International Property

Li Ka-shing’s CK Asset swoops on UK developer CapCo’s troubled London luxury housing project

  • Capital & Counties Properties’ Earls Court project is valued at about £707 million following a series of write-downs over the past three years
  • The 77-acre site is split into a series of parcels, some of which are owned jointly with other investors
PUBLISHED : Tuesday, 06 November, 2018, 5:13pm
UPDATED : Tuesday, 06 November, 2018, 5:22pm

CK Asset Holdings is in preliminary talks to buy most of Capital & Counties Properties’ 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 per cent of the West London site, CapCo said on Monday, confirming a Bloomberg report.

CapCo has received several proposals for the project and will evaluate them against the benefits of spinning the division off.

Capital & Counties rose 7.2 per cent, the most since November 2016 in London trading on Monday.

CapCo’s Lillie Square venture is not part of the proposal, the company said in a statement.

“Property is a core business of the group. We study all projects with good potential and evaluate each one of them prudently, with the aim of generating reasonable returns for shareholders,” the company said in a written reply to the Post, neither confirming or denying its involvement in the project.

The market for luxury homes in London has been pummelled by tax increases 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.

The Earls Court holdings are valued at about £707 million (US$920 million) following a series of write-downs over the past three years, Capital & Counties said in July. The 77-acre 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 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, which represents a 21 per cent discount to the company’s net asset value.

Rival Shaftesbury, which owns a nearby estate comparable to the Covent Garden holdings, trades at a 7 per cent 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 under way 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 from the sale of the first phase of the project and 80 per cent of the second phase has now been sold.

Additional reporting by Pearl Liu