Property News

Capco announces sale of Earls Court interests for £425m

Capco has announced the exchange of contracts for the sale of its interests in Earls Court,excluding Lillie Square, to APG and Delancey (on behalf of its client fund) for £425 million.

This transaction is consistent with Capco’s strategy of monetising investments at Earls Court over time with a focus on growing its central London property investment business, centred around Covent Garden. Completion of the transaction is expected to take place before the end of November 2019.

Highlights include:

  • Disposal to APG and Delancey’s client fund (the “Purchaser”) is for total consideration of £425 million, on a cash-free and debt-free basis which compares to a balance sheet value at 30 June 2019 of £508 million;
  • Payments will be made to Capco on a phased basis, with 45 per cent payable on completion and the balance over two years. Net proceeds from the initial payment are expected to be approximately £156 million (adjusting for net debt, transaction-related costs and other completion items). The balance of £211 million will be payable in two equal installments, 12 months and 24 months after completion;
  • The Board unanimously considers the Disposal to be in the best interests of the Company and shareholders as a whole;
  • On a pro forma basis as at 30 June 2019 following the Disposal, Capco’s loan to value is reduced from 19 per cent to 15 per cent with cash and undrawn facilities of over £900 million. This position will be enhanced further as deferred consideration is received. Net proceeds will be used to repay debt where appropriate or held as cash balances pending redeployment and;
  • The Disposal positions Capco as a prime central London property investment business, centred around Covent Garden, with a continued focus on driving rental growth and securing income. The business has significant financial flexibility to capitalise on investment opportunities and is well- positioned to deliver attractive long-term returns for shareholders.

Ian Hawksworth, Chief Executive of Capco, commented:

Having prepared Earls Court for future development, we are now pleased to have agreed terms for the sale of our interests to APG and Delancey (on behalf of its client fund), an experienced real estate investment partnership which, with the support of TfL will take forward this important scheme for London. Following the disposal, Capco will be a strongly-capitalised property investment business centred around our landmark Covent Garden estate. The business is well-positioned to generate attractive long-term returns for shareholders. Backed by a strong balance sheet and with a significant investment pipeline, our access to substantial liquidity will enable us to capitalise on opportunities.”

Further information on the disposal:

The balance sheet value of the Earls Court interests at 30 June 2019 subject to the transaction comprises of:

  • 63 per cent interest in Earls Court Partnership Limited: the investment vehicle with Transport for London in respect of the site formerly the location of the Earls Court exhibition centres and certain assets on and around Lillie Road valued at £389 million (Capco’s share of ECPL net debt as at 30 June 2019 was approximately £38 million);
  • Other related assets around Earls Court valued at £36 million; and
  • Capco’s interests in respect of the Conditional Land Sale Agreement in relation to the West Kensington and Gibbs Green Estates, comprising prepayments and capitalised costs, with a carrying value of £83 million.

The Disposal Group generated net rental income of £2 million (Capco share) for the year ended 31 December 2018. The Disposal Group had gross assets, including working capital, of £517 million as at 30 June 2019 (Capco share). The accounting loss on disposal, against 30 June 2019 valuation, taking account of transaction-related costs and working capital adjustments is expected to be approximately £103 million. This amount does not include any fair value adjustment which may be made in relation to the deferred
consideration. This exercise will be completed by the Company as part of preparing its annual report and accounts for the financial year ending 31 December 2019.

TfL has provided confirmation that it does not intend to take up its right to acquire a portion of shares in ECPL, which is triggered by the Disposal. The Purchaser has paid a cash deposit of £42.5 million. Failure by the Purchaser to complete would result in this deposit being retained by Capco. The Disposal will be effected by way of a sale of the entire issued share capital of a wholly-owned subsidiary of Capco. The Disposal to the Purchaser is on a cash-free and debt-free basis. Capco will receive total consideration of £425 million on a phased basis as set out above, subject to the following adjustments:

  • £15 million in relation to the final CLSA installment due in December 2019, if paid prior to completion; and
  • a net asset adjustment in respect of certain ongoing costs ensuring the business remains compliant with its continuing obligations between exchange and completion.

The deferred payments receivable by Capco would be accelerated in part to the extent that payments made by Capco to the London Borough of Hammersmith and Fulham pursuant to the CLSA are refunded to the Purchaser after completion.

Further consideration may be payable to Capco in limited circumstances. On 21 October 2019, following the announcement by Candy Ventures stating it was in the early stages of considering a possible cash offer for the Company, Capco entered into an offer period for the purposes of the Takeover Code.

The Panel Executive has provided its consent to enter into the Disposal for the purposes of Rule 21.1 of the Takeover Code without requiring shareholder approval on the basis that, under Rule 21.1(c)(v)(A) of the Takeover Code, the decision to undertake the Disposal had been taken and partly implemented prior to the date on which Rule 21.1(a) was engaged. Candy Ventures has confirmed to the Panel Executive that it is not appealing this decision. Rothschild & Co is acting as lead financial adviser to Capco on the Disposal. BofA Securities and UBS are acting as joint financial advisers and joint corporate brokers to Capco on the Disposal.

Source: Propertywheel.co.za | https://propertywheel.co.za/2019/11/capco-announces-sale-of-earls-court-interests-for-425m/

PropertyWeb
PropertyWeb brings you the latest news in the real estate sector from around Southern Africa. It is managed by Network 9, a division of The High Option Ltd.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.