MCA examines the Shaftesbury and Capco merger and its implications for tenants, consumers, and London’s West End

Soho dining

The announcement of a £3.8bn blockbuster merger last week placed some of London’s most coveted property portfolios under a single entity.

Shaftesbury Capital, the marriage of West End landlords Shaftesbury and Capital & Counties (Capco), will see the combined company boast a portfolio valued at £5bn.

With assets spanning Covent Garden, Soho, and Fitzrovia, a significant portion of central London will now be controlled by a single business, making Shaftesbury Capital an even more powerful force in shaping central London’s hospitality scene.

From a restaurant perspective, there are potential upsides and downsides to the major deal. On the one hand, the combined entity could use its scale to execute a bold vision for central London, building on Shaftebury’s curated approach, and supporting high-quality, diverse restaurant tenants.

Yet the elephant in the room is the implication of one company having a monopoly over a large chunk of the West End, and whether this could lead to a more generic, prosaic offering. 

In a joint statement, Shaftesbury and Capco said the combined group would provide a “rare opportunity” in the listed real estate sector to invest in an “exceptional” mixed-use portfolio in the heart of central London.”

The merger intends to combine a “best of both” approach, with benefits including asset management opportunities and a “dynamic leasing and marketing strategy across the portfolio”. 

Adam Hyman, founder of CODE Hospitality, is optimistic, citing Shaftesbury and Capco’s reputations as progressive landlords.

“They could be real leaders in shaping the future of the West End,” he told MCA. “I’m sure they will handle their current clients respectfully and continue to make sure the overall estate is managed well.”

Hyman hopes to see efforts to make the area accessible to a diverse range of operators.

“Going forward I hope they make it accessible to all sorts of businesses and tenants to look at securing sites with them, whether that’s through using a variety of letting agents and doing roadshows looking for the next talents in F&B both nationally and internationally,” he said.

“If that means being progressive over rental levels and lease flexibility that would set a precedent to other landlords.” 

He cautioned against an approach which erodes the West End’s historic charm. “There are parts of their estate that should retain heritage and not be redeveloped with big shiny buildings that only a handful of operators can evolve. It’s important that the West End remains a vibrant mixing pot of all different types of people.”

For Rik Campbell, founder of Indian-inspired concept Kricket, the merger means a step into the unknown, with a new party becoming involved in his Soho restaurant. 

“We have a close relationship with Shaftesbury; they’ve been a supportive and collaborative landlord from day one,” he told MCA. “I cannot say the same for Capco as we have not worked with them.

“What I do know is that their pre-pandemic rents were unsustainable, but I think that mentality has now changed, which can only be a good thing.”

Beyond the merger announcment, Shaftesbury and Capco have declined to made further comment. MCA contributing editor Peter Martin believes the new entity should waste no time in making its intentions clear.

“The question is, what’s their vision for central London?” he said. “Businesses need support to recover from the pandemic. The city is recovering, but not as before…now’s the time to tell us what your vision is.”

One potential benefit is the power an enlarged landlord could have in taking on the red tape preventing businesses from operating to their full potential, with the introduction of permanent pavement licenses for example.

“A big advantage of having a single landlord overseeing such a large swathe of property could be how they lobby the council over things such as making the West End a more 24/7 environment and the less draconian approach to al fresco drinking and dining,” Hyman said. 

Tenants aside, financial experts agree an enlarged and diversified estate will benefit both landlords in their road to recovery.

“A merger allows for cost synergies to be achieved, which is particularly welcome in a time when inflation is as high as it is,” said Graeme Smith, MD and EMEA head of financial advisory services at AlixPartners. “It also creates a more diversified portfolio overall in terms of types of tenants, with Capco being focused on retail and hospitality predominantly.

“The combined group will be an even more significant landlord in the capital, creating prestige, and also the ability to manage the tenant mix across a larger footprint.

“Asset management is increasingly important post-Covid, so best practice can be shared across the two groups.”

The impact on consumers – whether from the perspective of price or choice – remains to be seen, but Shaftesbury Capital is likely to do all it can to entice residents to flock back to city centres.

“They’ve got such an opportunity to make the West End one of the most iconic parts of a city in the world,” Hyman adds. “I dislike the word place-making, but the world is their oyster when it comes to doing that.”