Capital & Counties (Capco) is Liberty International’s UK non-shopping centre and international business, with £1.95 billion of investment properties.
A platform for growth
We reported the completion in 2007 of the realignment of Capital & Counties into large focussed business units with an emphasis on Central London, where we now have investments of £1.35 billion out of an overall £1.95 billion. In the first half of 2008, we made firm progress across our business units, actioning individual operating plans and disposing of non-core assets.
We achieved disposals of £198 million in the six months ended 30 June 2008. Since the beginning of 2007, the Capital & Counties disposal strategy has generated over £500 million with a total surplus against book values of over £30 million. In addition to this, we have contracted to sell Broad Gate, Leeds on its completion for £69 million which has not yet been reflected in the financial statements.
At Covent Garden, we received support from key stakeholders for our enhancement strategy and our vision to position Covent Garden as a world class district has been welcomed by target retail brands. Tenant engineering has commenced in earnest and we expect to welcome high end brands into the established mix. Selective enhancement and refurbishment work has commenced with planning applications made, most notably for Bedford Chambers which is contracted to a major global retailer. Marketing and rebranding drove higher customer visits of approximately 45 million per annum with average dwell time extended by 30 minutes to 2.5 hours.
The Great Capital Partnership has continued to benefit from its concentration in Central London with only a 5.7 per cent fall in values during the period. The Partnership undertook two significant transactions in the period, a major property swap transaction with the Crown Estate involving 580,000 sq.ft. of property in Central London with an aggregate value as at 31 December 2007 of £358 million, and a major financing of the partnership comprising a £225 million credit facility. Although headline rents in the West End will undoubtedly come under pressure, the GCP portfolio with an average rent of £34 psf is considered reversionary and its focus on prime properties with added value potential will prove of benefit.
We have made good progress with our plans for Earls Court and Olympia underpinned by a solid operating performance from the exhibition business and are in the process of agreeing a vision with adjacent landowners, TfL and London Borough of Hammersmith and Fulham for a major integrated mixed use development around Earls Court.
Development
We have merged the Capco Urban business unit with the development function of CSC to create two business units, Liberty International Developments and Liberty International Project Management Services, which will oversee and implement large scale development projects on behalf of the entire group.
Capco Opportunities
Capco Opportunities has focussed on the identification of high yield indirect investments, with £42 million of such investments made in the period, aiming to take advantage of the dislocation in the structured debt markets which has resulted in debt linked to high quality assets trading at abnormally high yields.
Capco International
Our international activities have performed to expectation. Our assets in California have remained robust both in terms of income and value. In India our joint venture, Prozone Liberty, is working on four major shopping centre projects with the first in Aurangabad due for completion around the end of next year. These projects have attracted third party investment at levels implying significant value creation from our initial investment. In China our relationship is developing well with Harvest Capital and China Resources. Our first co-investment in Harvest Capital’s fund CR1 is showing a healthy surplus.
