Plans to divide up Capco are “well advanced and could be implemented promptly” and several offers in relation to the possible sale of the development at Earls Court have been received the business has said.
It also revealed that value of the entire scheme at Earls Court has fallen by a further 15.6% to £658m, down from £759m in 2017.
Capco said in its full year results for 2018 that it has held a number of discussions over proposals for purchasing interests in the scheme to “establish the value and deliverability of the proposals” and it would evaluate the merits of the options.
Capco’s interest in the development at Lillie Square (part of the Earls Court scheme), which it is delivering in partnership with Kwok Family Interests, is now valued at £159m and the rest of its interest in the wider proposed development, in which Transport for London also has a stake, is valued at £499m. Capco holds a 63% interest in the Earls Court Masterplan.
This further decline in the value of the scheme was in part down to economic and political uncertainty continuing to impact the London residential market, Capco said.
Overall the value of the company’s entire portfolio fell by 2.4% on a like-for-like basis to £3.3bn despite Covent Garden operations rising in value by 1.6% to £2.6bn on a like-for-like basis, driven by ERV growth of 3%, achieved over the year.
At Lillie Square, the 1m sq ft, 800-home residential development adjacent to the Earls Court Masterplan, more than £450m of cumulative sales have been contracted across phases one and two, with delivery of phase one now substantially complete and more than 220 units handed over to residents, representing £129m (Capco share) of sales proceeds, Capco reported.
In phase two, more than 80% of the 186 units have now been reserved or exchanged, 66 of these transacted in 2018, including the exchange of contracts with an international investor for all 49 apartments and 31 parking spaces at 9 Lillie Square, one of the four blocks in phase two. Total consideration for this transaction will be approximately £66m (£33m Capco share). Completion of construction and handover of sold units is expected in 2020.
The rest of the Earls Court scheme is now ready for development after several years of demolition and preparation, Capco said.
It also confirmed that a reserved matters planning application submitted in November last year for 1.m sq ft of residential, office and retail space on part of the 22 acres that it acquired from Hammersmith & Fulham Council in 2013 for the Earls Court scheme has still not been validated.
The sale of this land, on which sit the West Kensington and Gibbs Green Estates, is being investigated by the council.
The council has said it would like Capco to hand back the 22 acres as it believes it is unlikely Capco will be able to deliver the Earls Court Masterplan and in recent weeks has also said it is also considering the use of a CPO to get the land back.
Capco said it noted “the hardening political tone towards large-scale residential development activity in London” and reaffirmed that the agreement was “legally binding”.
To date Capco has paid £90m of the £105m cash consideration payable to the council for the land, including four of the five annual instalments of £15m. The final payment is due to be paid in December 2019.
Covent Garden
The other side of Capco’s business at Covent Garden, however, has continued to perform well, with 103 leasing transactions during 2018, including new leases and renewals, representing £12.9m of rental income pa, and transacted at 7.5% above the 31 December 2017 ERV.
Net rental income at Covent Garden was up by 9.6% to £57.5m on a like-for-like basis, or 17.5% in absolute terms.
ERV was also up by 3% on a like-for-like basis to £108m for 2018 and contracted income of the estate is £83m, which represents 77% of the current ERV. Occupancy on the estate sat at 97%.
Full-year results
In its full-year results ended 31 December 2018 Capco reported EPRA NAV of £2.8bn, down from £2.84bn in 2017 and EPRA NAV per share of 325.7p per share, down from 333.8p per share in 2017.
Capco added that undrawn facilities and cash of £854m and its LTV was 18% with £53m of capital commitments.
The company’s net debt decreased by £161m to £573m, principally as a result of the disposal of the Empress State Building for £250m during the year and was partly offset by further investment into assets and the acquisitions at Covent Garden.
Capco’s revenue was also down to £83.5m for the year, compared to £87.7m in 2017 and it plummeted to a £119m loss before tax. In 2017 loss before tax was £62.5m.
In addition net rental income was down from £66.9m in 2017 to £64.4m in 2018.
Total return for the year, which represents the change in net assets plus the dividends paid during the year, was down 2%, while total shareholder return for the year, which comprises share price performance plus the dividends paid during the year, was down 27.3%.
Capco insisted in its results that it “is well-positioned to support the current capital requirements” of both Earls Court and Covent Garden.
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