Could a new owner finally unlock the troubled Earls Court development site in west London? After two suitors confirmed interest this week, EG takes a look at what the future might hold for Capital & Counties’ project and just who might be the party that takes it forward.
Nick Candy’s Candy Ventures confirmed reports that it was working with Saudi Arabia’s Public Investment Fund to bid for Capco, which is in the process of separating its stake in Earls Court and its £2.6bn estate in Covent Garden. However, Capco dismissed Candy’s announcement saying it had received “no approach” from Candy Ventures or any other party to discuss an outright offer, but that it had entered a “short period of exclusivity” with Delancey over a sale of Earls Court.
Peel Hunt analyst Matthew Saperia says Delancey is most likely the front-runner for any deal, given what he assumes is the “very preliminary” stage of Candy Ventures’ engagement.
“I think it definitely shows a positive development,” Saperia says. “If there’s a price on the table that is agreeable to both parties then I think that will be interesting to see what comes of that.”
Green Street Advisors research analyst Rob Virdee says that while he is “somewhat surprised” to see interest from Candy in acquiring the whole of Capco, the Earls Court opportunity fits Candy’s focus, and he disagrees that Delancey is the most likely contender to bag the site.
“Candy is a specialist luxury residential developer, and Earls Court fits this remit,” Virdee says. “With regards to Delancey, there was not much detail in Capco’s statement. I’m not surprised they are in advanced negotiations – if anything I would have expected this sooner given the potential development options for the site.”
Stalemate
An offer from either Candy or Delancey would be a sign of progress in getting the embattled scheme off the ground. Earls Court is one of the largest development opportunities in London, with a £12bn masterplan in place for 3.4m sq ft of new homes (7,500 in total) and commercial space across both the boroughs of Hammersmith & Fulham and Kensington & Chelsea.
Capco holds a 63% stake in the scheme, which it owns with TfL. However, the company has become embroiled in a long-running spat with Hammersmith & Fulham council, which has clashed with the developer over the number of affordable homes in the scheme.
This year has seen relations cool further. In February, the council said it was considering buying back parts of the site, which would set the council back £650m, according to recommendations made from Avison Young.
A month later, head of regeneration Matt Rumble pressed the council to “urgently approve” this plan to “unblock the stalemate in order to accelerate the delivery of homes and increase the number of genuinely affordable homes in the borough”. These plans were backed by London mayor Sadiq Khan, who in a meeting with leader of the council Stephen Cowan, advised the local authority chief to intervene. The council has since said it is exploring a compulsory purchase order for parts of the site.
Fresh pair of eyes
So could Candy or Delancey end this stalemate?
Handing the site over to a new developer could help make headway in getting Earls Court off the ground, says Saperio – and could help ward off a compulsory purchase order from the council.
“I think a reset under a new owner will see the chances of progress increase,” Saperio says. “Whether it’s Delancey or anyone else, I think the chances of getting it done [are] higher under a new owner than under the current incumbent.”
However, a developer that had looked at buying the site said local opposition could deter buyers.
“It’s a superb location but it’s got a number of challenges,” they said, including a “very active residents’ community” with local politicians and the London mayor on side; the fact that the scheme sits over the London Underground; and the added complexities of Capco’s joint ownership of the site with TfL.
Who, then, should take on Earls Court? According to that developer, someone with “deep pockets” who is prepared for a “hell of a battle”.
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