Shaftsbury 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, regarding its Covent Garden estate.

Shaftesbury Capital has exchanged contracts for selling 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 of 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, providing a seven-days-a-week trading environment and exposure to a diverse customer base that has proven resilient throughout economic cycles.

The portfolio had 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 of 31 December 2024. It 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 an 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 various options to deploy the proceeds, including acquisitions, investment into the existing Shaftesbury Capital portfolio and net debt reduction.

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.

This transaction leverages our operating expertise and assets through partnering with private capital, enhancing growth and expansion opportunities across our portfolio, 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, which has a 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, which are 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 public realm enhancement. 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 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 the 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 enhance Shaftesbury Capital’s earnings, reflecting adjustments to the 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 the 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 the 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 the 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.