CapCo in Talks to Sell Most of Earls Court to CK Asset Holdings

(Bloomberg) -- CK Asset Holdings Ltd. is in preliminary talks to buy most of Capital & Counties Properties Plc’s Earls Court project, a sign of investors’ faith in the long-term prospects of London’s luxury-housing market.

The Hong Kong company founded by billionaire Li Ka-Shing wants to buy about 90 percent of the West London site, CapCo said Monday, confirming a Bloomberg News story. CapCo has received several proposals for the project and will evaluate them against the benefits of spinning the division off. Capital & Counties climbed the most in almost two years in London trading.

CapCo’s Lillie Square venture isn’t part of the proposal, the company said in a statement. A spokesman for CK Asset wasn’t immediately able to comment.

The market for luxury homes in London has been pummeled by tax hikes and uncertainty surrounding Brexit, which have combined to push down land values and weighed heavily on the Capital & Counties stock. The slump in its shares and a proposal to split up its assets is attracting interest from international developers with the balance sheet to undertake huge long-term projects and withstand repeated downturns in the market.

Property Writedowns

The Earls Court holdings are valued at about 707 million pounds ($920 million) following a series of writedowns over the past three years, Capital & Counties said in July. The 77-acre (31-hectare) site is split into a series of parcels, some of which are owned jointly with other investors, and that may restrict the company to selling only parts of the project, which has permission to build 7,500 homes.

Capital & Counties jumped as much as 7.2 percent, the most since November 2016. The shares were trading at 268.2 pence as of 3:11 p.m. in London.

Capital & Counties is exploring separating its properties in the Covent Garden district from the assets in the Earls Court area to appeal to different types of investors and attract higher valuations. The firm’s market value has slumped this year to about 2.2 billion pounds, which represents a 21 percent discount to the company’s net asset value. Rival Shaftesbury Plc, which owns a nearby estate comparable to the Covent Garden holdings, trades at a 7 percent discount to the value of its assets.

The company has spent more than a decade preparing the Earls Court land for development and large parts of the site are now ready for work to start. Construction is already underway on about 800 homes at Lillie Square, part of the site owned in a venture with Hong Kong’s Kwok family. Capital & Counties said it generated 245 million pounds from the sale of the first phase of the project and 80 percent of the second phase has now been sold.

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