West End gold
BRIAN Bickell became bookkeeper and company secretary of Shaftesbury in 1986, when it was a sleepy family-owned firm and he was the first employee. Today, aged 62, he is chief executive of this specialised, Central London property group, which is valued on the Stock Exchange at more than £2.7 billion.
Shaftesbury is different from almost every other property business because its portfolio focuses entirely on London’s West End, specifically a million square feet of shops, bars and restaurants and almost the same again in offices and residential property.
Its 600 buildings are clustered in three key areas – Chinatown, Covent Garden and Carnaby Street – with other properties in Soho and Charlotte Street, near Tottenham Court Road.
Shaftesbury shares are 964 ½ p and are likely to rise. It has delivered decent dividends and capital growth for years and should continue to do so. But there is also the possibility of takeover action, as Hong Kong billionaire Samuel Tak Lee has built a stake of more than 18 per cent and could launch a bid.
A London property owner in his own right, with a swathe of assets north of Oxford Street, he first bought Shaftesbury shares in 2014. However, it is since Brexit that Tak Lee, now in his late 70s, has begun to spend serious money building a stake. His interest makes sense, whether as a long-term investor or as a potential predator. Shaftesbury is the largest owner of bars, restaurants, pubs and clubs in the West End and the second-largest owner of shops, after the Crown Estate.
As such, it is relatively shielded from the ups and downs of the property market because the area exerts a pull on overseas tourists, Brits coming to London to visit and Londoners wanting a day out. The West End is also a hub for hundreds of thousands of workers, many of whom are young creative or technology specialists with money to spend and a desire for fun.
Shaftesbury’s properties are in constant demand so its main challenge is ensuring that the sites are taken by shops, eateries and watering holes that people want to visit.
Bickell takes this aspect of the job seriously. Teams scour the world looking for new trends and ideas in food, drink and retail and talking to potential tenants. The result is an eclectic mix of clients, ranging from French fashion group The Kooples to Jerusalem-inspired restaurant Palomar, and from trendy Asian fast- food joint Flesh and Buns to almond milk cappuccino specialist The Timberyard.
Most retail leases last between three and ten years, while those for bars and restaurants tend to be for about 15 years, so there are frequent vacancies across the estate. Bickell works hard to make sure new tenants keep the portfolio vibrant and interesting.
The strategy has worked. Rental income has grown every year for the past decade, dividends have risen consistently and the firm has significantly outperformed peers.
The group has recently added three major sites to its portfolio, which should boost rental income and dividend payments over time, particularly following the launch of Crossrail, which is likely to increase West End footfall considerably.
Analysts expect rents to rise by 7 per cent to £97.2 million in the year to September, and to £102 million in 2018, while a 15.5p dividend is forecast for this year and 16.5p next.
The value of the portfolio is scheduled to grow too, with analysts expecting net asset values per share (the valuation divided by the number of shares in issue) to rise from 888p to at least 903p this year and nearer 930p next.
Unusually, independent specialist valuer DTZ said in Shaftesbury’s latest annual report that the group’s portfolio is very rare, so prospective buyers might consider all or part of it to be worth more than the formal valuation, now £3.4 billion. This compares with the firm’s £2.7 billion market value, suggesting a bidder would have to pay a considerable premium to today’s share price.
Whether Tak Lee agrees is open to question. Bickell offers all key investors the chance to take a guided tour of the assets and most accept. Tak Lee has declined and other efforts to engage with him have led to nothing too.
Midas verdict: Shaftesbury shares have risen in value, not least since Tak Lee’s stake rose to beyond 18 per cent. But at 964½p, the stock still offers potential to investors, whether or not a bid emerges. Traded on: Main market Ticker: SHB Contact: shaftesbury.co.uk or 020 7333 8118 This newspaper adheres to the system of regulation overseen by the Independent Press Standards Organisation. IPSO takes complaints about editorial content under the Editors’ Code of Practice, a copy of which can be found at ipso.co.uk.