Capco makes headway

Capital & Counties Properties PLC (CCO) has had a busy year so far, acquiring three new properties in Covent Garden in March and with tenant activity remaining strong with several recent openings.

Releasing the company's interim management statement for the period 1 January to 15 May 2012, Chief Executive Ian Hawksworth said Capco has maintained momentum and has made continuing progress against its strategy of creative rejuvenation in Covent Garden, achieving planning milestones for the Earls Court Masterplan and Seagrave Road as well as recycling capital back into the business.

Covent Garden has seen 10 new lettings in line with the repositioning and asset management strategy for the estate. Letting transactions, including new leases, renewals and reviews, in the first quarter represented GBP2.7 million of rental value, at 4.6% above December 2011 Estimated Rental Value (ERV) and the estate is on track to achieve its ERV target of GBP50 million by the end of 2013.

The adjusted occupancy rate for the estate is 97.4% and footfall remains consistently strong at 44 million on a 12 month rolling basis.

In recent months Covent Garden has become the destination for new restaurant signings in the West End. MEATmarket, a new cult burger concept opened in the Jubilee Hall Market in May and a strong pipeline of new restaurants is set to open ahead of the Olympic Games. Jamie Oliver will be opening Jamie's Union Jacks in the North Hall of the Market Building in July in part of the space previously occupied by Ponti's.

Following Brasserie Bar Co's acquisition of the Chez Gerard Group, the new Brasserie Blanc restaurant is set to open on the East Terrace of the Market Building in mid May.

Acquisitions comprised the purchase of three properties for GBP10.1 million on Bedford Street and Henrietta Street in March. The Odeon cinema on Shaftesbury Avenue was sold as part of this transaction.

The Henrietta, the first residential development undertaken by Capco in Covent Garden was launched in February. The sale of the penthouse was completed in April at GBP6.2 million, which reflects pricing in excess of GBP2,500 per square foot. Interest in the final three apartments is positive.

The Russell, the second office to residential conversion in Covent Garden, is on track to be completed in early 2013. Following planning consent, work on One South Piazza to create a new anchor restaurant or retail space and residential apartments will begin on site at the end of this year.

Progress continues on the planning process for Sir Terry Farrell's Earls Court Masterplan to create `Four Urban Villages and a 21st Century High Street' in the Earls Court and West Kensington Opportunity Area (ECOA).

In March, following an ongoing public consultation, both the Royal Borough of Kensington & Chelsea and the London Borough of Hammersmith and Fulham (LBHF) adopted their preferred option of the Supplementary Planning Document (SPD), which sets out a planning framework in support of comprehensive development of the Opportunity Area.

Progress has been made on discussions with LBHF in respect of its land within the Opportunity Area. Following a consultation undertaken by LBHF in March, the draft terms of the Conditional Land Sale Agreement (CLSA) were published in April. Under the draft CLSA, Capco would be entitled to acquire the Council's 22 acres of land on a phased basis in the Opportunity Area for a total cash consideration of GBP105 million, plus reprovision, as part of a future development, of the 760 homes currently on the estates, which reflects the prevailing residential property pricing on that part of the Opportunity Area.

At the LBHF Cabinet meeting in April to discuss these draft terms, it was agreed that a decision to enter into an agreement would be made at a full Cabinet meeting in the coming months on the basis of the draft terms outlined, subject to no major new issues emerging between the Council and Capco. At this stage no transaction has been agreed.

Following the signing of the Section 106 agreement, formal planning consent for the Seagrave Road development was granted in March, which will create 808 high-quality new homes and a new garden square for west London. The conditional joint venture with the Kwok Family Interests is expected to complete in mid-2012 subject to satisfaction of the remaining conditions.

The venues business has performed in line with expectations for the year to date, with a reduction in business at Earls Court given the uncertainty over its future as a venue.

Further improvement works are under way at Olympia Two and the conference centre as part of the ongoing strategy to enhance the Olympia venue and create more flexible space.

As at 30 April 2012, gross debt for the Group was GBP496 million compared with end December 2011's GBP553 million and net debt was GBP383 million from GBP464 million previously.

Based on 31 December 2011 property values, the pro forma debt to asset ratio was 25 per cent (31 December 2011 29 per cent).

A new 5-year GBP70 million revolving credit facility, secured on certain assets at Covent Garden, was agreed with BNP Paribas and HSBC Bank plc in April. The EC&O facility which had GBP89.5 million of debt outstanding was repaid out of cash and available facilities in May. As at 30 April, reflecting the new facility and pro forma adjusted for the EC&O facility repayment.
Capco's Finance Director Soumen Das commented that the new GBP70 million facility highlights Capco's access to debt finance and the attractiveness of its Covent Garden estate.
"The maturity profile of the group's debt has now been significantly extended, and the revolving and undrawn facilities will allow Capco to manage its liquidity more efficiently."

"The Queen's Diamond Jubilee celebrations and the Olympics will place a spotlight on London in 2012 and this should benefit the Group which is focused on landmark locations in the capital," Hawksworth added.

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