Twenty years ago market watchers may have questioned CLS Holdings’ investment in Vauxhall, SW8. Today, with industry chat of sites in the south London location selling for double the price they were bought for just a few years ago, the listed investor/developer has every right to feel a little bit smug.
Its London portfolio, which includes its 1.5m sq ft Vauxhall Square project (pictured), has seen soaring valuations, setting CLS up to announce a set of figures “materially ahead” of expectations next month.
The rising popularity of the Vauxhall area, thanks in part to the Nine Elms Opportunity Area Framework and the final start on site on Battersea Power Station, will give newly installed chief executive Fredrik Widlund the opportunity to present a stellar set of results.
For him, CLS’s success comes down not just to its patience in areas such as Vauxhall, but also its diversity. Its £1.2bn portfolio is majority based in the UK, but it has a 21% exposure in France, 18% in Germany, and 8% in Sweden. UK assets range from prime London development sites and, from late 2013, to investments across the regions.
The acquisition of the Neo portfolio, comprising 34 government-leased properties spread around the UK, for £120m in September 2013, represented a new direction for the company.
And it is a strategy that Widlund says it will expand.
For now though, Vauxhall Square remains the star project. Work on the £500m scheme, first consented in 2012, will begin next year when the last of the tenants leave the site.
The scheme will comprise 520 flats, a cinema, two hotels, offices, shops, restaurants and a 454-bed student block.
Analysts see the scheme as a strong reason for investing in CLS with a consensus that the business will outperform the market.
Outside the UK, France is CLS’s biggest market, and while there is political end economic environment remains difficult, Paris continues to perform well for the company. Property valuations for its 26 properties in France fell by 3.6% with vacancy rates at 7.1%.
Germany, however, has been a more successful arena for the company and will continue to be a focus for investment. At present the portfolio consists of 17 properties.
CLS has been able to reduce vacancy rates and boost yields above the average for Germany. In 2013 the net yield was 7.3% with a 3.5% vacancy rate.
Sweden has been a different story again. Described by Widlund as a very local investment market, Sweden is home to just one directly held CLS property. It also has a small interest in the property holdings of two equity partners. While rental yield on the direct property was good in 2013, at 8.9%, the value of the property fell by 2.3% over the year.
But the Swedish and French investments are failing to mar CLS’s overall success story.
The groundwork has been laid for a strong 2015, and CLS and its chief executive are confident about the future.
The 2014 results, due on 4 March, should show how much that confidence and the confidence of the market has been on point.
CLS Holdings
Chief executive:
Fredrik Widlund
Market cap: £684.6m
Share price: 1,562p
(11 February)
LTV ratio: 56.3%
Net assets: £531.1m
(30 June 2014)
Assets under management:
CLS’s property portfolio is valued at £1.2bn. It holds 65 UK assets valued at £620m. It has a £240.6m, 26-asset French portfolio and a 17-asset, £214m German portfolio. In Sweden, it holds the £60m Vänerparken Vänersborgs Kommun and a pair of equity investments.
