Shaftesbury Capital (SHC) Investor Update summary

Strategic partnership announcement and transaction overview

• Shaftesbury Capital and Norges Bank Investment Management (NBIM) formed a long-term partnership, with NBIM acquiring a 25% stake in the Covent Garden estate for approximately £570 million, valuing the estate at £2.7 billion as of December 2024.

• Shaftesbury Capital retains 75% ownership and management control, with NBIM as a non-controlling minority partner; completion is expected in early April 2025, following an internal reorganisation.

• The partnership leverages both parties' expertise, underlines the value of prime central London assets, and aims to support growth and investment in Covent Garden and the broader portfolio.

• The deal releases approximately £570 million to Shaftesbury Capital, enhancing financial flexibility and optionality for future investments.

• The transaction is structured to comply with UK regulatory requirements, with customary transfer restrictions, governance provisions, and a three-year lock-up for both parties.

Financial impact and use of proceeds

• Proceeds will be used for acquisitions, investment in the existing portfolio, and debt reduction, including partial repayment of the Canada Life term loan and £275 million exchangeable bonds due in 2026.

• Net debt is expected to halve from £1.4 billion to £700 million, reducing loan-to-value from 27% to 16% and net debt to EBITDA from 11x to 7x.

• Available liquidity will exceed £1 billion, including £450 million of undrawn committed facilities, with pro forma liquidity at £1.1 billion before deployment of proceeds.

• The transaction is expected to be NTA/EPRA NTA neutral and earnings enhancing.

• Lower net debt and increased liquidity are expected to benefit the cost ratio and income generation over time.

Portfolio strategy, estate profile, and market outlook

• Covent Garden estate comprises 1.4 million sq ft of lettable space, 220 buildings, over 850 units, with 74% of value in retail/food & beverage and 26% in office/residential.

• The estate generates £104 million annualised gross income, with an ERV of £134 million, a net initial yield of 3.6%, and an equivalent yield of 4.5%.

• There is a strong pipeline of repositioning opportunities, with £35 million already deployed in acquisitions across Soho and Covent Garden this year.

• The West End market is active, with both private and institutional sellers, and further acquisition opportunities are anticipated over the next one to five years.

• Targets include 5%-7% rental growth and 8%-10% total accounting returns over the medium term.