CapCo mulls splitting firm as property market diverges

Bloomberg

The poster boy for London’s two-tier property market may be split in two. The board of Capital & Counties Properties Plc is considering dividing the company into a landlord that owns much of the Covent Garden neighborhood and a developer that owns land in the Earls Court district. Both companies would be publicly traded if the demerger goes ahead, it said in a statement.
London’s property market is in flux with overseas demand for investment properties keeping values high in areas like Covent Garden while falling prices in the residential market are deterring some. CapCo cut the value of the Earls Court housing project by about 12 percent earlier this year as home prices fell across the capital and the development faces political protests. It had written down the value of the holdings by 20 percent a year earlier.
Investors are discounting real estate firms below the value of their assets amid fears about the impact of Brexit and the risk of development. CapCo’s Covent Garden estate was valued at 2.5 billion pounds ($3.3 billion) at the end of December, while Earls Court was valued at 759 million pounds following the sale of an office building and the writedown. The firm’s market cap was 2.5 billion pounds bef-
ore the announcement of the potential split.
Recent sales of investment property at the Earls Court estate have “paved the way for a split since it leaves two clear businesses,” Bloomberg Intelligence senior analyst Sue Munden said. “They have very different requirements and risks, so the split should enable them both to flourish.”
The mooted demerger plan comes after prolonged speculation about a potential takeover of the company which trades at a wide discount to the value of its assets.