Shaftesbury and Capco in fashion as West End ‘has its mojo back’

Matthew Saperia, a real estate equity analyst at investment banking firm Peel Hunt, was surprised to find himself queuing on a recent excursion in London’s West End – first to get into a Covent Garden restaurant, and then a second time outside the Lego store on Leicester Square. For Saperia, the crowds were proof that “the West End has its mojo back” – good news for the listed real estate companies that own much of the area. In a new note, Saperia and his Peel Hunt colleagues said Shaftesbury and Capital & Counties are both set to benefit from the West End’s revival, fuelled by “improving weather and an increasing number of tourists and offices workers”.  Peel Hunt has pegged Capco’s stock as a “buy” rating and moved Shaftesbury to “add” from “hold”, at the same time upgrading its capital value and earnings forecasts for both companies. Capco “remains the most attractive way to play the West End recovery”, the firm said, given that its shares trade at close to a third discount to Peel Hunt’s estimated 2022 net tanguile assets. “Although the outlook is uncertain, we remain optimistic about the attraction and recovery of these great landed estates,” Saperia wrote. Shaftesbury said in a valuation update last week that like-for-like ERV across its portfolio grew by 6.4% over the half-year to the end of March. Footfall and trading continued to recover, almost to pre-pandemic levels, and chief executive Brian Bickell said the team anticipated “an extended period of uninterrupted trading as we enter the important summer season”. Saperia and colleagues noted that Shaftesbury’s portfolio ERV is now only 7% below a pe-pandemic peak from September 2019. Capco’s December ERV, meanwhile, is a quarter below its March 2019 level, meaning there is still “plenty to go for” as both companies see their portfolios recover. Peel Hunt pointed to Colliers research for the New West End Company that predicted retail turnover in the West End will hit £9.5bn next year and £10.4bn in 2025, up from just £3.9bn last year and £9.2bn in 2019. “We do not expect all boats to rise on the same tide, however,” Saperia wrote. “The days of the whole of the West End effectively being deemed prime are over. The adage of ‘location, location, location’ has never been more relevant, and both [Shaftesbury and Capco’s] estates are very well placed in this regard.” To send feedback, e-mail tim.burke@eg.co.uk or tweet @_tim_burke or @EGPropertyNews Image © Guy Bell/Shutterstock   View market analytics for the West End on EG Radius >> Which agents are doing the most deals in the West End? Check out our On-Demand Rankings >>