Editor’s comment: It’s been a long time in the offing, but this week brought confirmation: a far clearer focus on two markets and the removal of attendant noise.
But that’s enough about Helical, which this week completed its transformation from a diverse UK-wide propco, into an office-led investor and developer focused purely on London and Manchester.
We need to talk about CapCo.
On Thursday, the business said it was considering a demerger, a move which would create two separate listed businesses by the end of the year.
The first, the jewel, would be focused on Covent Garden. Valued at more than £2.5bn at the end of last year, it would become an independent, prime central London retail-focused REIT, led by current chief executive Ian Hawksworth.
The second would be a London developer focused on delivering the Earls Court masterplan.
With a valuation that has fallen by a quarter since 2015, this £759m project would be taken on by Hawksworth’s right-hand man, managing director and chief investment officer Gary Yardley. It is, to say the least, a more challenging proposition.
CapCo – itself born of the demerger which created another business facing tough questions, intu – made positive noises on unveiling the not altogether surprising news. The demerger would enhance the “strategic flexibility” of the two businesses, it said.
It would offer investors the opportunity to invest in two “unique” assets.
But, put more simply, something had to give.
Covent Garden is one of the most coveted pieces of retail real estate in the world. Earls Court is still a long way short of realising its ambition to become “one of London’s finest addresses”.
Conceived at a time when the appetite for the upper end of London’s residential real estate appeared insatiable, but delivered into a market in retreat, the recent history of the 77 acres has been troubled.
Just as the market has shifted, so has politics – in Hammersmith & Fulham and in the London’s mayor’s office, too.
From community-led estate regeneration to the provision of affordable housing, it’s a different world, and Earl’s Court has become a lightning rod for criticism.
Ministerial attitudes to housing markets are very different these days, too.
The prime minister believes developers and housebuilders should “do your duty to Britain and build the homes our country needs”.
That requires close working between the public and private sector. CapCo’s relationship with Hammersmith & Fulham Council has, at times, been nothing short of toxic.
Retaining and enhancing Covent Garden’s allure won’t be plain sailing, of course. But Hawksworth’s will be an easier job than Yardley’s.
Almost certainly though, this demerger is not the end game. The creation of two businesses is likely to draw more suitors than would have been interested in CapCo.
The appeal of Covent Garden is obvious, and international interest – not least from China and Hong Kong, where Hawksworth spent over a decade of his working life – will have been piqued.
And while much will need to be rethought, there will be no shortage of interest in Earls Court either. London’s residential market continues to offer long-term opportunities for the patient and pragmatic.
To send feedback, e-mail damian.wild@egi.co.uk or tweet @DamianWild or @estatesgazette
