CSC/Peel deal queried by analysts
INVESTORS and analysts have reacted with scepticism at Capital Shopping Centres’ purchase of an option on a development site in Malaga, Spain, from Peel Holdings, according to PropertyWeek.com.
CSC announced yesterday that it had paid €2.5m to its largest shareholder, Peel Holdings, alongside a refundable deposit of €7.5m, for a three-year option to buy two parcels of land totaling 74 acres for a retail development just south of the Spanish city.
If the REIT exercises the option it would be its first overseas development project since its demerger.
CSC also announced yesterday that it had agreed to pay Peel Group’s Clydeport Properties subsidiary £4.7m for the 31-acre King George V Docks (West) site, which is adjacent to the REIT’s Braehead shopping centre and offers the opportunity for future development of the scheme.
But investors and analysts have today questioned the rationale behind CSC’s Spanish deal and whether it should be considering investing in the troubled Iberian peninsula at this time.
According to JP Morgan, some investors are understood to have questioned whether yesterday’s deal was a sweetener to the original Trafford Centre deal between CSC and Peel, and what the true market value of the option on the Spanish land is. Other investors have even raised questions about whether John Whittaker was deliberately depressing the share price so he can take over the company at a lower price, once the clause expires.
Harm Meijer, property analyst at JP Morgan, said: “Of course, investors are right to be sceptical, as history is not supportive of these types of transactions and time will tell how the numbers stack up. Besides, a Spanish development is a different animal in the portfolio.
“John Whittaker’s involvement will be a positive for CSC. From that point of view we give the company the benefit of the doubt. But we do agree: we do not like transactions between shareholders or management teams and the company, and the equity market does not tend to reward these. Therefore, if the Spanish acquisition passes the shareholders vote (50% hurdle rate), we believe it should be the last one.”
A vote will be undertaken on the transaction at a general meeting on Friday 17 February.
Mike Prew, an equity analyst at Jefferies, added: “Two deals totalling £13m at first seem immaterial, but they are not. The Scottish port is a sensible land acquisition for the extension of CSC’s Braehead centre, Glasgow. The Spanish land option is confusing and we are concerned that CSC risks diluting its core UK franchise investing in a market in which it has no track record through a transaction with its major shareholder.”
The Spanish deal comprises two plots of land, a 60-acre site which has planning consent for an 860,000 sq ft shopping centre alongside a residential scheme, petrol station and a 250-bed hotel, and an adjacent 14-acre site called Galvez Land which has also been earmarked for possible future development.
It is thought that if CSC does exercise the option it will pay a further €30m for the main site and €8.1m for Galvez Land.
The Braehead development site in Glasgow would add a further opportunity to extend the shopping centre after the £150m extension announced in February last year.
