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Capco considers spinning off Earls Court site

Capco is considering splitting its two main assets in Earls Court and Covent Garden into separate companies.

In an announcement to the stock market this morning, the London property developer said each business would offer “its own distinctive investment prospects”.

One business would hold the firm’s assets in Covent Garden, which Capco stats have a total value of £2.5bn, with current chief executive Ian Hawksworth managing the operation.

The other would be centred around the Earls Court masterplan development site, which has been valued at £759m, and would be led by current chief investment officer Gary Yardley.

In its recent results for 2017, Capco reported that its Covent Garden estate had appreciated from £2.28bn to £2.55bn, but the Earls Court development had dropped from £1.14bn to £989m.

In March Capco sold off the Empress State Building on the site to the Mayor’s Office for Policing and Crime for £250m.

This has left the remaining site with a value of £759m, almost half the £1.4bn it was valued at in 2015.

Capco said that demerging the two assets would offer investment opportunities with different “risk and reward profiles and capital requirements”.

The company would expect a demerger to be completed by the end of year if the option is pursued.

The Earls Court masterplan proposes building 7,500 houses along with commercial space on the 31 ha site that covers the old Earls Court exhibition centres, part of a Transport for London depot, and the West Kensington and Gibbs Green estates in west London.

Declining London property values combined with political changes have cast doubt on the viability of the scheme.

Capco has faced significant opposition from residents of the estates over its plans to demolish the homes and rehouse the residents on the new development.

Since Hammersmith and Fulham Borough Council switched from Conservative to Labour control in May 2014, political opposition to the demolition of the estates has also increased.

This culminated in council leader Steven Cowan calling on Capco to transfer the estates back to the council after he called the affordable housing element of the scheme “undeliverable”.

In its 2017 results released in March, Capco chairman Ian Durant said: “The political and economic environment has made discussions on enhancing the masterplan more difficult; however, Capco will continue to seek to positively engage with all stakeholders to evolve the masterplan over time.”

Hammersmith and Fulham council is now carrying out an inquiry into the sale of the estates to Capco in 2012.

Council leader Stephan Cowan said: “Our aim is to examine whether the cabinet decision in 2012 to sell the estates to Capco was a sound one.

“Our lawyers have written to the commercial and legal advisers appointed at the time to understand their independent advice, and what impact it had on the decision to enter into such a poor deal.”

It has been reported that Capco has tried to sell the entire Earls Court masterplan site to other developers, including Berkeley, which has valued the site at £500m.

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