Capital & Counties taps market to fund Covent Garden plans

Central London property investor Capital & Counties (Capco) has announced a share placing to fund acquisitions and developments at its flagship Covent Garden estate.

The placing will see the company issue 68.4m new shares, representing 9.99% of Capco's current issued share capital. Up to 30% of the placing will be denominated in Rand.

Capco wants to use the money raised to fund an expansion of the luxury food offering at Covent Garden and reposition assets towards higher value uses, in particular converting upper floors from office to residential use.

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Capco expects to complete over £50m of acquisitions in 2012, of which £18m have completed year-to-date and a further £24m are expected to complete in the next month. On top of that, there is a large pipeline of further acquisitions. Identified projects are forecast to require around £30m of capital expenditure over the next 12-18 months, which include further tenant engineering as well as capital expenditure for the next two residential conversion projects which have planning consent, namely The Beecham and 30-32 Southampton Street.

The placing price has yet to be determined, but Capco's current market capitalisation is £1.5bn, which suggests the placing will be aiming to raise in excess of £150m. The statement indicated the company's plans for the site will cost around £200m which is possibly a better indicator of the placing target.

The book building process, where the group's agents gauge interest in the placing in the market, is expected to close no later than 16:30 (London time) on Wednesday, but may be closed earlier or later at the discretion of the joint book-runners.

As at August 31st 2012, Capco's gross debt was £400m and the cash balance was £127m, resulting in net debt of £273m, an improvement on the net debt figure of £397m just two months earlier.

Based on June 30th property values, and adjusted for the sales completed in the second half of 2012, the pro forma debt to assets ratio was 18%, the company revealed, down from 24% at the end of June. The valuation of Covent Garden was upgraded in June by 4.5% to £856m. The group's site at Earl's Court saw its value lifted 4.6% to £620m.

BS