REG - Shaftesbury Capital - SHC and NBIM establish Covent Garden partnership

Shaftesbury CapitalAnnouncement

20/03/2025 07:15

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RNS Number : 4633B  Shaftesbury Capital PLC  20 March 2025

 

FOR IMMEDIATE RELEASE

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

20 March 2025

Shaftesbury Capital PLC

Shaftesbury Capital PLC and Norges Bank Investment Management establish Covent
Garden partnership

Further to the announcement dated 19 March 2025, Shaftesbury Capital PLC
("Shaftesbury Capital" or the "Group") is pleased to announce that it has
formed a strategic, long-term partnership (the "Partnership") with Norges Bank
Investment Management ("NBIM"), the Norwegian sovereign wealth fund, in
respect of its Covent Garden estate.

Shaftesbury Capital has exchanged contracts for the sale of a 25 per cent
non-controlling interest in the Covent Garden estate to NBIM (the
"Transaction") with Shaftesbury Capital retaining 75 per cent ownership and
management control over the estate. The Transaction values the Covent Garden
estate at £2.7 billion, in line with its independent property valuation as at
31 December 2024 (adjusted for a small asset acquisition post year-end), with
expected gross cash proceeds of approximately £570 million. Completion of the
Transaction is expected to take place in early April 2025.

Covent Garden is a world-class global destination in the heart of the West End
of London, centred around the iconic Piazza, the Market Building and
surrounding streets, together with Seven Dials. It is a mixed-use portfolio of
assets, with 74 per cent of the property value represented by retail and food
& beverage and 26 per cent by office and residential. The estate is a
vibrant, high-footfall destination, which provides a seven-days-a-week trading
environment and exposure to a diverse customer base which has proven to be
resilient throughout economic cycles.

The portfolio has a net initial yield of 3.6 per cent, annualised gross income
of £104 million and an estimated rental value (ERV) of £134 million as at 31
December 2024. The portfolio covers some 220 buildings and over 850 units,
across 1.4 million square feet (excluding 0.1 million square feet of
long-leasehold residential interests).

Benefits of the transaction

The Board of Shaftesbury Capital (the "Board") believes that the Transaction
will provide a number of strategic and financial benefits, including:

·      Creation of a strategic partnership with a leading global
investor with a long-term investment horizon and knowledge of and established
presence in London's West End;

·      Positions the business for enhanced investment and expansion
opportunities both within the Partnership and the broader Group, adding to its
growth prospects;

·      Substantial cash investment by NBIM, valuing the Covent Garden
estate at £2.7 billion, in line with the independent property valuation
undertaken by CBRE as at 31 December 2024;

·      The Transaction is expected to be earnings-enhancing and neutral
to 2024 EPRA net tangible assets per share. Shaftesbury Capital will retain
control and management of the Covent Garden estate, with fee income from the
Partnership reflecting the running costs of managing the estate; and

·      Strengthened balance sheet and enhanced financial flexibility
across the Group, with a range of options to deploy the proceeds, including
acquisitions, investment into the existing Shaftesbury Capital portfolio and
reduction of net debt.

Ian Hawksworth, Chief Executive of Shaftesbury Capital, said:

"We are pleased to announce the formation of a £2.7 billion long-term,
strategic partnership with NBIM. This investment by a leading global real
estate investor demonstrates the quality of our portfolio. This partnership
brings together two long-term investors who have a shared confidence in and
ambitions for the growth prospects of the Covent Garden estate and the West
End.

Through partnering with private capital, this transaction leverages our
operating expertise and assets, enhancing growth and expansion opportunities
across our portfolio whilst strengthening our financial position and providing
significant optionality to the Group.

As demonstrated by our recent 2024 results, Shaftesbury Capital's portfolio is
anticipated to deliver long-term sustained income and value growth. Backed by
a strong balance sheet, we are well-positioned to capitalise on market
opportunities in London's West End."

Jayesh Patel, Head of UK Real Estate at NBIM, said:

"We are delighted to announce our investment into the Covent Garden estate,
creating a long-term partnership with Shaftesbury Capital. This investment
underscores our belief in the strength of London with the portfolio
complementing our other high quality West End investments. Covent Garden is
one of the world's most recognised retail, leisure and cultural
destinations and we look forward to supporting Shaftesbury Capital's
management team, with their strong track record of delivering the growth
potential of this prime West End estate."

Background to the transaction

The Transaction highlights the value of our prime central London estates with
aggregated ownership, and characterised by strength of demand, high occupancy,
low capital requirements and reliable growing long-term cash flows.

Shaftesbury Capital has assembled the Covent Garden estate, now comprising
some 220 buildings over many years, and implemented a comprehensive leasing
strategy and a creative approach to asset management alongside strategic
consumer marketing, selective refurbishment and development, and enhancement
of the public realm. This unique portfolio in the heart of London's West End
represents one of the world's most desirable real estate locations.

Use of proceeds

The Transaction provides increased financial flexibility, with a range of
options to deploy the proceeds to enhance long-term returns for shareholders,
including:

·      Acquisition opportunities in both Covent Garden and across the
wider Group, with a number of buildings currently under review;

·      Investment into the existing Shaftesbury Capital portfolio
including refurbishment, asset management and repositioning opportunities, to
realise the long-term potential of our assets; and

·      Repayment of outstanding debt, whilst maintaining access to
significant liquidity.

Shaftesbury Capital has a strong balance sheet and maintains an active and
disciplined approach to capital allocation. Proceeds will be used initially to
reduce drawn debt, in particular partial repayment of the Canada Life term
loan (£67.4 million of the £135 million, which will utilise approximately
£42 million of the proceeds net of restricted cash), and in due course
repayment of the £275 million of exchangeable bonds due in March 2026. In the
meantime, cash will be held on deposit until deployed.

Financial effects of the Transaction

Shaftesbury Capital is expected to receive gross cash proceeds of
approximately £570 million from NBIM, representing 25 per cent of the
estimated net asset value of the Covent Garden group of approximately £2.3
billion (as at 31 December 2024). The existing Covent Garden debt of £380
million, comprising unsecured private placement loan notes, will remain within
the Covent Garden group following completion of the Transaction. Covent Garden
is expected to have an initial cash balance of approximately £25 million on
completion.

The Transaction is expected to be neutral to 31 December 2024 EPRA NTA per
share for Shaftesbury Capital.

The Transaction is anticipated to be earnings enhancing for Shaftesbury
Capital, reflecting adjustments to Group share of net rental income, asset
management fee income and costs to be borne directly by the Partnership
(totalling approximately £4.5 million initially at Group share on an
annualised basis), and the reduction in finance costs resulting from lower net
debt. It is expected that there will be the opportunity to enhance earnings
further over time as the proceeds are reinvested.

Following the Transaction, and before deployment of proceeds, the Group EPRA
loan to value ratio will be 16 per cent on a pro forma, proportionally
consolidated basis, compared with 27 per cent at the end of 2024. This is
based on Shaftesbury Capital's debt and cash balances as at 31 December 2024,
adjusted for the net Transaction proceeds, and the independent property
valuation of the Shaftesbury Capital portfolio as at 31 December 2024. Net
debt to EBITDA is estimated to reduce from approximately 11 to seven times. On
completion, Shaftesbury Capital will have access to £1.1 billion of
liquidity, including £450 million of committed undrawn facilities.

Shaftesbury Capital will continue to consolidate fully the Covent Garden
estate into its Group financial statements. A non-controlling interest will be
recognised by Shaftesbury Capital reflecting NBIM's 25 per cent interest in
Covent Garden. The illustrative impact of the Transaction on the Group, based
on reported 2024 results, would be to reduce the Group's share of property at
market value to £4.4 billion (compared with £5.0 billion on a Group share
basis at year end), a reduction in net debt from £1.4 billion to £0.7
billion and the net asset value of the Group being unchanged at £3.7 billion.

                                               31 Dec   Pro-forma(1)

 Key financial metrics                          2024
 Property portfolio                            £5.0bn   £4.4bn
 Net debt                                      £1.4bn   £0.7bn
 Net asset value (NTA or net tangible assets)  £3.7bn   £3.7bn
 EPRA NTA per share (pence)                    200p     200p
 EPRA LTV                                      27%      16%
 Net debt to EBITDA                            11x      7x
 Liquidity                                     £0.6bn   £1.1bn

1.     Pro forma Dec 2024 reflects proportionate consolidation of 75% of
Covent Garden and 50% of Lillie Square

Additional information

As a result of its existing shareholding in Shaftesbury Capital, NBIM is
defined as a related party to Shaftesbury Capital under the UK Listing Rules
("UKLR") and, as a result, the Transaction constitutes a related party
transaction under UKLR 8R.

The Board confirms its view that the Transaction is fair and reasonable as far
as the shareholders of Shaftesbury Capital are concerned and that the Board
has been so advised by Rothschild & Co in its role as Shaftesbury
Capital's sponsor and financial adviser in connection with the Transaction.

Enquiries:

 Shaftesbury Capital PLC                                                                        +44 (0)20 3214 9150
 Ian Hawksworth                          Chief Executive
 Situl Jobanputra                        Chief Financial Officer
 Sarah Corbett                           Director of Commercial Finance and Investor Relations

 Rothschild & Co (Financial adviser and sponsor to Shaftesbury Capital)                         +44 (0)20 7280 5000
 Alex Midgen

 Peter Everest

 Jake Shackleford

Media enquiries:

 UK: Hudson Sandler  Michael Sandler   +44 (0)20 7796 4133

 UK: RMS Partners    Simon Courtenay   +44 (0)20 3735 6551
 SA: Instinctif      Louise Fortuin    +27 (0)11 447 3030

 

A live audio call and webcast on the Transaction to analysts and investors
will take place today at 08:30am (UK time) at
https://stream.brrmedia.co.uk/broadcast/67d4476d19d2d898348937eb
(https://stream.brrmedia.co.uk/broadcast/67d4476d19d2d898348937eb)

It will be available on the Group's website at www.shaftesburycapital.com
(http://www.shaftesburycapital.com)

Rothschild & Co is acting as financial adviser and sponsor in relation to
the Transaction. Herbert Smith Freehills is acting as legal adviser to
Shaftesbury Capital in relation to the Transaction.

About Shaftesbury Capital

Shaftesbury Capital PLC ("Shaftesbury Capital") is the leading central London
mixed-use REIT and is a constituent of the FTSE-250 Index. Our property assets
under management, valued at £5.0 billion, extend to 2.7 million square feet
of lettable space across the most vibrant areas of London's West End. With a
diverse mix of shops, restaurants, cafés, bars, residential apartments and
offices, our destinations include the high footfall, thriving neighbourhoods
of Covent Garden, Carnaby, Soho and Chinatown. Our properties are close to the
main West End Underground stations and transport hubs for the Elizabeth Line.
Shaftesbury Capital shares are listed on the London Stock Exchange ("LSE")
(primary) and the Johannesburg Stock Exchange ("JSE") (secondary) and the A2X
(secondary).

Our purpose

Investing to create thriving destinations in London's West End where people
enjoy visiting, working, and living.

Our values

We have a set of values that are fundamental to our behaviour, decision making
and the delivery both of our purpose and strategy: Act with integrity; Take a
creative approach; Listen and collaborate; Take a responsible, long-term view;
and Make a difference.

 

Principal terms of the Transaction

Shaftesbury Capital and NBIM entered into a sale and purchase agreement on 20
March 2025. Pursuant to this, NBIM will pay cash consideration of
approximately £570 million to Shaftesbury Capital for the acquisition of 25
per cent of the shares in the holding company for the Covent Garden estate,
("CG TopCo"), currently a wholly-owned subsidiary of Shaftesbury Capital and
the owner of the entirety of the Covent Garden properties (following
completion of an internal reorganisation). As part of the Transaction, Covent
Garden will elect for REIT status.

The final consideration payable is subject to adjustment under a customary
completion accounts mechanism.

Prior to completion of the Transaction, Shaftesbury Capital will complete an
internal reorganisation to transfer all Covent Garden properties into the
ownership of CG TopCo.

On completion of the Transaction, Shaftesbury Capital and NBIM will enter into
an agreed form shareholders' agreement, pursuant to which Shaftesbury Capital
will retain day-to-day control over the Covent Garden estate, subject to a
limited number of customary reserved matters for NBIM, in keeping with its
non-controlling minority shareholding.

The shareholders' agreement contains customary transfer restrictions,
including minimum shareholdings, pre-emption rights and drag along and tag
along rights for both shareholders.

Shaftesbury Capital and NBIM are each subject to a three-year lock-up period,
subject to certain exceptions including in the case of a takeover of
Shaftesbury Capital.

Management arrangements

Shaftesbury Capital will provide day-to-day asset management and property
management services to the Partnership through an asset management agreement.

Asset management fees will be paid by the Partnership to Shaftesbury Capital,
reflecting the running costs of managing the estate.

Important notices

This Announcement is for information purposes only and is not intended to and
does not constitute, or form part of, any offer to sell or issue, or any
solicitation or recommendation of an offer to purchase, subscribe for or
otherwise acquire, or the solicitation of any offer to dispose of, any
securities in Shaftesbury Capital. Nothing contained in this Announcement is
intended to, nor shall it, form the basis of, or be relied on in connection
with, any contract or commitment whatsoever and, in particular, must not be
used in making any investment decision.

The distribution of this Announcement in or from certain jurisdictions may be
restricted or prohibited by the laws of any jurisdiction other than the UK.
Recipients of this Announcement are required to inform themselves of, and
comply with, all restrictions or prohibitions in such other jurisdictions. Any
failure to comply with applicable requirements may constitute a violation of
the laws and/or regulations of such other jurisdictions.

This Announcement has been prepared for the purpose of complying with English
law and the applicable laws and regulations of the UK (including the UK
Listing Rules and the Disclosure Guidance and Transparency Rules) and the
information disclosed may not be the same as that which would have been
disclosed if this Announcement had been prepared in accordance with the laws
and regulations of jurisdictions outside the United Kingdom.

This Announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation in respect of Shaftesbury Capital. The person
responsible for arranging for the release of this Announcement on behalf of
Shaftesbury Capital is Ruth Pavey, Company Secretary.

Important notices regarding the Financial Adviser

N. M. Rothschild and Sons Limited ("Rothschild & Co"), which is authorised
and regulated by the FCA in the United Kingdom, is acting exclusively for
Shaftesbury Capital and no one else in connection with the Transaction and
will not be responsible to any other person for providing the protections
afforded to its clients or for providing advice in connection with the
Transaction, the contents of this Announcement or any other matter referred to
herein.

Apart from the responsibilities and liabilities, if any, which may be imposed
on Rothschild & Co. by the FSMA or the regulatory regime established
thereunder, or under the regulatory regime of any jurisdiction where the
exclusion of liability under the relevant regulatory regime would be illegal,
void or unenforceable, neither Rothschild & Co nor any of its affiliates
(nor their respective directors, officers, employees or agents) owes or
accepts any duty, liability or responsibility whatsoever (whether direct or
indirect, whether in contract, in tort, under statute or otherwise) to any
person who is not a client of Rothschild & Co in connection with this
Announcement, any statement contained herein, the Transaction or otherwise.
Rothschild & Co. accepts no responsibility whatsoever for, or makes any
representation or warranty, express or implied, as to the contents of this
Announcement, including its accuracy, completeness or verification or for any
other statement made or purported to be made by it, or on its behalf, and
nothing contained in this document is, or shall be, relied on as a promise or
representation in this respect, whether as to the past or the future, in
connection with Shaftesbury Capital or the Transaction. Rothschild & Co.
and its respective subsidiaries, branches and affiliates accordingly disclaim,
to the fullest extent permitted by law, all and any duty, liability and
responsibility whether arising in tort, contract or otherwise (save as
referred to above) in respect of this Announcement or any such statement or
otherwise.

Cautionary note regarding forward-looking statements

This Announcement (including information incorporated by reference in this
Announcement), oral statements made regarding the Transaction and other
information published by Shaftesbury Capital may contain statements which are,
or may be deemed to be, "forward-looking statements". These forward-looking
statements can be identified by the fact that they do not relate only to
historical or current facts. Forward-looking statements are prospective in
nature and are not based on historical facts, but rather on current
expectations and projections of the management of Shaftesbury Capital about
future events, and are therefore subject to risks and uncertainties which
could cause actual results to differ materially from the future results
expressed or implied by the forward-looking statements. The forward-looking
statements contained in this Announcement may include statements relating to
the expected effects of the Transaction on Shaftesbury Capital, the expected
timing of the Transaction and other statements other than historical facts.
Often, but not always, forward-looking statements can be identified by the use
of forward-looking words such as "plans", "expects" or "does not expect", "is
expected", "is subject to", "budget", "scheduled", "estimates", "targets",
"hopes", "forecasts", "intends", "anticipates" or "does not anticipate", or
"believes", or variations of such words and phrases of similar meaning or
statements that certain actions, events or results "may", "could", "should",
"would", "might" or "will" be taken, occur or be achieved. These statements
are based on assumptions and assessments made by Shaftesbury Capital in light
of its experience and its perception of historical trends, current conditions,
future developments and other factors they believe appropriate. Although
Shaftesbury Capital believe that the expectations reflected in such
forward-looking statements are reasonable, Shaftesbury Capital can give no
assurance that such expectations will prove to be correct. By their nature,
forward-looking statements involve risk and uncertainty because they relate to
events and depend on circumstances that will occur in the future. There are a
number of factors which could cause actual results and developments to differ
materially from those expressed or implied by such forward looking statements,
including, among others the enactment of legislation or regulation that may
impose costs or restrict activities; the re-negotiation of contracts or
licences; fluctuations in demand and pricing in the commercial property
industry; changes in government policy and taxations; changes in political
conditions, economies and markets in which Shaftesbury Capital operates;
changes in the markets from which Shaftesbury Capital raises finance; the
impact of legal or other proceedings; changes in accounting practices and
interpretation of accounting standards under IFRS; changes in interest and
exchange rates; industrial disputes; war and terrorism. These forward-looking
statements speak only as at the date of this document.

Other unknown or unpredictable factors could cause actual results to differ
materially from those in the forward-looking statements. Such forward-looking
statements should therefore be construed in the light of such factors.

Neither Shaftesbury Capital, nor any of their respective associates or
directors, officers or advisers, provides any representation, assurance or
guarantee that the occurrence of the events expressed or implied in any
forward-looking statements in this Announcement will actually occur. You are
cautioned not to place undue reliance on these forward-looking statements.

Other than in accordance with their legal or regulatory obligations (including
under the UK Listing Rules and the Disclosure Guidance and Transparency Rules
of the FCA), Shaftesbury Capital is not under any obligation, and Shaftesbury
Capital expressly disclaim any intention or obligation, to update or revise
any forward-looking statements, whether as a result of new information, future
events or otherwise.

Pro forma

The unaudited pro forma metrics have been prepared for illustrative purposes
only, to illustrate the impact of the Transaction, as if it had been
undertaken as at 31 December 2024. Because of its nature, the pro forma
financial information addresses a hypothetical situation and, therefore, does
not represent the actual financial position or results of the Group. Future
results of the Group may differ materially from those presented in the
unaudited pro forma balance sheet due to various factors.

No Profit Forecasts or Estimates

No statement in this Announcement is intended as a profit forecast or estimate
for any period and no statement in this Announcement should be interpreted to
mean that earnings or earnings per share or dividend per share for Shaftesbury
Capital, for the current or future financial years would necessarily match or
exceed the historical published earnings or earnings per share or dividend per
share for Shaftesbury Capital.

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