Real Estate

Capital & Counties/Brexit: Candy crush 


London’s Covent Garden is just 1,500m from the rowdy politics of the House of Commons. Traders there will scarcely be bothered by Brexit. Whatever happens, foreign tourists will still pack the former fruit and vegetable market, buying overpriced teas, fashion clothes and the latest Apple gadgetry.

Brexit gloom nevertheless engulfed its owner, Capital & Counties. CapCo’s share price in August was half its level before the 2016 EU referendum. It jumped 8 per cent on Monday, however. That followed news of a possible takeover bid from Nicholas Candy, the colourful London property developer best known for the ultra-prime One Hyde Park development. Unlike shoppers at Covent Garden, he could pick up a bargain.

The central London tourist destination should be Brexit-proof. But Capco has been dogged by its other big project, redeveloping Earl’s Court in west London. The market value of its stake there has fallen 40 per cent in less than two years thanks to local political squabbling and a collapsing residential market. It is eyeing a sale or spin-off.

Chart comparing share prices of Capital & Counties with Shaftesbury, Land Securities and British Land

Mr Candy has spotted an opportunity. Capco reported a net asset value of 315p a share in July. Of that Covent Garden accounts for about 285p, reckon analysts. Applying a 10 per cent premium just to CapCo’s trophy business would justify an offer of roughly 315p a share, even if nothing was paid for Earl’s Court. That would still represent a juicy-looking 50 per cent more than the average share price over the three months until last Friday.

UK property stocks are twitching ahead of a possible resolution of the Brexit impasse. Shares in British Land and Land Securities leapt as much as a 10th last week after Boris Johnson, prime minister, appeared to have found a way out. If the exodus of London bankers fails to materialise, the upside for prime City office properties is clear. Smart retail and residential space might still be weighted by sectoral woes other than Brexit. But Covent Garden, like the UK parliament, will remain a scrum.

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