2019 Annual Report & Accounts

Capital & Counties Properties PLC ANNUAL REPORT & ACCOUNTS 2019 CREATING LONG-TERM VALUE Capital & Counties Properties PLC (Capco) is one of the largest listed property companies in central London. Our key asset is the landmark Covent Garden estate. We create and grow value through a combination of creative asset management and strategic investments. PRIME ASSETS P.04 A focus on prime central London, centred around the landmark Covent Garden estate CLEAR AND FOCUSED STRATEGY P.14 Driving rental growth and capital value appreciation Creative asset management and investment to drive expansion and change STRONG CAPITAL STRUCTURE P.34 Conservative leverage and substantial liquidity EXPERIENCED MANAGEMENT P.52 Strong track record East Piazza at Covent Garden Strategic report STRATEGIC REPORT About Capco 2 Our estate 4 Operational highlights 6 Chairman’s statement 8 Chief Executive’s review 10 Business model and strategy 14 Key performance indicators 15 Principal risks and uncertainties 16 Operating review 20 Financial review 34 Responsibility 42 Governance GOVERNANCE Board of Directors 52 Corporate governance report 54 Audit Committee report 61 Nomination Committee report 65 Directors’ Remuneration report 68 Directors’ report 88 FINANCIAL STATEMENTS Directors’ responsibilities 91 Independent auditor’s report 92 Financial statements Financial statements 98 Notes to the accounts 104 Other information 142 Board and advisers 148 Dividends 148 Glossary 149 Shareholder information 152 1 WHO WE ARE ABOUT CAPCO A PRIME CENTRAL LONDON REIT DRIVING LONG-TERM VALUE CREATION CENTRED AROUND OUR LANDMARK COVENT GARDEN ESTATE COVENT GARDEN PORTFOLIO PORTFOLIO VALUATION1 RETAIL FOOD & OFFICE RESIDENTIAL LEISURE BEVERAGE £2.6bn 0.4m sq ft 0.2m sq ft 0.3m sq ft 0.2m sq ft 0.1m sq ft 53% 22% 14% 8% 3% % OF PORTFOLIO VALUE LETTABLE SPACE BUILDINGS UNITS 1.2m sq ft 81 549 1. Including Capco’s 50 per cent interest in the Lillie Square joint venture, total Group property portfolio is £2.8 billion. 2 Capco Annual Report & Accounts 2019 COMPETITIVE STRENGTHS Strategic report PRIME ASSETS BUSINESS MODEL STRONG CAPITAL A focus on prime central London, A clear and focused strategy STRUCTURE centred around the landmark to create, grow and drive value Responsible approach to capital Covent Garden estate in the heart from our assets to deliver allocation, underpinned by low of London’s West End. superior long-term returns leverage and high liquidity. for our shareholders. For more on our assets, For more on our business model, For more on our capital structure, see page 4. see page 14. see page 34. EXPERIENCED EFFECTIVE GOVERNANCE DYNAMIC LEADERSHIP The framework of oversight, CULTURE controls and reporting provided Experienced management team High-performance and Governance with a strong track record by Capco’s governance structure entrepreneurial culture, reflective of leading the Group supports the business and allows of our business strategy where in delivering its strategy. Capco to operate with transparency innovation and creativity are to achieve its objectives. promoted across the business. For more on our leadership, For more on our governance, For more on our culture, see page 52. see page 54. see page 48. FINANCIAL STRENGTH NET ASSETS LOAN TO VALUE CASH & UNDRAWN FACILITIES £2.5bn 16% £895m Financial statements 2019 FINANCIAL RESULTS PERFORMANCE SINCE DEMERGER 2010 NET RENTAL INCOME £61m TOTAL RETURN 9.6%1 UNDERLYING EARNINGS PER SHARE 1.0p TOTAL SHAREHOLDER RETURN 10.8%1 TOTAL DIVIDEND PER SHARE 1.5p EPRA NET ASSET VALUE PER SHARE 293p TOTAL RETURN (9.6)% TOTAL SHAREHOLDER RETURN 14.0% TOTAL PROPERTY RETURN (5.4)% See page 35 where we discuss our alternative performance measures. 1. Annualised basis. www.capitalandcounties.com 3 OUR ESTATE FITZROVIA RD IDGE ʼS BR MARYLEBONE OP BISH HOLBORN WORLD-CLASS ROYAL COURTS OF JUSTICE ESTATE SOHO ROYAL IN THE HEART OPERA HOUSE OF LONDON’S MAYFAIR SOMERSET HOUSE WEST END THE SAVOY TRAFALGAR SQUARE LONDON – A GLOBAL CITY London’s population set to grow to 10.1m in 2031, from 8.8m SOUTHBANK Contributes c.23% to UK Gross Value Added Attracts talent and investment from around the world 350m domestic and international visitors per annum LONDON EYE THRIVING WEST END ECONOMY BUCKINGHAM 24/7 economy PALACE High-performing retail and leisure destination in London Over 200m domestic and international visits per annum Working population over 650,000 COVENT GARDEN – A WORLD-CLASS ESTATE Landmark estate with global recognition in the heart of central London Scale and concentrated ownership High-quality footfall location D R ʼS Rich in heritage with vibrant culture and events G N KI Attracting differentiated flagship, independent and London first brands 4 D R ʼS G N KI FITZROVIA RD IDGE ʼS BR MARYLEBONE OP BISH HOLBORN ROYAL COURTS OF JUSTICE SOHO ROYAL OPERA HOUSE MAYFAIR SOMERSET HOUSE THE SAVOY TRAFALGAR SQUARE SOUTHBANK LONDON EYE BUCKINGHAM PALACE 1 D PORTFOLIO LETTABLE SPACE BUILDINGS UNITS FOOTFALL PER ANNUM R ʼS G VALUATION N KI £2.6bn 1.2m 81 549 >40m sq ft visitors 40% London, 40% international and 20% domestic 1. Indicative footfall numbers from CACI Ltd; Springboard Research Ltd; EE data. www.capitalandcounties.com 5 D R ʼS G N KI OPERATIONAL HIGHLIGHTS AN ACTIVE YEAR UPSIZING AND STRENGTHENING EXPANSION RETAIL OFFER The luxury retail operator Polo Ralph Lauren and French Bucherer agrees terms to upsize luxury sportswear brand Lacoste offering to a more prominent introduce new stores on King Street flagship store within the and James Street. These additions Royal Opera House Arcade. continue to position Covent Garden Bucherer’s re-location builds as one of London’s best retail on the ongoing strategic destinations, offering a wide range positioning of the arcade as a of high-quality brands. premium shopping location. UK FIRSTS REPOSITIONING American casual men’s apparel brand, UNTUCKit, OF FLORAL STREET agrees terms to open on Repositioning of Floral Street Long Acre. The retailer continues with the introduction originated online, and this of US ethical fashion brand is the first physical store Free People, Parisian label in the UK. In addition, A.P.C. and American Vintage. eyewear brand For Art’s Fitness technology company Sake opens its first stand- Peloton continues its fit-out of alone retail store in the its European flagship training Market Building. studio, expected to open later in 2020. Danish brand Ganni signs in 2020. JANUARY FEBRUARY MARCH APRIL MAY JUNE ESTATE ANIMATION DIGITAL GROWTH An active consumer- 2019 sees continued focused calendar of growth across our digital events and activations audiences, reaching over throughout the year half a million followers from Godiva’s Easter across social media egg ballpit to Pimm’s channels. Covent Garden Wimbledon experience launches its WeChat and a programme channel in China, with of pop-up events on further channels planned the Piazza. to launch in 2020. SUCCESSFUL SALE OF APPLE LEASE AWARD WINNING EXTENSION FLORAL COURT RESIDENTIAL Apple agrees to extend Award winning new-build its lease, resulting in residential collection at Floral its occupation for Court is named ‘Best London a further 15 years. Home – Under 100 units’ at the This underlines the Evening Standard Awards 2019. importance of the A successful sales programme Covent Garden location of all 29 apartments completes for global brands at the end of 2019, generating and the encouraging £100 million of gross cumulative trading prospects of sales proceeds. the estate. 6 Capco Annual Report & Accounts 2019 SALE OF ACQUISITIONS Strategic report EARLS COURT Capco’s strong balance sheet Capco announces the sale and access to substantial of its interests in Earls liquidity provide significant Court for £425 million. The financial flexibility. Over sale positions Capco as a £70 million is invested strongly capitalised prime through the acquisition of central London REIT. target properties located on the southern side of the estate, which offer significant value DINING GOES creation opportunities. FROM STRENGTH TO STRENGTH A significant number of COVENT GARDEN restaurant openings further CHRISTMAS strengthens the dining Actress Emilia Clarke, Dame offer. The estate welcomes Emma Thompson and Director Wahlburgers, Santa Nata and Paul Feig switch on the Covent Italian-style boulangerie Garden Christmas lights, along VyTA Santa Margherita. with the incredible West End Governance Dominique Ansel Treehouse cast of The Snowman. The opens on Floral Street in Q1 2019 festivities are in support 2020, which will be joined of Crisis. Stores across Covent by Big Mamma on Henrietta Garden open late and host Street later in 2020. exclusive in-store experiences. JULY AUGUST SEPTEMBER OCTOBER NOVEMBER DECEMBER LONDON BEAUTY WEEK PHASE 2 The first ever London Beauty Week LILLIE SQUARE launches as a partnership between Construction of Phase Covent Garden and the British 2 continues to progress Beauty Council. The week-long with over 80 per cent initiative celebrates the British of the units reserved beauty industry, hosting a number or exchanged. First Financial statements of consumer and trade events to completions and mirror its sister event, London handover of sold units Fashion Week. expected in H1 2020. COVENT GARDEN ACTIVATIONS CELEBRATES PRIDE Cosmetic brands Glossier Throughout July, Covent Garden and Huda Beauty launch celebrates all forms of love for pop-up concepts on London’s Pride. The iconic Infinity Floral Street and the Chamber turns into a rainbow to East Piazza, which also celebrate Pride. Covent

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