Capital & Counties Properties (Capco), the UK London-focused property firm, has acquired a 26.3% stake in peer Shaftesbury for £436 mln (€485 mln).
The deal, which will be executed in two tranches, sees Capco pick up the entire Shaftesbury holding of Hong Kong tycoon Samuel Tak Lee, through his trust fund Veloqx. Capco is paying 540 pence per share, a discount of 13.9% to Shaftesbury's closing share price on Friday. Both firms own significant portfolios in London's West End.
Ian Hawksworth, chief executive of Capco, commented: 'As long-term investors in the Covent Garden estate and the West End, the investment in Shaftesbury represents a unique opportunity to deploy our capital in an exceptional portfolio at an attractive entry price, which we believe will generate long-term value for Capco shareholders.'
The transaction is being funded through a revolving credit facility of £705 mln backed by Capco's flagship Covent Garden asset.
'Whilst Covid-19 has had a significant impact on the group’s customers and business in the near term, the Capco board continues to believe in the resilience and long-term fundamentals of prime central London and in particular the West End. It maintains a strong balance sheet with access to significant liquidity,' the firm said in a statement.
Peter Papadakos, head of European real estate at property analyst Green Street noted that the sale price implied a capital value of £1,200 per ft2. 'This transaction offers a window into how far prime central London retail real estate values have fallen,' he said. 'At face value, this deal
would suggest a ~20% decline in asset values in just one year.'
Capco sold its Earl's Court residential arm in November 2019 for £425 mln to focus on its Covent Garden estate, at which time a number of firms - including Shaftesbury and Candy Ventures - were said to be interested in bidding for Capco's more streamlined operations.
Papadakos added: 'The acquisition could pave the way for an all-share M&A deal for the remaining capital of Shaftesbury at some future point in time. A combination of the two portfolios has long made strategic sense.
'It is Capco that has seized the opportunity today, and could now be the driving force in amassing a circa £6 bn portfolio of retail / food & beverage real estate in London's West End.'
