Brexit Hits London Luxury Homes With Earls Court Writedown

Updated on
  • Capital & Counties writes down land in the district by 14%
  • Company’s shares decline by as much as 5.3% in London trading

Capital & Counties Properties Plc wrote down the value of its land holdings in London’s Earls Court district by 14 percent, the latest signal that luxury-home values will probably fall following the vote for Brexit. The shares fell as much as 5.3 percent.

The company cut the value of the plots to 1.2 billion pounds ($1.6 billion) from about 1.4 billion pounds after sale prices were trimmed at part of the project and forecasts were lowered for the Lillie Square development, the landlord said in a statement on Tuesday. The firm, including its joint ventures, plans to build more than 7,500 homes at Earls Court.

“We expect to see a reduction in prices and a further hit” of 10 percent to the valuation of Earls Court this year, Peel Hunt analysts including James Carswell wrote in a note to clients. Price cuts may be needed to accelerate sales at Lillie Square where the sales rate has fallen to one apartment every two weeks in recent months, they wrote.

London home prices may fall as much as 30 percent as the U.K. economy weakens following the vote to leave the European Union and companies move staff overseas, Societe Generale SA analysts including Marc Mozzi wrote on July 18. Sales of London homes under construction slumped 34 percent in the second quarter, according to data compiled by Molior London. Hedge funds have been betting that shares in CapCo, which owns most of the Covent Garden district, will fall as luxury-home sales decline.

The landlord decided against a sale of its venues unit before the Brexit vote. The firm said it wants to retain the rent generated by the business, which holds exhibitions.

CapCo was down 4.5 percent at 283.10 pence as of 1:03 p.m. in London. The shares have fallen about 36 percent this year, cutting the company’s market value to 2.39 billion pounds.

Half-Year Loss

CapCo reported a first-half loss of 109 million pounds compared with a year-earlier profit of 264 million pounds. The company also announced that Soumen Das, its managing director and chief financial officer, will resign to become CFO of London-based developer Segro Plc. The company’s adjusted net asset value fell 5 percent to 344 pence per share during the period.

Four apartments at CapCo’s Lillie Square venture have been reserved by buyers since the U.K. voted to leave the European Union. The company has now sold 41 of the 70 homes released in the second phase of the project at prices 4 percent higher on average than the first phase.

The reduction in net asset value is a “sign that management is starting to reflect market conditions for high-end” London homes, Numis Securities Ltd. analyst Robert Duncan wrote in a note on Tuesday.

(Updates with analyst’s comment in third paragraph.)
    Before it's here, it's on the Bloomberg Terminal. LEARN MORE