.

CEO Ian Hawksworth said Covent Garden had proved to be a resilient asset in the UK regardless of the uncertainty about Brexit.

“While I can’t speak for the whole of the UK, I can say that the London economy has actually been very strong in 2020 so far and Covent Garden has stood out as one of the best commercial assets in Britain,” he said.

“We own 81 buildings in the Covent Garden district. These branch out from the centre. We decided last year that we need to focus on this district and, as a result, we plan to upgrade what we already own and to buy more buildings within the district,” said Hawksworth.

The Covent Garden entertainment complex now accounts for 94% of Capco’s portfolio, valued at about £2.8bn. As much as 40% of the annual visitors to the complex are from London, 20% are from the rest of the UK and 40% are from other countries.

Hawksworth said the coronavirus outbreak had not yet had noticeable effects on trade at Covent Garden.

Keillen Ndlovu, head of listed property funds at Stanlib, said Capco's results did not contain any surprises and that the company had one of the strongest balance sheets among UK-invested property funds.

“Fortunately, Capco has a strong balance sheet. It has a low loan-to-value ratio of 16%. This enables management to take advantage of opportunities that may arise around Covent Garden,” he said.

Ndlovu said it made sense to buy back shares given that Capco was trading at a discount of about 24% to its net asset value. /With Karl Gernetzky