UK landlord Capital & Counties’ (Capco’s) profit swung into a loss in its final results before its merger with property group Shaftesbury next week, because of the steep fall in the share price of Shaftesbury in 2022.
The company, valued at R23.58bn on the JSE, saw its profit of £35.5m (R780.2m) from its 2021 financial year to end-December turn into a loss of £218m in its 2022 annual results despite a higher gross profit and net rental income.
Capco, which owns property in popular parts of London such as Covent Garden and the West End, was spun out of SA businessperson Donald Gordon’s Liberty International in 2010, and has been under pressure in recent years because of Brexit, the Covid-19 pandemic and the energy crisis.
The share price of Shaftesbury, in which Capco currently has a 25.24% stake, fell about 40% in 2022, and the value of Capco’s investment in Shaftesbury declined by a similar margin to £357m.
The all-share merger between Capco, which counts the Public Investment Corporation (PIC) among its shareholders, and Shaftesbury got the necessary approval in February and will become effective on March 6.
Together they will have a portfolio of about 270,000m², including properties in high-profile centres such as Soho and Carnaby.
“There is positive momentum across the Covent Garden estate with strong demand, high occupancy levels and rental growth across all uses, which has continued into 2023,” CEO Ian Hawksworth said on Wednesday.
“Despite the macroeconomic backdrop, the West End has clearly demonstrated its resilience and enduring appeal with strong recovery in footfall and customer sales ahead of pre-pandemic levels,” he added.
The planned merger comes at a time when the real-estate market is under considerable pressure from the rising interest-rate environment, increasing the cost of capital while eroding consumers’ disposable income.
With the planned merger, the two companies are looking to derive many benefits, such as cost savings and enhanced access to capital markets.
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